Infosys possibly on an acquisition mode. What should investors do?

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Infosys possibly on an acquisition mode
Infosys: Quotes, News
BSE 999.30BSE Quote6.85 (0.69%)
NSE 997.50NSE Quote6 (0.60%)
Infosys Technologies, the second largest information technology company will be buying US-based information technology firm, according to a newspaper report by DNA.

There was no mention of the target company's name but the deal ticket could be worth approximately $500-750 million dollars.

The official stand of the company's spokesperson was, “We do not comment on rumours."

Till now..

The company has avoided any inorganic growth on its part as it did not subscribe hard enough on the view. Its rivals HCL had outbid Infosys on the Axon deal by paying $680 million. And this acquisition has helped HCL gain higher market share.

Meanwhile, Infosys stayed away from other potential targets.

And TCS on the other hand bought the captive unit of Citigroup for $500 million dollar. This helped TCS to increase its share in the US market and this also helped it survive the slowdown.

TCS bought the captive unit of global banking giant Citigroup for nearly $500 million. The transaction helped TCS get more than its fair share of the technology spend by US financial services industry as it shook off the slowdown blues.

What Next..

Now that co-founder Narayan Murthy has retired and KV Kamath has been appointed as the new Chairman of the company. There is expectations or that the company will aggressively try and push the boundaries of its reach. As of June 30, 2011, Infosys has cash and equivalents of Rs 16,916 crore.

Since, another economic recession remains at large in US and Europe; acquiring and integrating a large firm present its own set of challenges even if the same will benefit in the long-term.

What should investors do?

VIEW: Technicals are not in favor of this company, Infosys. Simple moving averages show a down turn in the company since March 2011. Fast Stochastic Oscillator shows a bearish pattern as it has a falling pattern and is currently less than 60. On the MACD, there is a huge divergence, a clear pattern will emerge only in 3-4 days. DISCLAIMER: The views expressed in this article are the views of the author and do not reflect the views of our company. does not take any responsibility for any losses incurred by investors who take their cues from the above article

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