Digital GlobalSoft was lauded for its results, albeit decent, considering that some frontline software companies had only disappointed in the quarter ended 31 December 2002.

The scrip of the software major spurted 5.33% to Rs 568 by 11:25 IST on Friday and registered substantial volumes of over 1.43 million shares on BSE by then. Taking its Thursday's gains into account, the scrip has risen 13% from Rs 502.60 on 29 November 2002 to its current levels.

For the third quarter ended 31 December 2002, Digital GlobalSoft recorded a 9.7% rise in net profit to Rs 27.01 crore (Rs 24.62 crore) on net sales growth of 26% to Rs 109.98 crore (Rs 87.28 crore).

Capitalmarket.com (polling seven software analysts) had projected a net profit of Rs 21-31 crore and net sales of between Rs 96.8 crore and Rs 104.8 crore (Rs 1.04 billion), a growth of 11% to 20% for the company .

On a sequential basis, the company's performance was more redeeming - a 27% rise in net profit on a 16% increase in sales. The company reported strong sequential growth rates in both Hewlett- Pakard and non-HP revenues. HP revenues grew by 11% QoQ thus arresting declines in growth rates witnessed during the last few quarters. Non-HP revenues grew by 35% during the quarter. Contribution from HP revenues stands reduced to 78% from 85% last year and 81% during September 2002.

Strong growth was witnessed in its enterprise solutions division (QoQ 35%+) and its e-applications division (QoQ 15%).

The company added 29 new customers during the quarter under review, including a significant multi-year, multi-location comprehensive outsourcing e-business application deal from HP. Operating margins during the quarter improved by 350bps to 31%, primarily due to increased contributions from offshore revenues. Revenues from offshore increased to 37% from 34% during the previous quarter.

The company also recruited 252 employees taking its employee strength to 2003. 189 recruitments were undertaken in the services segment, largely in the e-application and enterprise solutions segment, while around 71 people were added in DCC.

Analysts say the results have been modest despite apprehensions about the company's integration with HPISO. The India offshoring process is of strategic importance to HP internationally, particularly keeping in view HP's global focus on software services. Digital is positioned as an important asset that provides significant value proposition to this strategy. The future business and operating structure of Digital is currently under consideration.

Digital has constituted a committee comprising independent directors of its board to identify and consider various options. This committee is specifically charged with looking after minority shareholder interests. The focus remains on arriving at a structure and making a recommendation that is best aligned to the corporate and business objectives of the company. No final decision has been taken on the proposed model and the timing of its implementation. Until such time that a conclusive decision is arrived at, the Digital's board has indicated that the company's business has continued as usual with sustained growth in its software services business.

Digital GlobalSoft, previously known as Digital Equipment (India), is a globally focused software development and services company. It has an independent charter for growth and functioning, and enjoys the unique advantage of having Hewlett-Packard Company, one of the leading IT companies in the world – as a major investor, customer and supporter.

Earlier, at the global level, there was a merger between Hewlett-Packard, Heloise Merger Corporation and Compaq Computer Corporation. A new entity called Hewlett-Packard Company took shape on 7 May 2002 in the US. Compaq Computer Corporation is the holding company of Compaq Computer Holdings UK, that holds 51% equity stake in Digital GlobalSoft.

Meanwhile, the company remains confident of its long term business outlook. Even as the duration of the sales cycle has extended due to increased customer due diligence, the average size of individual orders have increased, adding to business sustainability from a long term perspective. Given the fast changing operating realities, the management continues to maintain a conservative performance view, the company has said.

In line with the earlier stated outlook, the performance for the rest of FY2003 will continue to be positive, the company said.