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Dayanand Menashi

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  • Oracle: Incredible Reward To Risk [View article]
    A look at Oracle's latest 10-Q . Company generated $6.4bn Cash from operations (For six months May-2012 to Nov-2012) . Spent $660mn and $350mn on Cap exp. The rest $6bn was spent on share buybacks. The share count reduced from 5.13bn to 4.90 bn (reduction of 200mn shares)

    Even if Oracle's earnings are flat for next 6 months and its able to buyback 200mn more shares. The shares outstanding will be reduced 4.7bn and assuming Net income to be $5bn its diluted EPS for six months will be $1.06/share . Thus giving $2.00/ share for the year 2012-2013.

    This is the lower end of my estimate. If we add 15% to it the higer end turns out to be $2.30 / share. Current stock price is $35.54. Thus multiple is 15.4 (which I assume is OK for the company of this size and biz model)

    As per current stock price of $35.54 the business is valued at $168bn. I would wait for some pull back and would buy when stock is below $31.00
    Jan 29 12:15 AM | Likes Like |Link to Comment
  • Why Delphi Automotive Is Likely Poised For Solid Upside [View article]
    I just wanted to highlight one very important aspect about this company which is to do with its Tax status. As of now its fighting in court over it. If IRS wins then the company might owe large amounts of $$$ to Uncle sam......this I feel is a risk that cant be downplayed....

    Following are the details of its Tax status . Its published in its latest 10-Q report.

    Tax return filing determinations and elections
    Delphi Automotive LLP, which acquired the automotive supply and other businesses of the Predecessor on October 6, 2009, the Acquisition Date, was established on August 19, 2009 as a limited liability partnership incorporated under the laws of England and Wales. At the time of its formation, Delphi Automotive LLP elected to be treated as a partnership for U.S. federal income tax purposes. Prior to the Acquisition Date, the Internal Revenue Service (the “IRS”) issued Notice 2009-78 (the “Notice”) announcing its intent to issue regulations under Section 7874 of the Internal Revenue Code of 1986, as amended (the “Code”), with an effective date prior to the Acquisition Date. If regulations as described in the Notice are issued with the effective date indicated in the Notice and with no exceptions for transactions that were subject to binding commitments on that date, the Company believes there is a significant risk that the IRS may assert that Delphi Automotive LLP, and as a result Delphi Automotive PLC, should be treated as a domestic corporation for U.S. federal income tax purposes, retroactive to the Acquisition Date. If Delphi Automotive LLP were treated as a domestic corporation for U.S. federal income tax purposes, the Company expects that, although it is incorporated under the laws of Jersey and a tax resident in the U.K., it would also be treated as a domestic corporation for U.S. federal income tax purposes.
    Delphi Automotive LLP has filed U.S. federal partnership tax returns for 2009 and 2010. In light of the Notice, the IRS is currently reviewing whether Section 7874 applies to Delphi Automotive LLP’s acquisition of the automotive supply and other businesses of the Predecessor. The Company believes, after consultation with counsel, that neither Delphi Automotive LLP nor Delphi Automotive PLC should be treated as domestic corporations for U.S. federal income tax purposes, and intends to vigorously defend any assertion by the IRS to the contrary, including through litigation if the Company were unable to reach a satisfactory resolution with the IRS. However, no assurance can be given that the IRS will not contend, or that a court would not conclude, that Delphi Automotive LLP, and therefore Delphi Automotive PLC should not be treated as a domestic corporation for U.S. federal income tax purposes. No accrual for this matter has been recorded as of June 30, 2012.
    If the Company was treated as a domestic corporation for U.S. federal income tax purposes, the Company would be subject to U.S. federal income tax on its worldwide taxable income, including some or all of the distributions from subsidiaries as well as some of the undistributed earnings of foreign subsidiaries that constitute “controlled foreign corporations.” This could have a material adverse impact on our future tax liability related to these distributions and earnings. Future cash distributions made by the Company to non-U.S. shareholders could be subject to U.S. income tax withholding at a rate of 30%, unless reduced or eliminated by a tax treaty. In addition, the Company could be liable for additional U.S. federal income taxes on such distributions and earnings, and for the failure by Delphi Automotive LLP to withhold U.S. income taxes on distributions to its non-U.S. members, for periods beginning on or after, the Acquisition Date, which liability could have a material adverse impact on our results of operations and financial condition.
    Aug 5 12:19 AM | Likes Like |Link to Comment
  • What Facebook Is Really Worth [View article]
    Hi Shaifel,
    I agree with your point that Facebook is being priced way too high than what's its current earning power.

    I have been following Facebook's IPO roadshow and have just heard about its lofty user base of 900 million people and how much its growing.....but there has been very little information as to how these users will eventually be monetized....

    Let us say that by some magical means I get exclusive access to world's largest library which has all the books in the world. Does that instantly make me the most knowledgeable person in the world???.....I dont think so.....even though I have the potential to become one because of my access to all the knowledge but unless and until I have the means and mode to digest all that knowledge , all those books will mean little to me.

    Similarly Facebook should have a stellar plan to make use of all that personal information they have. For instance I love to play tennis, but have yet to see any advertisement of tennis lesson on my facebook page. Instead I see the advertisement of mobile phones which to me are least interesting, not that I dont love phones. But that's not something I would like to explore.

    Bottomline - Facebook has done a tremendous job of creating a unique platform that lets people explore about who they are. But they have done a very ordinary job of monetizing it.

    Last but not the least, it pays to read the following investment lesson from Buffett "Investment vs Speculation"

    May 15 09:56 AM | Likes Like |Link to Comment
  • All That's Wrong with the AIG Bailout [View article]
    Has anyone thought of the liability part of AIG's balance sheet and which are the companies that are paying it. As June-30 / 2008 it had a liability of $971bn. Out of which $162bn was long term borrowings. All the people who leant that money can just forget about it because it will be next to impossible to get money from its new owner.
    Sep 17 06:21 PM | Likes Like |Link to Comment
  • Infosys Needs to Diversify Out of Body-Shopping [View article]
    IT outsourcing has in itself become a "CENTER OF EXCELLENCE" and calling it bodyshopping shows the ignorance towards this new business model. Achieving success in this business is as tough as achieving success is any other kind of IT business like Hardware or software development.

    I feel Infosys is in the right track and have created their own circle of competance. Any further advancement should be linked with their present competence.

    The latest contract from Phillips is worth $250mn . I am sure any guy who works in IT would agree the degree of complexness involved in winning such contracts.

    Everyone always talks about how INFY can adapt the model of Accenture and grow further, but I would say before attempting that they should first become India's#1 IT consulting company by exceeding TCS's revenues....
    Dec 6 11:35 PM | Likes Like |Link to Comment
  • Stewart's Shop of IT Consulting [View article]
    I guess you have not Understood Perficient's core competance.They are not in the market for the big IT outsourcing deals.They mostly deal with projects that need quick turnaround and can solely dealt with onshore teams.
    Sep 20 10:22 PM | Likes Like |Link to Comment
  • Which IT Outsourcing Stock is the Best? [View article]
    I agree with your point that the core competance of offshoring gained by the Indian IT outsourcing heavy weigths cannot be mimmiced by the MNCs in few years. They would take years before they can achieve expertise in outsourcing field.

    Coming back to your point on which stock is best for investment, it should be kept in mind that not all good companies are good stocks to invest. The golden rule of investing is to figure out "IS THE STOCK UNDERVALUED COMPARED TO ITS INTRINSIC VALUE".

    In order to explain my point: Just consider the case of Microsoft. It is one of the best companies in the world. Their growth has been phenomenal in recent years (24% growth compounded annually).Following is their growth of net income last five years.

    2002 $5.3bn
    2003 $7.5bn
    2004 $8.1bn
    2005 $12.2bn
    2006 $12.5bn

    Now looking at the stock price, it was $30 in may-2002 and was around the same price in May-2007. The reason being the stock has been overvalued last few years and the market has been contantly correcting its value by reducing its P/E. Which during the dotcom bust was around 84 and has come down to around 20 now.

    Following are the P/Es of some of the leading outsourcing companies.

    Infy P/E = 28.5
    Wipro P/E = 27.4
    Cognizant P/E = 36.3

    IBM P/E = 17.9
    ACN P/E = 19.5
    EDS P/E = 18.2

    I guess your analysis should be more on evaluating the P/E of the above mentioned stocks and figuring out if they would remain the same in near future.

    visit me @ annualreportanalysis.b...
    Sep 11 10:17 AM | Likes Like |Link to Comment
  • NetSuite: The Next Hot Tech IPO? [View article]
    Wonderful analysis.I got your bottomline that Netsuite's CRM and E-commerce capabilities. I just had couple of points to discuss.

    1.As per your article the market for small sized businesses that use ERP and SAP was 31% of $12.7bn which is around $4bn. The projected growth rate is 11%. This means that to grow at present rate the company has to successfully acquire some small players. Any insight on this???

    2. As per the S-1 filing the combined accumulated deficit has been $193mn. I guess this might continue in near future before they attain profitability. Let us assume that the net accumulated deficit reaches $200mn before they start becoming profitable. What will be the time frame required to generate $200mn cash???

    visit me @ annualreportanalysis.b...
    Sep 4 04:42 PM | Likes Like |Link to Comment
  • How Much Longer Will Indian Outsourcers Offer Cost Advantages? [View article]
    If you see my equation, it boils down to the fact that the USD will change from Rs 40 to Rs 23 in 10 years.This is based on the fact that USD was Rs 16 in 1990 and Rs 40 by 1998. So actually I am still conservative in my approach.

    I considered 10 years experienced professional just as a benchmark.The 3-5 exp folks comparison will also be in a similar line.

    Aug 18 09:53 PM | Likes Like |Link to Comment
  • How Much Longer Will Indian Outsourcers Offer Cost Advantages? [View article]
    The gist of your reply what I understand is "VALUE ADDITION". I agree with you on that point.It is the oldest business rule that has never changed nor will ever change.In essence, till you bring value addition to your customers they will keep on coming to you.The day you stop it they will go somewhere else.

    Till date the Indian consulting companies were bringing the value addition of "LOWER COSTS".But companies like Accenture, previously known as Andersen consulting were established in fifties and developed there expertise in helping the customers in improving their business processes.In fact in those days a consultant was purely hired for those reasons.

    <b>FIRST PROJECT BY ARTHUR ANDERSEN :</b> Accenture originated as the consulting division of Arthur Andersen which was founded in 1913 by Arthur Andersen and Clarence DeLany as Andersen, DeLany &amp; Co. Its origin goes back to 1953, when General Electric (GE) asked Arthur Andersen to undertake a feasibility study about payroll processing and manufacturing automation using computers for GE's Appliance Park manufacturing facility near Louisville, Kentucky. Arthur Andersen recommended installation of a UNIVAC I computer and printer, and GE agreed, which is the start of what became the first-ever commercial computer in the United States. Joe Glickauf was Arthur Andersen's project leader for the GE engagement and was responsible for the payroll processing automation, launching the era of data processing. Considered to be the father of computer consulting, Glickauf headed the Arthur Andersen administrative services division for 12 years.

    Accenture since its first project fifty years back has mastered the art of improving business processes of its customers , the most important thing to note is that it has taken them decades to master this.The challenge for Indian IT consulting companies is to mirror this achievement in years instead of decades.

    <b>WHEN CAN WE SAY INDIAN IT CONSULTING COMPANIES HAVE ACHIEVED THIS THRESHOLD? :</b> The day revenue per employee for Infy or Wipro is same as that of Accenture or HP. We all know its a long way to go....
    Aug 17 10:44 AM | Likes Like |Link to Comment
  • Is Convergys a Value Play At Current Levels? [View article]
    STRONG BUY.....provided you have the stomach for value investing. I mean an investment time horizon of around five years...
    Aug 14 10:28 PM | Likes Like |Link to Comment
  • Wipro's Infocrossing Acquisition Could Herald A New Age of Buyouts [View article]
    Yes Microsoft could buy Patni and use its resources for software development provided it suits there acquisition criteria. Microsoft bought hotmail for 400mn in 1996.As such hotmail was a free e-mail service providing very little revenue. But when it was combined with MSN it became a great asset with huge potential of getting advertising revenues.

    Coming back to your point on Patni being acquired by Microsoft. Patni's resources are specializing in several technologiies: mainframe, web, SAP, microsoft to name a few....this means more than half of the resources wont be much of use for Microsoft's product development.........a cobol programmer with 10 years experience will be of little value to microsoft, and 30% of Patni's resources are COBOl experts (based on my personal experience of working in that company for 7 years).

    Let us say there is an outsourcing company in India that is specializing in microsoft technologies and has about 1,000 employees and is selling at $x. If it costs Microsoft India more than $x to add 1,000 employees then obviously they would jump on that Indian outsourcing company because Microsoft will get its additional employees at a cheaper of now I dont see any such company in India.
    Aug 9 01:56 PM | Likes Like |Link to Comment
  • Wipro's Infocrossing Acquisition Could Herald A New Age of Buyouts [View article]
    It is not necessary for an intelligent answer to contain world's all financial jargons . With my experience of interaction with an averrage investor , I guess he or she is looking for business analysis he or she understands which is PLAIN ENGLISH.
    Aug 9 08:48 AM | Likes Like |Link to Comment
  • Wipro's Infocrossing Acquisition Could Herald A New Age of Buyouts [View article]
    Coming out of the intricacies of finacial accounting on calculations of cash flow, lets talk PLAIN ENGLISH. As the whole deal was on cash so any shareholder will be curious to know as to what will be the time frame Wipro expects before it gets back its $400mn.As we are discussing IT outsourcing business so I guess it is not unusual to anticipate 20% ROI, because that is quite conservative compared to the growth rate of industry.

    In this high growth IT outsourcing indutry if Wipro says that they will invest $400mn and wait for 10 years to get their money back (assuming your single digit ROI). The shareholders will get a heart attack.

    The very reason people are investing in IT outsourcing business is because of its high growth rate.If they were to expect single digit growth rate then they might go to some less risk financial companies like Citigroup.

    BASIS FOR WIPRO'S INVESTMENT : The whole world knows that Infocrossing will nobe generating $400mn in cash flow next 5 years, and that is not Wipro estimates. The reason they are taking over this infrastructure management company is to use Infocrossing's standing in the market to help its core business of application outsourcing.

    Explaining this in plain english, let us say there is a IT staffing company in India that had 10 programmers who were working for Indian clients and earning about $1,000 evey month. If an American software company buys that Indian staffing company for $100,000 then they dont expect the programmers to generate a cash flow of $100,000 by working for Indian clients. What they would instead do is are-deploy those resources to develop their latest product . If they are able to develop the product in two years and sell the software product to its clients earning a net profit of $100,000 then they have recouped their investment in 5 years. Plus they have created two assets :
    1. the software product that will have earning power for years to come.
    2. Experienced programmers who are well versed with their product development.

    STRATEGY OF REDEPLOYING THE ASSETS : This is the strategy Wipro is going to undertake once it acquires the company, it is going to re-deploy the assets in line with its business model.
    Aug 8 11:41 AM | Likes Like |Link to Comment
  • Patni: Hot As Indian Curry [View article]
    Thanks for your time in reading my blog, just to give you a brief background about myself.I started my career with Patni, worked for seven years and last three years I am working independently through MNCs (by being third party contractor) on outsourcing assignments. In fact more than half of my staff is from Patni. So I know handson how the value of cooks change by changing the restaurant...)

    People in the Industry very much value the experience that folks get while working for companies like PCS and TCS. The reason being these guys were the founders of IT outsourcing and have mastered the strategy of coverting fresh college grads into seasoned outsourcing pros.

    Aug 3 11:04 PM | Likes Like |Link to Comment