Outsourcing Boom: Satyam Computer
The outsourcing boom is alive and well and we're finally beginning to cover some of the Indian ADRs that are benefitting from the wave of multinationals who're furiously plucking workers out India's gargantuan talent pool.China and India are molding the global economy as never before.
The 40% of the world’s population that lives in these two countries is finally tasting economic prosperity, albeit with different development models.
China has taken the manufacturing route (low cost manfacturing capabilities & cheap labor) in order to satiate external demand whereas India has opted for a service-driven economy.
Multinationals like GE and Dell go to India to save money -- it's that simple.
An MIT level grad in India earns 10K vs. 80K for the same employee here in the United States.
India's brain pool is untouchable: India accounts for 17% of the world's population and pumps out more than quarter million engineering degrees a year.
Where should investors turn?
Satyam Computer (SAY), a global IT consulting and services provider, is at the top of our pecking order.
Simply stated, the outsourcing boom has been hitting Satyam's bottom line like a ton of bricks.
Satyam is a mid to large sized company ($5 billion market cap) that caters to the outsourcing needs of household names like IBM and Lehman Brothers, not to mention 148 other Fortune 500 companies (about 70% of Satyam's revenues come from clients in the US).
Satyam - which floated its shares to the public just 3 years ago -- consistently outperforms its peers.
Quarter after quarter, Satyam delivers impressive numbers; it's no shock that its stock is approaching an alltime high.
Could that be because Satyam recently announced that it's revenues ran past the $1 billion mark for the first time in the company's history?
Notwithstanding India's perennial shortfalls of infrastructure and direct investment -- there's no denying that India holds a massive army of qualified engineers at 1/8 the price.
With exponentially increasing revenues, awesome visibility here in the states, and headstrong management to carry the firm forward -- Satyam makes a boatload of economic sense for investors looking for an outsourcing play.
With an extensive presence in 53 countries, Satyam's incredibly positioned.
Because we believe that demand for both global business solutions and India's world class education will remain robust, we're initiating coverage on shares of Satyam Computer with a strong buy rating.
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