On Sept 11th 2007, in the article "Which IT outsourcing stock is the best," I had mentioned that Infosys (INFY), TCS and other big Indian IT companies can use their cash and raise debt to acquire companies like Electronic Data Systems (EDS).

It makes a lot of sense for HP (HPQ) as well to acquire a company like EDS, primarily to boost its own services and technology consultancy business. Since the acquisition isn’t at a huge premium to the prevailing price, it will provide significant synergies without hurting the balance sheet (HP has over $11 billion CASH on its balance sheet). A $23 billion revenue company pruchased at about $13 billion is quite a bargain, if not a steal. If HP can manage more cost cuts by leveraging its offshore base while keeping the EDS clients happy post-acquisition, then it can even help its bottom line to a great extent.

Coach, Inc. (COH) is engaged in design and marketing of accessories and gifts for men and women in the United States and internationally. Coach’s product offerings include handbags, women’s and men’s accessories, footwear, outerwear, business cases, sunwear, watches, travel bags, jewelry and fragrance. The product mix has not changed significantly in the past three years. 65% of the revenues come from Handbags and 28% through accessories and the 8% from other products. The products cater to the premium segment and have very good brand recognition. Coach Inc. conceptualizes and designs its complete range of products from New York.

Segments:

The Indian IT companies have posted record growth in the past decade. However, if the past year's stock performance is anything to go by, then one can sense skepticism in the minds of analysts and investors regarding the future prospects. The key concerns are the rising rupee, domestic salary hikes, reduction in tax sops and whether these companies are capable of moving up the value chain.