Software IPO: VanceInfo Competes with Infosys, Cognizant

VancInfo Technologies (VIT), a Chinese offshore IT service provider for major companies such as Microsoft (MSFT) and IBM (IBM), is expected to issue a public offering of its stock this week. The company's IT services include R&D services, enterprise solutions, application development and maintenance and quality assurance services.

All quotations are taken from the company's most recent SEC filing with a link provided.

VANCEINFO TECHNOLOGIES (VIT)
Business Overview (from prospectus)

We are an information technology, or IT, service provider and one of the leading offshore software development companies in China. We ranked among the top three Chinese offshore software development service providers for the North American and European markets as measured by 2006 revenues, according to International Data Corporation, or IDC, a leading independent market research firm. Our comprehensive range of IT services includes research and development services, or R&D services, enterprise solutions, application development and maintenance, or ADM, quality assurance and testing, as well as globalization and localization. We provide these services primarily to corporations headquartered in the United States, Europe, Japan and China, targeting high-growth industries such as technology, telecommunications, financial services, manufacturing, retail and distribution.

Offering: 7.7 million shares at $7.50 - $9.50 per share. Net proceeds of approximately US$45.8 million will be used for general corporate purposes, including capital expenditures, such as in connection with establishing new offices to expand the company's delivery platform, and funding possible future strategic acquisitions.

Lead Underwriters: Citi, Merrill Lynch

Financial Highlights:

Our net revenues were US$25.4 million in the six months ended June 30, 2007, representing an increase of 128.4% from our net revenues of US$11.1 million in the six months ended June 30, 2006... In the six months ended June 30, 2007, our cost of revenues was US$15.7 million, representing an increase of 124.4% from US$7.0 million in the six months ended June 30, 2006... Our gross profit in the six months ended June 30, 2007 was US$9.7 million, representing an increase of 135.3% from US$4.1 million in the six months ended June 30, 2006. Gross profit as a percentage of our net revenues increased to 38.3% in the six months ended June 30, 2007 from 37.2% in the six months ended June 30, 2006... Our net income was US$3.6 million in the six months ended June 30, 2007, representing an increase of 110.6% from US$1.7 million in the six months ended June 30, 2006. Net income as a percentage of our net revenues decreased to 14.0% in the six months ended June 30, 2007 from 15.2% in the six months ended June 30, 2006.

Competition:

The offshore IT services market is highly competitive. Competition in the offshore IT services market depends in large part on industry experience, quality of the services offered, reputation, marketing and selling skills as well as price. No single participant or group of participants dominates the entire market or any of the segments, and we expect competition to intensify. We compete in the offshore IT services market primarily with:

Chinese IT services companies, such as Achievo, Chinasoft International, DHC, Hisoft, and SinoCom;

Indian IT services companies, such as Cognizant (CTSH), HCL, Infosys (INFY), Satyam (SAY), Symphony, TCS and Wipro (WIT); and

Offshore IT service providers in emerging outsourcing destinations with low wage costs such as the Southeast Asia, Latin America and Eastern Europe.

Additional Resources:

• Company website
• Online road show
• AP: 'VanceInfo Technologies Files for IPO'