Yes, we've won a nice size contract, 1 Billion plus over eight years, but we hav'ta take on 4000 employees. This is why the stock is doing the doggy paddle in Paris. European Players, many of whom are Savvy Investors, are simply not impressed with the Reliance win. And when the NYSE opens at 9:30 est, I sincerely hope for the best but I suspect that American Market Mavens will see the win as a washout, w/no significant upside to our profit structure. If we won the contract w/o strings, yes, it would be a huge win/win. But as it stands, I don't believe we'll even get a ten cent pop.
Did you ever call tech support here in the U.S. for most American companies?
chances are you'll wind up with someone in India at least half the time.
The reason is...they work for so little that it's like paying chinese worker to manufacture parts...
Google "per capita income in India" and you'll understand better.
It is FAR bettter to take on a deal like this and then shift that work load to their work force.
Sentiment: Strong Buy
Just to through out some simple numbers that I assumed were completely obvious. Correct me where I'm wrong.
The contract is worth around $1 Billion over 8 years.
That makes $125 Million per year.
ALU acquires 4000 employees from Reliance that have to get paid.
Here is where it gets interesting. Reliance is an Indian company, and I assume they have Indian workers.
India has a staggering per capita income of (...drum roll..) $1219.
Let's just be generous and say the the Alcatel Lucent employees will get bigger wages and will give them over 8 times the average at $10,000 a year. (As a side note, that would be the same as saying every worker in Alcatel Lucent USA would be making about $300,000 a year. I just pointing out the $10,000 average is ludicrous as I've seen Indian computer programmers willing to work for $3 or $4 per hour.)
So, with that math, cost per year for all employees would be $40 Million. You could probably safely use 25% to 50% of that number to get a more realistic cost, but, not knowing the other associated cost for materials, offices, computers, tariffs, etc., I'll just stick with that number.
So, that totals $85 Million net per year or 68%.
I think this is why Rajeev Singh-Molares, President, Asia-Pacific with Alcatel-Lucent said:
“This business association is an extension of our long-standing relationship with Reliance Communications, and our commitment to India. It also demonstrates our renewed focus on managed services as we apply greater selectivity on more value-added contracts."
That sounds like value-added to me!
Sentiment: Strong Buy
Link for contract info.
"During, the 2008 contract between ALU and RCOM, 3000 employees migrated to ALU for managing RCOMs pan India wireless network. Now the contract is for South and East India with a greater scope. 4000 employees will move to ALU from RCOM... At the end of the transition there would be a potential net addition of 1000 employees," Alcatel-Lucent said.
I just looked up the salary for an aLu 'senior software engineer' in India -- it's under $12,000 a year (compared to $122,000 in NYC). office workers would make a fraction of that.
also, I have seen complaints from aLu employees about a tier system of employment where some workers are 'off-roll', and do not receive the same benefits or job security as on-roll employees. we can't even guess at the terms of the indian workers' employment.
"About 4,000 people, about 15 percent of the Indian company's employees, will move to Alcatel-Lucent as part of the deal, Gurdeep Singh, Chief Executive of Reliance Communications' wireless business, said on Wednesday."
Excerpt taken from Reuters.