CloudSquad deal to accelerate social platform: Persistent

A: This company is primarily into social space, social collaboration building community space and is based in the US and India. It is a very small acquisition but very niche for us because we are heavily going into our social collaboration space as a corporate strategy. I cannot tell you the exact number that will add to my top line but overall it is roughly around 20 people plus but all they do is like a premium billing, we are also acquiring IP along with that.

Ekta: How big is the acquisition and how will you be funding it?

A: The funding is primarily through our internal accruals so it is completely a cash deal which is upfront payment and is very niche. Social as a sector is just emerging, companies are still starting to invest into this sector and this company does very interesting thing. It not just builds communities outside, it also has an IP which will connect these communities to the company’s internal system. And there are a lot of fortune 500 companies where they have built this kind of community. So, it brings a capability which our company did not have and it is really complimentary. The size is very small in terms of headcount but from a strategy perspective, it fits right where we want to take our social practice.

Ekta: How big is this segment for you at this point in time, the social segment and in terms of incremental revenues, do you expect this acquisition to contribute. What do the EBITDA and profits look like for this company?

A: Social as a practice we don't track separately. Overall if you look at social, mobile, data analytics and cloud technologies (SMAC), we have roughly around 50 percent of our revenue. Last year, we did around USD 238 million and so, roughly 50 percent of that is from this sector. We have close to 200 plus people already working on social engagement and it is going to add roughly around 10 percent to our team. It is a multiplier effect because we are acquiring a capability which we did not have because this team brings in a very niche capability and also brings in a lot of IP that we did not have. So putting these two together, we think this is really a force multiplier for us.

The other thing about financial details, because we have a confidentiality agreement and it is very difficult to disclose what the numbers would be. But it has been a profitable company, it is a growing company and it fits right into our sweet spot where we are trying to grow our social business.

Anuj: The stock of Persistent Systems has been a big outperformer, it has been one of the best performers. The market this time around was disappointed with your quarter on quarter dollar revenue growth. Do you think that was just an aberration and going forward, what kind of trajectory can you maintain?

A: Last quarter, overall, we grew by 2.2 percent and so, if I take the IP out of that we grew the services business, which is 83 percent of my business that has grown by 3.8 percent. In Q3 which is traditionally a soft quarter, we have grown services business by 3.8 percent which has come both due to volume growth and pricing growth. Both have increased, IP business last quarter went down by 4.9 percent but that has to be seen in the 38 percent growth that we had in Q2. In Q2, we grew the IP business by 38 percent. The kind of IP we are selling is very different, we have a client list which is very small to very large and so, it is very difficult for us to monitor this IP business on a quarterly revenue projection. I cannot comment about overall expectation in the market but as a company we have done fairly well in the last quarter.