Wipro Ltd acquires Harman Digital Transformation Services (DTS), the software services and engineering arm of the Connecticut-based audio product manufacturer, in a bid to strengthen its engineering, research, and development arm.
On Thursday, the country’s fourth-largest information technology (IT) services company stated that its acquisition of Harman DTS, which makes JBL speakers, is expected to cost about $375 million and will be completed by December this year.
This comes a little more than a week after a peer’s move. Cross-city peer Infosys Ltd announced it bought a 75% stake in Australian IT firm, Telstra, for $150 million, signalling that the country’s largest software services companies are eyeing inorganic growth in the face of demand uncertainty.
“The acquisition expands Wipro’s ER&D service offerings and capabilities by enhancing its AI-powered digital engineering and device engineering,” said the company as part of its press release on Thursday.
Harman DTS is a subsidiary of Samsung Electronics with about 5,600 employees in 14 countries. It specialises in ER&D and IT services, including cloud, data analytics, and AI, for the industrial, consumer, hi-tech (communication and software), healthcare, and lifesciences sectors. This implies that the acquisition is expected to impact almost three-fourths of Wipro’s overall business.
Mint first reported in June that Harman’s DTS business in India was up for sale.
According to Wipro’s press release, Harman DTS reported $314.5 million in revenue last year, up 2% on a yearly basis. A little more than four-fifths of its revenue came from services, whereas the remaining came from selling products.
This translates to 3% in incremental revenue for Wipro, which ended the last two years with a revenue decline. The tech services provider ended last year with $10.51 billion, down 2.7% on a yearly basis.
Staff to merge
As part of the transaction, about 5,600 of Harman’s staff, including its leadership in key geographies, will join Wipro. Upon completion of the acquisition, DTS will be integrated into Wipro’s Engineering Global Business Line. To be sure, Wipro does not mention revenue from its individual business lines.
“DTS’s strong presence in high-growth sectors and strategic markets complements our global footprint and strengthens our position as a trusted transformation partner. Together, we’ll accelerate digital innovation, reduce time-to-market, and sharpen competitive advantage,” said Srinivas Pallia, managing director and chief executive of Wipro, as part of the company’s release to stock exchanges.
This is the company’s third big-bang acquisition. In March 2021, Wipro announced the acquisition of London-based consulting firm Capco for about $1.45 billion. A year later, it acquired Rizing Intermediate Holdings Inc., a global SAP consulting firm, for $450 million to improve its cloud business.
However, this acquisition comes months after the company acquired Applied Value Technologies, a Massachusetts-based IT firm, for $40 million last December.
At least one analyst cheered the move.
“Overall, the move positions Wipro in a far more balanced, diversified, and global growth trajectory during a time when addressing complex supply chains in an unforgiving and unpredictable climate is critical,” said Phil Fersht, CEO of HFS Research, adding that “there is also limited overlap in clients between the two firms, making this addition very complementary.”
Wipro’s move follows that of Infosys, which made its third acquisition eight days ago. The company has spent about $248 million on acquisitions in less than a year, with US-based MRE Consulting and Australian cybersecurity services firm The Missing Link being the other two.
He added that other IT outsourcers are expected to follow suit.
“The Wipro-Harman DTS acquisition and Infosys’ majority stake in Telstra’s Versent Group highlight a decisive shift in strategy for India’s top IT outsourcers. These firms are increasingly using inorganic moves to accelerate capability building and diversify their client base,” said Fersht.
link