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Sify (NASDAQ:SIFY) reported its Q1 numbers on 7/18/2006 and as I expected we also found out on Tuesday that Raju Vegesna is taking over as the new CEO of Sify.

As a Sify stock holder I can’t tell you how happy I am with the change at the top. I am not sure how Raju Vegesna is going to do in his new CEO role but I am willing to give him a chance. The best thing I heard from the conference call was hearing Raju Vegesna say that they are going to focus internationally. If they can grow internationally we can all expect Sify to grow at a much higher rate. Most of the Indian IT companies are making money internationally since technology in India is still at a very early stage. The number of Internet users in India is miniscule so Sify needs to focus on generating revenues internationally while it awaits the Indian Internet market to grow.

Let’s look at the highlights from the 1st Quarter (with my comments is bold):

* Sify reported revenues of $ 28.74 million for the quarter ended 30th June 2006, 29.1% higher than the quarter ended 30th June 2005. The sequential growth in revenues over the previous quarter was 2.5%. - Not impressed by the quarterly numbers at all.

* Sify ended the quarter with a cash balance of $ 55.27 million after capital expenditures of $6.7 million and the acquisition of Globe Travels, USA, during the fourth quarter - Healthy amount of cash still in the bank.

* Some nice wins in the VPN business: Bombay Dyeing, Fanuc, Globus, ICICI Webtrade, Mitsubishi, Park Hotels, Suzlon, Yesbank, and repeat orders from GE, Vishal Retail.

* New Level 4 Data Centre at Bangalore.

* Internet learning classes at Iways for a fee.

* Airline ticketing, hotel & holiday bookings etc will follow at Iway with the launch of such online services by Sify’s portal.

* Online Games: A3 - the MMORPG game increased its registered user count to over 50,000 with continued promotion of online games through the Game Dromes and iWays - The concurrent users playing A3 is 400 which is very low. It doesn’ t seem as though A3 has been successful. Is there still time? Can anyone confirm?

* Decreased margins in the broadband business - What’s Raju’s plan for the ISP part of the business?

* Revenues grew approximately 17% QoQ and 96% YoY - Almost doubled year over year in revenues. Broadband portal strategy seems to be paying off. More local portal launches coming up soon.

* Launch of -- I really like the local portal strategy.

* Sify signed new advertisers for its portals: Clear Trip, GE Money, Malaysia Tourism, National Geographic, Thomson Learning, Smash Hits, SP Jain Center of Management, Thumbs Up, Travel Guru, Wallet 365, X-Box and Yahoo.

* eCommerce in Portals accounted for 24% compared to 20% in Q4 - Nice to see this number growing.

* Broadband subscribers at 191,000 and Sify expects it to grow to about 350,000 at the end of this year - Sify is aiming to almost double their broadband subscriber rate by the end of this year.

* Sify will move beyond simple banner advertising into video advertising, video banners as well as television commercials, which are perfect for online videos.

This is a very important quarter coming up for Sify which will define my investment goal. I am currently long Sify but am not sure how Raju Vegesna is going to run the company. I expected him to take over the company when he bought a majority stake, so it didn’t really surprise me to hear him become the CEO. The old management had their chance but couldn’t deliver the numbers to impress Wall Street.

SIFY's most recent conference call transcript.

SIFY 1-yr chart:

SIFY 1-yr chart

Source: Can SIFY's New Management Turn the Company Around?