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PUBLICATION: www.PC World .com DATE: April 8,2010

HP's MphasiS Buys Fortify for Remote Services

By John Ribeiro, IDG News Service

MphasiS, an Indian IT services subsidiary of Hewlett-Packard, said on Thursday that it has signed a definitive agreement to acquire Fortify Infrastructure Services, a provider of offshore based remote IT operations and management (ROM) services.

MphasiS will be paying US$15.5 million up front in an all-cash deal, followed by two performance-related payments over two-and-half years, said Ganesh Ayyar, CEO of MphasiS.

Privately-held Fortify has annual revenue of about $20 million, and operations in the U.S. and India. The acquisition is expected to be completed over the next six weeks.

Besides bringing 24 clients to MphasiS, privately-held Fortify also has the platform and processes to offer customers outcome-based services relating to both technical and business results, Ayyar said. MphasiS will also be merging some 280 staff from Fortify into its operations, he said.

As it expands into the remote services market, MphasiS expects that its offshore delivery of services at a low cost will be attractive to its target market of mid-market customers.

The market for remote monitoring from offshore locations is about $4 billion, and will grow about 30 percent this year, according to Ayyar. About $1.2 billion of that business is from mid-market customers, who are looking for partners to solve the challenges of operating and managing their IT, he said.

HP owns close to 62 percent in MphasiS which is listed on Indian stock exchanges. The company was earlier a subsidiary of Electronic Data Systems (EDS) which was later acquired by HP.

About 58 percent of MphasiS current business comes from HP's clients, Ayyar said. About 10 to 12 percent of business comes directly from HP.

MphasiS currently specializes in application development and maintenance, business process outsourcing, and IT infrastructure management, Ayyar said. Application development and maintenance account for 67 percent of revenue.

The company had 35,690 staff at the end of January. http://www.pcworld.com/businesscenter/article/193775/hps_mphasis_buys_fortify_for_remote_services.html

PUBLICATION: www. IT World.com DATE: April 8,2010

HP's MphasiS buys Fortify for remote services

The Indian outsourcing subsidiary plans to expand its offering in remote IT operations and management services by John Ribeiro

April 8, 2010, 06:41 AM — IDG News Service —

MphasiS will be paying US$15.5 million up front in an all-cash deal, followed by two performance-related payments over two-and-half years, said Ganesh Ayyar, CEO of MphasiS.

Privately-held Fortify has annual revenue of about $20 million, and operations in the U.S. and India. The acquisition is expected to be completed over the next six weeks.

As it expands into the remote services market, MphasiS expects that its offshore delivery of services at a low cost will be attractive to its target market of mid-market customers.

HP owns close to 62 percent in MphasiS which is listed on Indian stock exchanges. The company was earlier a subsidiary of Electronic Data Systems (EDS) which was later acquired by HP.

About 58 percent of MphasiS current business comes from HP's clients, Ayyar said. About 10 to 12 percent of business comes directly from HP.

The company had 35,690 staff at the end of January. http://www.itworld.com/it-managementstrategy/103902/hps-mphasis-buys-fortify-remote-services

PUBLICATION: www. IT World.com DATE: April 8,2010

MphasiS to Buy IT Infrastructure Provider Dhanya Ann Thoppil

BANGALORE -- Indian software services company MphasiS Ltd. is to buy privately held Fortify Infrastructure Services for an initial $15.5 million in a move that will partly reduce its huge revenue exposure to parent Hewlett-Packard Co.

In a cash deal, Bangalore-based MphasiS will buy 100% equity in the technology outsourcing services provider, which has operations in India and the U.S., gaining access to Fortify Infrastructure's 24 customers.

MphasiS will also pay additional amounts to Fortify Infrastructure over the next two-and-a-half years if it achieves certain revenue and profit targets, Chief Executive Ganesh Ayyar told Dow Jones Newswires Thursday.

The target is set over the current annual revenue of $20 million that Fortify books, Mr. Ayyar added.

"The acquisition will give MphasiS access to marquee customers, an experienced management team, a talent pool of highly specialized professionals..." MphasiS said in a statement.

The acquisition comes as MphasiS, which has so far been shielded from the global slowdown because of its direct work and co-projects with H-P, sees pricing pressure from the parent. The company saw a reduction in billing rates at the end of 2009 from H-P within its two main segments--infrastructure technology outsourcing and business process outsourcing.

H-P, which accounts for about 70% of MphasiS revenues, acquired the Indian company's parent, Electronic Data Systems Corp., in May 2008.

This is the second acquisition by MphasiS in less than a year. The company's previous acquisition was in August, when--in an all-cash deal--it bought an Indian unit of American International Group Inc., which provides software services exclusively to the U.S.-based insurer.

The latest deal will also be funded through internal cash, Mr. Ayyar said, adding that the company had about $256 million in cash as of end January.

Mr. Ayyar also expects the deal to close in the next six weeks, after which the buy will start adding to revenue and profit. "This is a small deal for them and looks fairly valued also," said a Mumbai-based analyst, who didn't want to be named. The additional payment would be less than the initial $15.5 million as they have already taken 100% equity, he added. Also, the 24 customers from Fortify are largely non-H-P clients.

Avendus Capital was the adviser to MphasiS on the deal. http://online.wsj.com/article/SB10001424052702304198004575171412481054270.html?mod=googlenews_wsj

PUBLICATION: www.in.reuters.com DATE: April 8,2010

MphasiS to buy Fortify Infrastructure Services

MUMBAI (Reuters) - MphasiS Ltd said on Thursday it has signed a deal to acquire privately held IT services firm Fortify Infrastructure Services. Financial details were not disclosed.

Fortify Infrastructure provides remote IT operations and management services and has operations in India and the U.S., MphasiS said in a statement to the stock exchange. http://in.reuters.com/article/businessNews/idINIndia-47528920100408

PUBLICATION: www.vccircle.com DATE: April 8,2010

Mphasis Acquires US Firm Fortify Infrastructure Services

Private equity firm Baring Private Equity Partners India holds 10.4% stake in Mphasis. Mphasis Limited, a Bangalore-based applications and business process outsourcing (BPO) company, is acquiring Fortify Infrastructure Services Inc, an offshore remote IT operations and management (ROM) services firm in the US. Fortify has operations in India as well, and has a command center in Pune, Maharastra, it said in a statement.

VCCircle has learnt that the deal is a combination of upfront payment of $15 million by Mphasis and earnouts. The revenue of privately-held Fortify is understood to be in the region of $20 million. Avendus Capital has acted as advisor to Mphasis in the transaction.

According to IT sector observers, infrastructure management is a hotly contested area. It is clearly one of the fastest growing and highly scalable business in long-term IT services play. So, acquiring a good asset in the US corridor is important especially since there are not too many quality assets up for sale.

The shares of Mphasis were traded at Rs 650, up by Rs 16.65 or 2.63% at 12:30 pm in the BSE today. The acquisition follows Mphasis’ last year buy of AIG Systems Solutions Pvt Ltd (AIGSS), the captive back office arm of the insurance major, American International Group (AIG), in India. Fortify offers services including data center operations, systems and application infrastructure management, security services, network monitoring and virtualization. It caters to the mid market customers globally.

Mphasis says in the statement that the acquisition will give it access to an experienced management team and a talent pool of highly experienced professionals, besides new customers. “Mphasis will now be able to provide outcome based services which go beyond technical service level agreements (SLAs). This disruptive approach will be a game changer amongst the providers of offshore ROM services,” it explains.

Ganesh Ayyar, CEO, Mphasis, said, “As mid market customers are looking for partners to solve the challenges of operating and managing their IT, we see this as a sweet spot to provide cost effective and outcome based ROM services.”

Mphasis is a private equity-backed company. Leading PE firm Baring Private Equity Partners India had invested for around 47% stake in the company, and eventually made two successive exists as well. It sold 34.73% and 2.1% stake in 2006 and 2009, respectively. Currently, Baring holds 10.4% stake in Mphasis.

Mphasis currently has a total of 35,000 head counts, and has clients across financial, healthcare, communication, transportation, consumer & retail industries, and government sectors. http://www.vccircle.com/500/news/mphasis-acquires-us-firm-fortify-infrastructure-services

PUBLICATION: www.moneycontrol.com DATE: April 8,2010

To acquire Fortify Infra Services for USD 15.5m: Mphasis

In an interview with CNBC-TV18, Ganesh Ayyar, Chief Executive Officer and Director of Mphasis, spoke about the company acquiring Fortify Infra Services and his outlook for it. Here is a verbatim transcript of an exclusive interview with Ganesh Ayyar on CNBC-TV18. Also watch the accompanying video.

Q: Could you take us through the kind of money you have paid for this company and is this company profitable?

A: Yes it is a profitable company. We are absolutely excited about signing this agreement today. It is a company which is in the area of remote operations and management. They have a very exciting platform. This is an earn- out based transaction. The base consideration that we are paying is USD 15.5 million. This company has a turnover of USD 20 million at this point of time.

Q: Can you take us through what the synergies will it mean for Mphasis itself? Should we take this as a gain of USD 20 million in terms of topline from FY11 or is this going to be much more than that?

A: Obviously this has a significant potential beyond USD 20 million which they already have. We are entering into a space where we are going to be providing services around infrastructure and infrastructure application. Entering the space of offshore based remote operations and management. What is unique about this is that this company has a platform where they can focus on delivering business outcome based services which is very different because many people think that remote management is a commodity game. We are here to change the game. So it’s an exciting opportunity for us and this acquisition is more focused on the future than just USD 20 million of revenue that they are bringing in.

Q: You are saying the company has revenue of USD 20 million and you are buying it for USD 15 million, that is about 1.25 times sales that is reasonably cheap going by IT deals. What about margins? Does it work on low margins or single digit margins? Are you happy with the margin profile?

A: They have reasonable margins and the focus is on growing the offshore element of the solution even more. This is the base consideration and there is earn out involved with it. I believe that this is not just about consideration, it is about collectively the value proposition that we are going to bring to the market because Mphasis has tremendous track record in off shoring. Fortify has a exciting platform, they have 24 very happy customers and future potential. Together we are going to bring some game changing offerings to the market place.

Q: I did not understand what you meant by there is an earn-out involved?

A: We have a set of financial metrics spread over three years. Depending on the financial metrics being achieved there will be extra consideration which will be paid. So the base consideration is USD 15.5 and depending on the achievement of those financial targets extra consideration will be given.

Q: Is there any debt also comes along with it?

A: They have but it is nothing significant. Holistically, it’s creative to our business in terms of revenue and profits. Once the volume growth and offshore element goes up, profits improve and the pipeline is also reasonably strong. So it’s a very exciting opportunity for us. So we are not just acquiring it for USD 20 million of revenue, we are acquiring the company for the future potential that it brings with it?

Q: Is there any upper-limit to this earn-out clause? For how many years, quarters will this earn out clause be there? Can you share some more details on that?

A: Earn-out is spread over the next 2.5 years. There is an upper limit and there are specific metrics. Once they are achieved it is going to be paid out over two installments––first one at the end of 2011 and second one at the end of 2012.

Q: Assuming that the metrics are achieved what will be the payout?

A: Right now we have not revealed it to the market as to how much is the payout if the metrics are achieved. At an appropriate time we will be revealing it. When we looked at the transaction including earn-out this is positive play both for Fortify and for us.

Q: A word on Mphasis––sometime back you had said you are not considering wage hikes but then wage hikes had to be given. Any thoughts on how margins might pan out considering that you had to give out unplanned wage hike?

A: Last year and even in first quarter, we had a bonus model. So it is not that we did not have wage hikes, it was a variable cost model. So our P&L already accounted for the wage hikes in the form of bonus. Now the bonus has stopped and we are going for the traditional wage hike. So it does not have any impact on our P&L because it was already accounted in out financials. http://www.moneycontrol.com/news/business/to-acquire-fortify-infra-services-for-usd-155m-mphasis_450714- 0.html

PUBLICATION: www.profit.ndtv.com DATE: April 8,2010

MphasiS to acquire Fortify Infrastructure

Press Trust of India, April 8, 2010 (Bangalore)

MphasiS has reached a definitive agreement to acquire Fortify Infrastructure Services (FIS), a global provider of offshore based Remote IT Operations and Management (ROM) Services.

This acquisition of FIS (a privately held company with presence in India and the US) will give MphasiS access to marquee customers, an experienced management team, a talent pool of highly specialized professionals and a proven platform to provide ROM services. This will be part of a new business unit which focuses on ROM services, a company release said.

Through this acquisition, MphasiS will be able to provide outcome based services which go beyond technical SLAs.

"This acquisition will catapult us ahead as a provider of offshore based ROM services. Mid-market customers are looking for partners to solve the challenges of operating and managing their IT. We see this as our sweet spot to provide cost effective and outcome based ROM services," said Ganesh Ayyar, CEO MphasiS.

MphasiS will be acquiring a 100 per cent equity stake in Fortify Infrastructure Services in an all-cash transaction. http://beta.profit.ndtv.com/news/show/mphasis-to-acquire-fortify-infrastructure-34111

PUBLICATION: www.bloombergutv.com DATE: April 8,2010

MphasiS hardens on acquisition

MphasiS gained 2.53% to Rs 649.35 at 12:18 IST on BSE, after the company signed a pact to acquire 100% stake in Fortify Infrastructure Services in an all-cash deal. The company made this announcement during trading hours today, 8 April 2010.

Meanwhile, the BSE Sensex was down 109.59 points, or 0.61% to 17,860.43. On BSE, 82,765 shares were traded in the counter as against an average daily volume of 1.56 lakh shares in the past one quarter.

The stock hit a high of Rs 655.60 and a low of Rs 632.20 so far during the day. The stock had hit a lifetime high of Rs 796 on 17 November 2009 and a 52-week low of Rs 198.15 on 8 April 2009.

The large-cap stock had underperformed the market over the past one month till 7 April 2010, falling 5.54% as compared to the Sensex's 5.74% rise. It had also underperformed the market in the past one quarter, declining 9.91% as compared to the Sensex's return of 2.01%. The company's equity capital is Rs 209.71 crore. Face value per share is Rs 10.

The current price of Rs 649.35 discounts the company's Q1 January 2010 annualized EPS of Rs 45.51, by a PE multiple of 14.27.

Fortify Infrastructure Services is a global provider of offshore based remote IT operations & management (ROM) services. The company has its presence in India and in the US.

This acquisition will give MphasiS access to marquee customers, an experienced management team, a talent pool highly specialized professionals and a proven platform to provide ROM services.

MphasiS' net profit rose 3.65% to Rs 238.52 crore on 7.54% increase in net sales to Rs 960.32 crore in Q1 January 2010 over Q4 October 2009.

Bangalore-based MphasiS provides application services, business process outsourcing (BPO) services and infrastructure technology outsourcing (ITO) services. http://www.bloombergutv.com/stock-market/stocks/commentary/385448/mphasis-hardens-on-acquisition.html

PUBLICATION: www.ciol.com DATE: April 8,2010

Mphasis to 'fortify' itself in ROM mkt

The acquisition of Fortify Infra Svcs will give MphasiS access to marquee customers, an experienced management team, and a proven platform to provide ROM services

http://www.ciol.com/Enterprise/News-Reports/Mphasis-to-''fortify''-itself-in-ROM-mkt/8410134554/0/

PUBLICATION: www.economictimes.indiatimes.com DATE: April 8,2010

MphasiS to buy Fortify Infrastructure Services

MUMBAI: MphasiS Ltd said on Thursday it has signed a deal to acquire privately held IT services firm Fortify Infrastructure Services. Financial details were not disclosed.

Fortify Infrastructure provides remote IT operations and management services and has operations in India and the U.S., MphasiS said in a statement to the stock exchange. http://economictimes.indiatimes.com/infotech/ites/MphasiS-to-buy-Fortify-Infrastructure- Services/articleshow/5773656.cms

PUBLICATION: www.business-standard.com DATE: April 8,2010

MphasiS to buy Fortify Infrastructure Services

MphasiS, an HP subsidiary in India focussed on software services exports, has announced that it has reached a definitive agreement to acquire Fortify Infrastructure Services, a provider of offshore based Remote IT Operations and Management (ROM) Services for $15 million. in an all cash transaction.

Fortify Infrastructure Services is a privately held company with presence in India and the US and has revenues of $20 million. The acquisition will give MphasiS access to 20 customers along with a good pipeline of customers. Through this acquisition, MphasiS will be able to provide outcome based services which go beyond technical SLAs (service level agreement). http://www.business-standard.com/india/news/mphasis-to-buy-fortify-infrastructure-services/90646/on

PUBLICATION: www.mydigitalfc.com DATE: April 8,2010

Mphasis Ltd to acquire Fortify Infrastructure Services

Leading IT solutions and BPO services provider Mphasis Ltd today said it will acquire IT operations and management services provider Fortify Infrastructure Services in an all-cash deal.

The company has entered into an agreement to fully acquire Fortify Infrastructure Services, Mphasis said in a filing to the Bombay Stock Exchange (BSE).The firm, however, has not disclosed the cash paid for this buy-out.

"This acquisition will catapult us ahead as a provider of offshore based remote IT operations and management services," Mphasis Ltd CEO Ganesh Ayyar said.

Shares of Mphasis Ltd were trading at Rs 650.80 on the BSE, up 2.76 per cent from previous close. http://www.mydigitalfc.com/companies/mphasis-ltd-acquire-fortify-infrastructure-services-496

PUBLICATION: www.rttnews.com DATE: April 8,2010

MphasiS To Acquire Fortify Infrastructure Services

Services, a global provider of offshore based remote IT operations and Management or ROM services. Fortify Infrastructure Services is a private company having presence in India and U.S. Mphasis will be acquiring 100% equity stake in Fortify Infrastructure in an all-cash transaction. http://www.rttnews.com/Content/BreakingNews.aspx?Id=1263548&SM=1

PUBLICATION: www.news.yahoo.com DATE: April 8,2010

Mphasis Ltd to acquire Fortify Infrastructure Services

Mumbai, Apr 8 (PTI) Leading IT solutions and BPO services provider Mphasis Ltd today said it will acquire IT operations and management services provider Fortify Infrastructure Services in an all-cash deal. The company has entered into an agreement to fully acquire Fortify Infrastructure Services, Mphasis said in a filing to the Bombay Stock Exchange (BSE).

The firm, however, has not disclosed the cash paid for this buy-out. "This acquisition will catapult us ahead as a provider of offshore based remote IT operations and management services," Mphasis Ltd CEO Ganesh Ayyar said.

The acquisition would give Mphasis access to customers, management team and a platform to provide remote IT operations and management services, the filing added. Fortify Infrastructure Services is a privately held company with presence in India and the US. Shares of Mphasis Ltd were trading at Rs 650.80 on the BSE, up 2.76 per cent from previous close. http://in.news.yahoo.com/20/20100408/372/tbs-mphasis-ltd-to-acquire-fortify-infra.html

PUBLICATION: www.myiris.com DATE: April 8,2010

MphasiS to acquire Fortify Infra in all-cash transaction

MphasiS today announced that it has reached a definitive agreement to acquire Fortify Infrastructure Services, a global provider of offshore based Remote IT Operations and Management (ROM) Services.

Fortify Infrastructure Services is a privately held company with presence in India and the US. The acquisition will give MphasiS access to marquee customers, an experienced management team, a talent pool of highly specialized professionals and a proven platform to provide ROM services. This will be part of a new business unit which focuses on ROM services.

MphasiS is now positioned to take lead in the rapidly emerging market for offshore ROM services. Through this acquisition, MphasiS will be able to provide outcome based services which go beyond technical SLAs. This disruptive approach will be a game changer amongst providers of offshore ROM services.

``This acquisition will catapult us ahead as a provider of offshore based ROM services. Mid Market customers are looking for partners to solve the challenges of operating and managing their IT. We see this as our sweet spot to provide cost effective and outcome based ROM services,`` said Ganesh Ayyar, CEO MphasiS.

``Our proven industry track record in providing outcome-based ROM services, coupled with MphasiS` rich expertise and leading offshore capability will provide Mid Market customers a flexible, high-value operations management platform that is focused on achieving their business objectives,`` said Rajkumar Velagapudi, CEO of Fortify.

MphasiS will be acquiring a 100% equity stake in Fortify Infrastructure Services in an all-cash transaction; MphasiS was advised by Avendgs Capital in this transaction.

Shares of the company gained Rs 16.65, or 2.63%, to trade at Rs 650.00. The total volume of shares traded was 82,055 at the BSE (12.08 p.m., Thursday). http://www.myiris.com/newsCentre/storyShow.php?fileR=20100408121307194&secID=fromnewsroom&secTitle =From%20the%20News%20Room&dir=2010/04/08

PUBLICATION: www.indiainfoline.com DATE: April 8,2010

Mphasis to acquire Fortify Infrastructure in all cash deal

This will be part of a new business unit which focuses on ROM services.

MphasiS announced that it has reached a definitive agreement to acquire Fortify Infrastructure Services, a global provider of offshore based Remote IT Operations and Management (ROM) Services.

“This acquisition will catapult us ahead as a provider of offshore based ROM services. Mid Market customers are looking for partners to solve the challenges of operating and managing their IT. We see this as our sweet spot to provide cost effective and outcome based ROM services.” said Ganesh Ayyar, CEO MphasiS.

“Our proven industry track record in providing outcome-based ROM services, coupled with MphasiS’ rich expertise and leading offshore capability will provide Mid Market customers a flexible, high-value operations management platform that is focused on achieving their business objectives,” said Rajkumar Velagapudi, CEO of Fortify.

MphasiS will be acquiring a 100% equity stake in Fortify Infrastructure Services in an all-cash transaction. MphasiS was advised by Avendus Capital in this transaction. http://www.indiainfoline.com/Markets/News/Mphasis-to-acquire-Fortify-Infrastructure-in-all-cash- deal/4811124395