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Flextronics to acquire 55 percent of Hughes Software Systems
08-06-2004 electronics /Flextronics source: Flextronics
Flextronics, The DIRECTV Group, Inc., and Hughes Network Systems, Inc. (a wholly-owned subsidiary of DIRECTV) today announced that they have signed an agreement whereby Flextronics will acquire Hughes Network Systems' entire ownership stake of fifty-five percent (55%) in Hughes Software Systems (HSS), a leading provider of software products and services to telecom infrastructure companies.
  Flextronics (NASDAQ: FLEX), The DIRECTV Group, Inc. (NYSE: DTV), and Hughes Network Systems, Inc. (a wholly-owned subsidiary of DIRECTV) today announced that they have signed an agreement whereby Flextronics will acquire Hughes Network Systems' entire ownership stake of fifty-five percent (55%) in Hughes Software Systems (HSS), a leading provider of software products and services to telecom infrastructure companies. HSS' shares trade in India on the Bombay Stock Exchange (BSE:532266) and the National Stock Exchange (NSE:HUGHESSOFT). Some of its customers include many of the world's largest telecom companies. HSS reported revenue of Rs3,604 million (approximately US$80 million) and net income of Rs769 million (approximately US$17 million) in its fiscal year ended March 31, 2004. Revenues grew approximately 63% in fiscal 2004 and are expected to grow approximately 25% in fiscal 2005. HSS provides convergent software solutions for fixed and mobile networks for both voice and data. Its products and services span a variety of domains, such as optical networks, wireless networks, satellite networks, switching systems, convergent networks and broadband networks. HSS' product portfolio includes protocol stacks and value-added frameworks and are comprised of licensable technologies focused on Voice over Packets (VoP), SS7, broadband and wireless (GPRS/UMTS) products that provide customers with open architecture solutions. This innovative combination of products and services offered by Flextronics and HSS will provide a complete outsourcing solution to telecom Original Equipment Manufacturers (OEMs). A telecom product can require the following end-to-end supply chain outsourcing services during its development life cycle: Engineering Services: includes industrial and mechanical design, hardware design, embedded and application software development, semiconductor design, PCB design, optical design, tooling design, electronic system design, system validation, and test development. System Assembly and Manufacturing: manufacturing services includes printed circuit board assembly (PCBA), full systems assembly and integration, the fabrication and assembly of plastic and metal enclosures, the fabrication of printed circuit boards and backplanes and the fabrication and assembly of photonics components. Logistics Services: includes freight forwarding, warehousing/inventory management and outbound/e-commerce solutions to move products through a global supply chain network. After-Market Services: includes repair and warranty services as well as network and communications installation and maintenance. By partnering with HSS, the premier telecom software company in India, Flextronics is the first EMS provider to offer embedded and application software development for telecom infrastructure products and customers. Flextronics can now provide a complete outsourcing solution to telecom OEMs. "This partnership should offer significant opportunities to cross-sell our respective products and services to a very complimentary telecom customer base," said Michael E. Marks, chief executive officer of Flextronics. He added, "We are committed to expanding design services into every product area where we have a manufacturing presence. HSS will enable us to move quickly into the telecom infrastructure space. We are thrilled to have this opportunity." "We are very excited about the prospect of creating more value for our customers," stated Arun Kumar, President and Managing Director of HSS. He further said, "We believe by teaming with Flextronics, HSS will be better positioned to enhance our offerings. The transaction will also present our employees with opportunities for growth on a more global scale." Flextronics will pay Rs547 per share, with total cash consideration paid to Hughes Networks Systems of approximately US$226 million. Subject to regulatory approval, the transaction is expected to close no later than October 2004. Pursuant to Indian securities regulations, Flextronics is required to make an open offer on or about June 11, 2004 to purchase an additional twenty percent (20%) of the shares outstanding from the remaining shareholders at a price no less than Rs547. There is no obligation for shareholders to accept this open offer and there is no assurance that any shares will be offered for sale to Flextronics. The approximate total purchase price of US$226 million to be paid to Hughes Network Systems, along with the open offer of US$82 million, assuming an offer price of Rs547, is required to be funded by Flextronics on the date the open offer is initiated. Flextronics was advised by Citigroup Global Markets, Inc. and its affiliate Citigroup Global Markets India Pvt Ltd., while The DIRECTV Group and its subsidiaries were advised by DSP Merrill Lynch Limited.
 
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