Wipro: At Crossroads

Wipro’s
grand metamorphosis from a vegetable oil company to an IT giant is history now.
All along, there have been many firsts for Chairman Azim Hasham Premji and
Wipro, the last fiscal being no exception. Premji became the richest Indian,
and, for a short period, the second richest man in the world. Wipro was no less
fortunate, commanding the largest market capitalization. And together, Premji
and Wipro became synonymous with India Inc.

Wipro has realigned and recreated its IT divisions, by
merging and consolidating its line of business. The company has always had a
restructuring saga and in the last four years it had close to five
reorganizations. Today, Wipro’s hardware business is with Wipro Infotech,
under the control of Arun Thiagarajan. Its software business, under Wipro
Technologies–the bedrock of the company’s revenues–rests on the shoulders
of its Santa Clara-based chief, Vivek Paul.

To begin with, let us take stock of what transpired at Wipro
during the 1999-2000 fiscal. The company lost one of the most successful and
most admired CEOs of corporate India, Ashok Soota, who left Wipro to start his
own venture. And the entrepreneurial bug did not bite Soota alone–a host of
other senior professionals left the company to start their own ventures. Despite
that, Premji in his impeccable style, went ahead with his plans and roped in
Vivek Paul from General Electric, to take Soota’s place on the company’s
board. Wipro has been following the policy of manning itself with professional
managers, ever since its inception.

Domestic business has been Wipro’s weak front, and with the
joint ventures (JVs) falling through over the years, the PC market has become
another gray area for an otherwise strong company. But the break-up with Acer,
to a large extent, did some good to the company. Wipro was able to push up the
number of PCs, and sell close to 50,000 boxes in the last fiscal. It also came
out with a range of PCs, including home PCs, workstations and servers. Somehow,
Wipro has been a company unable to strive through JVs.

Despite Wipro Technologies being the major revenue garner,
the company has never let go of its hardware business. The philosophy behind
this is that the combination of hardware with services and solutions that the
company provides, gives it a better access to the domestic market. Particularly
in the PC business, Wipro hopes to cash upon its brand name and make a big entry
into the home segment. A recent survey by DATAQUEST showed that Wipro was the
most prolific PC brand, with a share of 32% among the branded PC vendors.

The bedrock of the company has always been its services, and
the year that passed too saw Wipro Technologies improving on this front since
the preceding year. By positioning its CEO in the US, Wipro hopes to reach out
to the market and its customers, and keep in tune with the changing trends in
technology. As for the last year, Wipro Technologies continued to grow along
with the industry. The results were on expected lines and there was nothing
dramatic to write about.

Interestingly, against all anticipations of analysts and
market watchers, Premji has desisted from hiving off Wipro’s software arm into
a separate company. The recent spate of advertisements, in the wake of its plans
to get a US listing, also tries to convey the message that Wipro is a one-stop
shop for the entire home needs. Wipro, in all probability, will go for a New
York Stock Exchange listing.

Another interesting fact that comes out is the holding
pattern in Wipro. Premji continues to hold 75% of Wipro stocks, and this is
another demand that he has not conceded–diluting his shares. And with just 15%
of Wipro shares floating in the market, the low liquidity of the company is one
of the reasons that Wipro stock has always been on the higher side. The stock
split of 5:1, by which Wipro brought down its par value to Rs 2, has also not
helped the liquidity of its stocks. And in its entirety, this shows why the
company’s employee stock option plan (ESOP) is creating a lot of
disgruntlement among its employees.

The other significant area that Wipro will be getting into is
the ISP segment through Wipro Net. Though it commenced operations long ago, it
is only in this fiscal that it has plans to make a major breakthrough into the
market. Wipro Net will be concentrating its efforts on corporates and a part of
it will also be catering to the business-to-business (B2B) segment through its
portal.

Wipro has always bet on its brand, value system and the
passion for quality. As part of restructuring its brand image, it came out with
the vibrant Rainbow Flower logo, with a positioning statement ‘Applying
thought, day after day,’ last year. Now, after achieving Carnegie Mellon
University’s Software Engineering Institute’s Capability Maturity Model (SEI-CMM)
Level 5, Wipro is targeting to attain the Six Sigma by 2002. The Six Sigma
initiative across the company also helped it reap a benefit of Rs 16.2 crore in
the last fiscal.

Wipro’s avowed aim is to establish itself as a global brand from India. If
it has to achieve this aim, some compromises and concessions will have to be
made, be it spinning off its software division or diluting Premji’s stake.
Such measures will not only increase Wipro’s liquidity, but also emblazon it
with a better ESOP. DQ

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