Byrraju Ramalinga Raju, the Chairman of the Hyderabad it services company Satyam Computer Services, is getting ready to hive off his largest subsidiary, Satyam Infoway (Sify). Sify-the company that started off the dotcom boom in India with that fantastic Rs 499-crore deal with the portal Indiaworld.co.in-and an unnamed potential partner, will go it alone. Raju plans to divest, either in part of full, the 53 per cent that Satyam holds in Sify.

	Chips, Rigs, And Black Gold
	Down The Services Elevator

Raju believes that both Satyam and Sify would gain by becoming 'pure play': Satyam in it services and Sify on the internet. "We are actively pursuing the plan to divest with both local and global players and have started receiving inquiries," he says. Satyam has engaged financial advisory firm Merrill Lynch to find a strategic partner. The divestment might happen over the next half-year, though the takeover of Sify's software business by Satyam will be effective January 1, 2002. It was acquired by an unnamed investor for $6.9 million (Rs 33 crore).

	The Divestment may happen over the next half-year, though takeover of Sify's software business is effective starting January 1.

Sify has been Satyam's largest subsidiary and the country's first private ISP since its launch in April 1998 as a provider of company wiring solutions. Today, you could call Sify an internet, networking, and e-commerce services company. The company's revenues are diversified. Only around 10 per cent come from sify.com. (Page views: 51 million in March 2000; 180 million in March 2001).

Despite the dotcom bust, Sify hasn't done too badly. For the quarter ended December 31, 2001, Sify recorded a revenue of $8.6 million (Rs 41.28 crore). The quarter also saw a rapid decrease in cash burn from $4.6 million (Rs 22.08 crore) in q2 to $3.9 million (Rs 18.72 crore), making it the fourth successive quarter of reduction in cash burn. Cash balance at the quarter-end was around $13 million (Rs 62.40 crore).

So how has the Sify experience been for Satyam? The perception within the company, and shared by some analysts, is that contrary to common view, Sify has been a phenomenal investment for Satyam. ''Satyam Computer Services has derived considerable value from its investments in Sify all along,'' agrees Raju. The reason: On an initial investment of just around $5 million (Rs 24 crore) a couple of years ago, Satyam has realised $50 million (Rs 240 crore) in cash from a partial stake sale (1.6 per cent) in late 2000. What is more, it still owns around 53 per cent of the stock, which is believed to be worth over $100 million (Rs 480 crore), though that's debatable.

Wired Wisdom

Thou Shalt Celebrate THE PROFITS OF AMAZON.COM Deep from the trough of disillusionment comes a stairway of hope. E-retailer Amazon.com-whose losses of $3 billion since it went public in 1997 seemed to embody the dotcom bubble-burst-has finally posted its first-ever net profit. Buoyed by strong online holiday shopping, the US dotcom posted net profits of $5 million (Rs 24.18 crore) in Q4, against a $545-million loss (Rs 2,635.89 crore) a year earlier. Revenues? A record $1.12 billion (Rs 5,416.88 crore). Thou Shalt Mourn THE CRISIS IN PC SALES For the first time in 16 years, the world's pc industry shrank in 2001. Global shipments were down 4.6 per cent, Gartner Dataquest has said. Though businesses were reluctant to buy PCs in the fourth quarter, consumers bought them in higher numbers that expected. The worldwide total of computers shipped for 2001: 128 million. It wasn't just the downturn that was responsible for the drop in pc sales; it was also a saturation in personal computers in developed markets.

Q&A
Net Advertising Still works

Yusuf Mehdi, Vice President (Personal Services Business), Microsoft Corporation, was in Mumbai as part of his tour of the Asia region. During his visit, he spoke to BT's Roshni Jayakar on the future of the Microsoft Network (msn) and the portal industry. Excerpts:

Mehdi sees strong vortals partnering with big horizontals

Q. MSN was launched in India a year ago during the downturn. What has been responsible for its acquisition of a large base of unique users-0.5 million in September 2000 to 3.4 million in October 2001-in such a short period of time?

A. As a part of launching in an already dull market, we were lean and small. We also have some unique services that no one else has, including msn Hotmail, free messenger service, and play-by-play cricket.

Can you tell us about the shift in portal models?

Portal business has changed from being overhyped to underhyped and now it is somewhere in the middle. It has moved away from the inward-looking evaluation of models where you just put internet for any business idea and you get funding for models that have to show value.

What are the earnings models?

Earnings can be through advertising. But you can also earn revenues from consumers directly. The question is: what is it that you deliver that other people don't? For instance, in the US, msn is trying to sell extra storage space for Hotmail. In India, we have yet to decide when the right time is for introducing such premium features. Then there are wireless and SMS business models. People want access to Hotmail and messenger through mobile devices. We see big opportunity for us in driving traffic on wireless networks.

Do you see advertising-based portals surviving?

Yes. For instance, msn has done advertisements in such a way that they can be downloaded quickly, give a full impression in a second, and then go back. Not only do our new generation ads on the web offer greater richness than the print ones, we are also able to do targeting and do it for half the price.

Do paid models work on the internet?

Today, the consumer does think that if it's on the web, the service should be free. But, from the provider's side, you have to offer unique things. Also, now that dotcoms have gone bust, there are fewer choices and that allows us to be distinguished.

How do you keep track of changing user needs?

In many ways, we can actually predict some social phenomena before they hit mainstream because you detect them through search queries. For example, about a year ago, we came across 'shampoo' as a top query on a worldwide basis. When we explored why, we found that there was an association between people searching for shampoos and Japanese animated characters. That kids were searching for a new character by the name 'Shampoo'. Before it made it to the mainstream media, we had it on our homepage and roped in tons of clicks.

Post-consolidation, what will the portal industry look like?

In the US, the top three portals account for 60-70 per cent of the advertising revenue. We, at msn, are building full-fledged consumer network with Hotmail, messenger, as well as content. Going ahead, we are likely to partner with other specialised portals. For instance, msn suggested that ESPN Sports take the site off the web and be part of msn network. Now, the traffic on ESPN is 25 per cent higher since the day they signed with us.