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MOSL: TECHNOLOGY-So far, so good; Deal wins in 1HCY19 v/s 1HCY18 suggest healthy

Technology: So far, so good; Deal wins in 1HCY19 v/s 1HCY18 suggest healthy, not cautious macros

 

• Amid claims of softening macros and multiple uncertainties, we compared the deal activity in 1HCY19 to that of 1HCY18, on the basis of key data points — aggregate deal TCVs as reported by ISG-One, and 1HCY19 deal TCVs at TCS, INFO and ACN.
• ISG had anticipated softer deal activity amid the on-going concerns around trade wars, Brexit and the recessionary fears around a few developed economies. However, deal activity has been surprisingly strong despite the macro headwinds. Pipeline is strong in ADM and IMS. ISG-One’s survey of most providers indicates positive growth patterns at the year-end.
• While order bookings for Accenture were on the softer side, the company reiterated its lumpy nature on a quarterly basis, brushing off any demand concerns. It expects to play catch-up given the strong pipeline.
• For INFO and TCS, deals TCV reflected a business-as-usual scenario in the June quarter. While the USD2.7b TCV figure at INFO was a historical high, it was steady growth, once adjusted for the inorganic contribution from Stater NV. (TCS started sharing this data from 2QCY18. For 1QCY18, we have approximated the TCV at USD6b, on the basis of Transamerica (USD2.5b), Prudential and Marks & Spencer – assuming these to be 60-70% of the total deals won).
• Execution on deals won should take care of the remainder of the calendar year. All entities mentioned above have cited a very healthy pipeline, suggesting that deal activity is likely to remain strong for the remainder of CY19. This, in turn, should bode positively for revenue growth over the next one year, notwithstanding any macro shocks.