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TRENDS: STRATEGY Xerox Looks To Make A Comeback Its sales may be stagnating and morale wallowing, but Xerox Modicorp's new CEO intends to go to war. July 20 will be a landmark day for Xerox Modicorp. That's when the photocopier company's CEO of eight months, Pedro Enrique Fabrega will stand in front of the parent company's Chairman and CEO, Paul A. Allaire, and President and COO, Anne M. Mulcahy, trying to get a new lease on life for the comatose Indian operations. It won't be easy winning support.
For one, Xerox is going through one of its worst phases globally. It announced a net loss of $86 million in the first quarter of 2001, besides which it is facing a Securities and Exchange Commission probe into financial irregularities at its Mexican operation. That apart, the embattled Xerox is on a sell-off spree. It recently sold its 50 per cent stake in its Japanese venture to rival Fuji, in an apparent message that non-performing businesses would not be tolerated. And the Indian operation's lackluster performance isn't likely to enthuse either Allaire or Mulcahy. Yet, Fabrega plans to go to the headquarters in Stamford, Connecticut, on a positive note. ''Before 2005, we will double sales in this country. The conditions are right, and we have the right products,'' says he. According to the 30-year Xerox veteran, the problem in India was wrong focus. All this while, Xerox ModiCorp focussed on the plain-vanilla copier market (10 to 20 copies per minute), where not only were the sales stagnant, but also profits were piffling. Not surprisingly, the two new buzzwords Fabrega is using at this swank new Indian headquarters in Gurgaon are ''premium'' and ''digital''. ''We expect the high-end segment to grow 50 per cent this year,'' he says. ''Last year, the high-end fetched 20 per cent of our revenue, and we expect this figure to go up to 70 per cent in the near future.'' Fabrega wants to tap three broad segments: the BT-500 companies, commercial copiers, and the small and home office (SOHO). The BT-500 will be targeted for high-end solutions work by the newly formed industry solutions operations, which-in line with the world wide realignment of Xerox-only focuses on big-ticket clientele. Already Xerox has bagged contracts from cellular service provider, Airtel, for billing solutions. It also works with NIIT and IBM with a ''books on demand'' inventory reducing solution for their training requirements. And come September, Xerox will hard-sell its high-end solutions to a gathering of 1,000 CEOs at its Docuworld do in Mumbai. In the high-end market, Xerox claims to have a 70 per cent share, although competitors say the category is not so clear cut. Take the case of HCL Infosystems (which has a tie-up with Toshiba), which recently bagged the Citibank Diners Club billing project from Xerox Modicorp. Says V. Rajendren, General Manager (Sales and Marketing), HCL Infosystems: ''Two years ago you would have found only Xerox at the high-end, but today even Toshiba is there.'' Besides competition, there is the question of demand for such new generation products. In the commercial copier market, Xerox says it has a 45-50 per cent share. The analog copier market has not been growing in India. Also, it was a late mover in India as far as the shift from Selenium to organic photo conductor machines was concerned. According to Fabrega the idea now is to perk the sector up by concentrating on digital products. The digital market is growing at a healthy 20 per cent with players like Toshiba and Gestetner also concentrating on the segment. Rather than using a separate copier, fax, scanner and printer, the digital devices present a one-point solution. But the constraint here has been the extra cost. But come this summer Xerox Modicorp will be launching a new product code named taishan, which will be a printer, copier, scanner and fax solution priced much lower than the current offerings. The SOHO segment has been an Achilles heel for Xerox. Here again Fabrega has an answer in the form of an inkjet printer the company has developed after the acquisition of Tektronix colour printing and imaging division. The printer will be launched in India in time with the worldwide launch within the next few months. Says Fabrega: ''In July, we will launch Xerox ink jets which is when we expect SOHO to regain its momentum.'' One thing is sure, though. One way or another, Fabrega has a busy July to look forward to. -Seema Shukla SCIENCE Thanks to a small institute in Kerala, TTK Pharma becomes the world's third company to make a tilting-disc heart valve.
Try accessing Sree Chitra Tirunal Institute of Medical Sciences and Technology's website (www.sctimst.ker.nic.in), and you would probably get 'http error 404'. Still, not too many people today are in a mood to curse the Thiruvananthapuram-based medical institute. Far from it, actually, those who suffer from heart ailments, probably can't stop thanking SCMITST for having done what it has: conceived and crafted the world's cheapest heart valve, which now goes commercial in the hands of TTK Pharma, a Chennai-based company. The valve, first introduced for trials in 1990, is a product of 15 years of R&D, and TTK is only the third company in the world to produce such a tilting-disc valve. Simply put, the valve consists of a chrome cobalt alloy frame, an occluder, which monitors the pressure, and a sewing ring made from implant tested unfilled 100 per cent polyester fabric (made by Reliance Industries in a special run). Says A.V. Ramani (Vice-President-TTK Group): ''Even at Rs 18,000 apiece, we are making a profit.'' Apart from the price, sctimst's R&D team had to keep in mind several factors unique to India. For instance, the average age of the recipient in India ranges between 20 and 30, compared to 60 in developed countries. That meant the heart valve had to be much more durable to last longer. Consider: in a normal person, the valve disc flutters 115,000 times a day, or 42 million times a year. To ensure chemical and structural stability, a modified form of Ulta-high Molecular Weight Poly Ethylene has been used. Besides, unlike the standard disc in the Bjork-Shiley valve, a popular model, the Chitra valve has a 'taper' (smooth peak) and a 'well' (gentle slope) to allow improved blood flow. About 12,000 people in India have received the Chitra Valve, although mass commercialisation begins only now. TTK has a licence to manufacture 3,600 pieces a year, says K. Sunil, Deputy General Manager, in charge of the Chitra valve project. However, the company has a capacity to make up to 10,000 a year. And unlike SCTIMST's homepage, each one of them will work. -Nitya Varadarajan ADVERTISING Just why is IBM taking potshots at rival Sun? Call it a new-found aggression or merely a sign of the times. IBM, a.k.a. the Big Blue, has brought its global advertising battle against Sun to India. For instance, a prominent hoarding at a busy crossing in Mumbai rubbishes the performance of Sun's servers. The second one, and more direct, says that the reliability of Sun servers is as good as the weather forecast. Unlike in the US, Sun in India has refused to get drawn into the street fight. ''I don't think we will respond (to those advertisements). It is fine with us if IBM is spending money on publicity for Sun,'' says Anil Valluri, Director (Systems Engineering), Sun Microsystems India. At stake is the growing server market in India. Globally, IBM leads the $60-billion business, with a 34 (Sun 18%) per cent share. Says Basu Hurkadli, Country Manager (Systems Sales), IBM India: ''We are the number one server company. But it is in the Unix segment where we are picking the fight.'' Currently, IBM has just 16 per cent of the Unix server market, compared to Sun's 39 per cent. But IBM says that Sun servers are far too expensive for the performance they offer. For a similar configuration, an IBM P660 costs only $92,000 against Sun Fire3800, which costs $174,000, says Hurkadli. Sun says the price depends on factors like volume and customisation. And the battle continues. -Ashutosh Sinha FINANCE Having raised a tonne of cash, cement major Gujarat Ambuja now has the luxury of picking its next strategic move.
At this point, just about everyone agrees that Gujarat Ambuja Cements (GACL) is sitting on a pile of cash. To be precise, Rs 1,020 crore raised over the last five months. The kitty includes Rs 360 crore from Warbrug Pincus in a two-phase deal, where GACL will sell 8 million shares to a Warburg Pincus affiliate for Rs 225 apiece (total Rs 180 crore), and another 8 million warrants with the option to subscribe to an equivalent amount of equity before October 1, 2002. That apart, GACL raised $50 million from a five-year foreign currency convertible bond and $50 million from a three-year bond issue. Flush with funds, the cement major has an array of strategic options to choose from. BT examines the three most likely end uses of the funds. Option 1: Restructure debt
Anil Singhvi, GACL's whole-time director and treasurer, has no doubts where the money will go. ''The amount would be used to restructure debt and ongoing capital expenditure,'' he says. That comes as no surprise. Although GACL is a cash-rich company, it has been under a cash-crunch, thanks to the shopping it did last year-and-a-half. It acquired Modi Cements (now called Ambuja Cement Eastern), DLF Cements (Ambuja Cement Rajasthan), and a 14.4 per cent stake in acc. The bill: Rs 1,491 crore. That jacked the company's net interest payout by 39 per cent to Rs 32 crore during the third quarter of 2000-01. In March 2001 GACL repaid its entire Rs 200 crore borrowings from the IDBI, and is now looking at retiring Rs 120 crore of expensive debt, and converting Rs 300 crore of loans into debentures. Some analysts expect the move to lower interest cost in the fourth quarter of year ending June 2001 to Rs 26 crore. GACL's ongoing Rs 1,400-crore capex plans would hike capacity to 7.5 million tonnes per annum, including a new Rs 650-crore, 2-million tonne plant in Chandrapur in Maharashtra. Therefore, not much investment may be needed in further capacity expansion. Says Dalip Pathak, Managing Director, Warburg Pincus India: ''We are very impressed with the vision and operating capabilities of (CEO, Narottam) Sekhsaria.'' Option 2: Hike stake in ACC Dalal Street has been speculating about an open offer from GACL for an additional 20 per cent stake in ACC. The rationale being that GACL's current holding of 14.4 per cent doesn't give it any strategic leverage. Crossing the 26 per cent threshold (needed to block a special resolution) will put GACL in a better position to fend off a hostile bid from someone like Lafarge. Singhvi, however, trashes the logic: ''For us control comes only with a shareholding of 51 per cent, and even with an open offer, we won't reach that level.'' Option 3: Fully own ACIL Ambuja India Cement (ACIL) is a special purpose vehicle created for investment reasons. For instance, GACL's stake in acc is actually owned by ACIL. Similarly, 93 per cent of Ambuja Cement Eastern is held by ACIL, simply because GACL sold the stake to ACIL under a restructuring plan that fetched Rs 249 crore in profits for the former. But GACL's holding in ACIL itself is only 60 per cent; the rest is held by AIG (via its infrastructure fund) and Government of Singapore (thought its infrastructure investment arm). Why would the partners want to sell out? Because, except dividend income, their investment in ACIL has not yielded any significant returns. If the pressure to book profits mounts on the two partners, GACL may have no choice but to buy them out. While some analysts are worried over the equity dilution (post the Pincus deal, equity goes up from Rs 147.1 crore to Rs 163.1 crore), a few others, including merchant bankers, are bullish. Says Vimal Bhandari, Executive Director, IL&FS, ''It's a vindication of the company's strength and the potential of growth.'' If Sekhsaria does decide to use all this money to strengthen the balancesheet, he may have more analysts crowing about GACL. -Roshni Jayakar TRENDS A high-profile CEO goes solo again, and there's a new consultant in town. From e to m: Once his firm e-capital was acquired by Leading Edge (which is how Trigyn was born) those who knew Suresh Rajpal were sure he would not stay on for long. So when he quit in April not many were surprised. As he puts it: ''After the merger the structure was such that we had four CEOs running the company. I want to have my own business where I could have fun and control of the company.'' Whereas e-capital looked at e-commerce services, Rajpal's new venture will provide end-to-end mobility services.
Sheikh Punoose: As we told you some time back, Salil Punoose's moving out of International Bestfoods in the wake of HLL buyout was a no brainer. And contrary to what some people expected, he isn't joining an NGO. From what we learn Punoose is off to the Gulf where he will be heading a consumer goods conglomerate. In and out: When BCG India's hi-profile Managing Director Ralph Heuwing bid adieu last month his successor was already here learning the ropes. So when Valentin von Massow slipped into Heuwing's shoes it was a quick and quiet affair. Massow comes in from the BCG London office. Beam me out: Zee's Agrani project may not be taking off, but its people are. Most recent exit from the troubled project is of Rajat Jain, who was Senior Vice-President (Business Operations), ASC Enterprises. Jain who boasts of stints at HLL, Benckiser India, Telstra International joins Sony Entertainment Television as Executive Vice-President (Corporate Development). After the flutter at BPL's ISP business a month ago the dust has begun to settle. CEO of the portal business R. Lakshminarayanan has gone back to Mudra in Bangalore, whereas the ISP business CEO Anup Verma has joined SAP India as Director (Strategic Accounts).
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