News
Issue #2002 - 38 (October 2002)
(Updated Oct. 8, 2002)

ACQUISITIONS, MERGERS & AGREEMENTS

Ericsson Outsources its Major R&D Divisions to Wipro of India

India's position as a global center for high technology has received another boost with news that its third-largest software company is planning to buy a chunk of Swedish mobile network giant Ericsson. 
The deal sees Wipro - take over Ericsson's research and development units in Hyderabad, New Delhi, and Bangalore, India's main center for hi-tech. 

Wipro will then run the whole concern under an outsourcing contract, in effect taking responsibility for running a sizable portion of the Swedish company's software research team. 

Wipro is already doing about $5m of business each quarter with Ericsson, and should pick up more as a result of the deal. The news - announced after the stock market in Bombay had closed on Monday - triggered demand for the company's shares, pushing them up 1.2% on Tuesday in a generally declining market.

Necessity 
The scale of the deal has not yet been made clear, either in a financial sense or in terms of how many people are involved. But with a letter of intent signed, the final details are expected to be wrapped up by November. Ericsson has been in financial difficulties for some months, as world spending on telecoms has stalled. Offloading some of its units to free up cash has formed a central arm of its strategy. 

Source: BBC news and Wipro

For More Information: http://www.wipro.com

MobileInfo Comments and Advisory:  Ericsson must do all it can to cut costs. R&D is a necessary cost for future survival. Outsourcing R&D is also very risky because you can loose control of your most important asset - intellectual property. Therefore, it must have been difficult for Ericsson to make this decision. Credit must go to the ability and integrity of Wipro in running an R&D shop for what was once the number two wireless infrastructure company in the world.  

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