The Hindu Business Line : Hughes Soft at new low on Q1 results

A dismal first quarter performance and continuing global slowdown in the telecom sector have dragged down the share price of telecom software solutions provider, Hughes Software Services (HSS) by over 20 per cent since the announcement of its results on July 18.

The company has seen its stock fall from Rs 187.75 on July 18 — the day it announced its `below expectation' first quarter results — to today's close at a new 52-week low of Rs 141.95 on the Bombay Stock Exchange (BSE), registering a decline of 24.39 per cent. On the National Stock Exchange, the stock has fallen by 23.95 per cent from Rs 186.80 to Rs 142.05 during the period.

HSS, which is focussing on providing software solutions for convergent networks, registered a 76-per cent decline in net profit for the first quarter at Rs 4.4 crore compared to Rs 18.7 crore in the corresponding period last year. The company's total income also fell to Rs 49.9 crore during the quarter as against Rs 66.6 crore.

The management had, at the time of declaring its Q1 results, said that `travel advisories issued in the last 30 to 60 days of the quarter impacted certain orders that the company was counting on for the quarter and hence it missed its financial guidance.'

According to analysts, the downward pressure on the stock is likely to continue given the uncertainty surrounding the telecom sector globally, which may result in HSS missing its guidance for the 2002-03 as well.

"The company's topline has been under pressure, with business from its parent — Hughes Network Systems — down by 35 per cent. Further, the product business, which was growing sequentially in the last few quarters, has declined by 27 per cent due to a decline in volumes. The only saving grace has been professional services which depicted a q-o-q growth of 12 per cent," said Mr Sandeep Shah, Analyst - Equities, Pranav Securities. "Also, HSS's operating profit margin has declined to 16 per cent from 29 per cent, mainly due to decline in volumes and billing rates, he added,

"The below par results that the slowdown in the telecom sector is impacting the visibility of revenue and margins going forward. Although the company has maintained its FY03 topline growth guidance of 15 per cent, we feel that this will be unachievable," said Mr Shah.

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