Lodestone to be bought by Infosys: Five ways in which the deal will help

Infosys made its biggest-ever acquisition when it bought Zurich-based Lodestone Holding for about for about $350 million (Rs 1,930 crore). While it’s still too early to say how the buy will play out, there are some immediately visible benefits. We list five of them.

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1) Clients: Lodestone will bring in its more than 200 clients across sectors, including manufacturing, automotive, life sciences, chemicals, and consumer goods. Its clients like BMW, Allianz, Kimberly-Clark, Sandoz SHAPE, Warner Chilcott, Munich Re, Roche will now be with Infosys, which has a client base of 700 firms. The acquisition is also expected to boost Infosys’ SAP client base.

2) Revenues: In 2011, Lodestone reported revenues of 207 million Swiss Francs (Rs 1,200 crore), up from 181 million Swiss Francs in 2010. This will increase Infosys’ annual revenue and help it maintain its lead over other rivals like Cognizant and Wipro. Post-acquisition, the consulting and package implementation revenues of Infosys are expected to be more than $1 billion, according to analysts.

3) Geography: The deal will bolster Infosys’ presence in Europe, Middle East and Africa. “In the short term, the economics of EMEA will work against Infosys as Eurozone concerns amplify into 2013. Long-term, the acquisition may prove itself out as Infosys gains a greater foothold through consolidation,” said Ray Wang Principal, analyst and CEO at Constellation Research, in a report.

The acquisition will also enhance the presence of Infosys in new markets like Latin America and Asia Pacific.

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4) Employees: Zurich-based Lodestone has about 850 employees, including 750 SAP consultants. The consultants will help Bangalore-based Infosys to ramp up expertise in SAP-based solutions.

5) Perception: The deal will go a long way in helping Infosys shake off its image as a conservative company hesitant to make bold acquisitions. While research firm Constellation Research said Lodestone’s methodology and culture will transform Infosys, Mumbai-based brokerage house Prabhudas Lilladher saw it as a much-needed booster for the struggling IT bellwether. “We see the acquisition as a step towards Infosys 3.0,” analysts Shashi Bhushan and Pratik Shah said in a report.