VSNL may unveil $90 mn bid for Data Return
The growing market opportunity in the converged telecom and IT market is likely to see VSNL, an international long distance telecom major and part of the Tata group, making a $90-100 million bid for a US-based technology entity which is into manag...
By Sushmita Mohapatra, TNN |
BANGALORE: The growing market opportunity in the converged telecom and IT market is likely to see VSNL, an international long distance telecom major and part of the Tata group, making a $90-100 million bid for a US-based technology entity which is into managed hosting services (MHS) and IT operations (ITO).
According to sources, VSNL is eyeing an acquisition of Data Return, a privately-held entity which primarily caters to the North American market. The auction process for the proposed sale has evinced interest from two other bidders. Data Return is 80% owned by the investment firm Saratoga Partners with the rest being held by the management. It has a headcount of around 250.
Data Return which registered revenues of $51.1 million for the 2005 fiscal has a net loss of $8.5 million, with valuation of the company pegged at $85-95 million. When contacted, VSNL refused to comment. “VSNL as a matter of policy does not comment on market speculation,” a spokesperson said.
Sources said the the higher valuation is due to the dominating presence of Data Return in North America especially in the web hosting services. The acquisition will also expand the convergence play for VSNL as it can address a larger market with IT services provided by TCS.
Sources said this acquisition will also help VSNL in cross selling and upselling for the customers of Data Return in networking and telecom services. According to analysts, the North American web hosting market is relatively mature but SMEs are expanding and driving the growth.
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The acquisition would also give VSNL an entry into high-end managed hosting services market as well outsourcing of IT operations. However, VSNL would have to address a few concerns in going for the acquisition. The main concern would be the retention of key management personnel of Data Return and the impact of the loss making entity would have on VSNL’s balance sheet.sushmita.mohaptra@timesgroup.com
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