Sasken Communication Technologies

I am happy to present to you the performance of your Company for the
 Financial Year 2007-08. Let me begin by giving you an overview of the
 fnancial performance of the Company and then share some thoughts from a
 strategic perspective.
 
 The Sasken Group has seen robust growth; revenues increased by 19.5% in
 Rupee terms, from Rs.477 Crores in FY 06-07 to Rs.570 Crores in FY
 07-08. In USD terms, FY 07-08 consolidated revenues of USD 142 Million
 grew at 34.5% over the FY 06-07 revenues of USD 105 Million. Software
 Services, including Network Engineering Services, contributed Rs.524
 Crores in FY 07-08, a 15% increase over FY 06-07 services revenues of
 Rs.454 Crores. In USD terms, in FY 07-08 software services contributed
 USD 131 Million growing at 29.8% over FY 06-07 revenues of USD 100
 Million. Products revenues grew 102% to Rs.46 Crores in FY 07-08 from
 Rs.23 Crores in FY 06-07. In USD terms, FY 07-08 product revenues grew
 to USD 12 Million at 127% from USD 5 Million in FY 06-07. The net
 profts stood at Rs.39 Crores during the year which has translated into
 an EPS of Rs.13.80. The Board of Directors has recommended a dividend
 of 40%. This year 3 of our Tier-1 customers generated more than USD 20
 Million each, up from 2 customers in the last year.
 
 Coming to the strategic perspective, today’s Sasken is a different
 company than it was about two decades ago, when we started. Over the
 years we have realigned our offerings, taken risks, built entrenched
 customer relations and made a mark in the communications space, thereby
 building a company focused on success and performances. In the course
 of FY 07-08, Sasken took many steps to drive the organization towards
 success. While we are proud of our achievements, we are also mindful of
 the challenging environment we face today. We believe that continuing
 on the path of innovation, quality, customer commitment and overall
 growth; Sasken is uniquely positioned to take advantage of the various
 opportunities presented by the changes in the communications industry.
 
 The NEMS infrastructure space continues to remain sluggish, as the
 effects of consolidation continue to play out. However enterprise and
 data communication needs as well as emerging technologies like
 Femtocell, WiMax and 3G LTE will fuel the growth in this segment.
 Sasken is well poised to take advantage of opportunities arising in
 these areas.
 
 The semiconductors industry is also currently on a slow track. But with
 traditional silicon vendors looking at adding more value through
 software, along with increased application of silicon in several
 consumer electronic segments, such as digital lifestyle and near field
 communications, the opportunity for Sasken becomes that much bigger.
 
 The mobile handset market continues to be dominated by the top 5 OEMs.
 The fact that Sasken is engaged in its integration services business
 with all of Top 5 Handset manufacturers is driving volume growth in
 this vertical across all locations, and is a matter of great pride for
 Sasken.
 
 Our products have made major headway last year. Royalty-bearing
 handsets have started shipping in the Japanese market. One of the Top 5
 Handset vendors has licensed Sasken’s Multimedia software solution for
 its Symbian/UIQ platform, and a couple of top of the line handsets
 based on the same are already shipping with operators and retailers in
 Europe. We have not been able to drive volume shipments as anticipated
 for the Sasken Application Framework (E-series product line). We have
 Rs.21 Crores of capitalized software on account of developing the
 Sasken Application Framework. We continue to have a small team working
 on E-series, while the rest of the team has been revectored for other
 accounts. We are in the process of evaluating alternatives for this
 product line, and we will arrive at a decision by the end of September
 2008.
 
 On the people front, attrition remains a challenge for Sasken as well
 as the industry, with the attrition numbers being 24.3% on an LTM
 basis. The Headcount for Sasken globally now stands at 3,623.
 
 Sasken’s demonstrated ability to deliver the best in whatever it does,
 has won many accolades in the past year. One of our largest handset
 vendors recognized us as a preferred vendor, and our leading
 semiconductor customer recognized Sasken’s Mexico development center as
 the Best Supplier. It is also a matter of pride that Sasken became the
 only Indian company chosen amongst one of the Top 100 across all
 industry categories at LACP (League of American Communications
 Professionals) 2006 Vision Awards Annual Report Competition, where we
 received the Gold Award for the 2005-06 Annual Report in the telecom
 category.
 
 Focusing solely on a single vertical has inherent risks. Some
 constituents of the communication industry value chain are witnessing
 business pressures owing to consolidation or changes in the market
 share of the top tier players. Technology innovation also results in
 disrupting the creation of challenges for existing market leaders. We
 are confident that telecom will still continue to be a sector that is
 vital to both developing and developed economies in a business
 environment that is rapidly seeing the need for global business
 integration.
 
 In terms of diversifying, our strategy is to pick those verticals where
 communications technology can make a significant impact in terms of new
 product concepts or productivity enhancement, and to enter them through
 Joint Venture partnerships with others who can enable us to reach those
 markets. Currently, we have two JVs operational - ConnectM and
 TACO-Sasken Automotive Electronics (TSAE). In TSAE, we are building
 three product categories - driver information systems, in-vehicle
 entertainment systems and telemetry gateways.  The goal is to provide
 solutions available only in luxury cars today to entry level cars in
 the affordable price range.
 
 ConnectM, backed by Sasken and IDG Ventures, focuses on improving the
 productivity of assets by deploying remote monitoring and analytics
 solutions for mission critical equipment used in the industrial,
 transportation, utilities and health care verticals. ConnectM recently
 relocated to a 10,000 Sq. Ft. SEZ facility, which marks the evolution
 from a start-up center to a scalable full-service facility within nine
 months of its operations. The new location will help ConnectM expand
 its quality talent pool to service immediate needs and be scalable to
 match its future growth needs.
 
 Sasken has also invested in OmniCapital, a US-based venture capital
 fund that provides early stage funding for information technology
 companies in the US. The investment in OmniCapital augments Sasken’s
 access to the US Market, providing it with another window into the
 latest technology, industry developments and new markets in information
 technology, telecommunications, video, and multimedia.  It also
 provides opportunities for mutually beneficial strategic partnerships
 with OmniCapital portfolio companies.
 
 Our investments in creating “co-located” delivery centers in Mexico and
 Finland is beginning to pay off. We have witnessed excellent
 contributions from both Sasken Mexico and Sasken Finland to the overall
 service business. In the coming fiscals, it will be our endeavor to
 sustain these growth trajectories.
 
 Going forward our company is faced with several challenges from the
 business environment, heightened competition, currency volatility,
 extended sales cycles and a possible recession. The management will be
 tracking these periodically and will do all it can within its purview
 to de-risk any adverse impact one or a combination of these factors may
 have on our business.
 
 As Sasken enters another strategic period in its existence, I trust
 that the year will be marked by growth and profit, while further
 strengthening our customer engagements. I am confident that all of you
 will continue to support Sasken in making the best of the opportunities
 and taking Sasken to the next level which it truly deserves.
 
 Thanking you,
 
 Rajiv C Mody
 Chairman and Managing Director