It is by now well known that Blue Star's shareholders are entitled to a share of the Blue Star Software stock, and the date for the split is October 1. The software arm has been growing at a 40 per cent compound rate for the last two years, and the expected revenue is Rs 42 crore for the current year.

The advantage that Blue Star Software has is that it has very little exposure to the Y2K business (the trend amongst Indian software companies has beenreduction in Y2K exposure, at least from the bigger firms). According to company sources, a great deal of Blue Star's software business comes from Hitachi Medical Corporation of Japan, for software solutions for an entire range of medical equipment, and a lot of that work is developmental in nature, thus resulting in close interaction between the two companies and a lot of repeat business.

But success is not guaranteed for all companies in the software business. Take Ramco Industries for example. Much has been written about Ramco's (one of the leading manufacturers of asbestos cement sheets in the country) diversification into the high end of the software market. The company diversified into the enterprise resources planning (ERP) packages. This high-end segment in India is dominated by packages such as SAP and Baan, of which SAP is fast emerging as the dominant package in India.

Ramco attempted to develop such a package called Marshall from scratch, which resulted in a huge investment as well as cost andlead time as the international majors set up shop in India. Notwithstanding the large number of orders recieved by the company including those from PSUs like BEML, according to some consulting firms involved in advising Indian companies on these packages, Ramco's package lacks the capability for very complex applications. There is a rumour in these circles that a prestigious order for an ERP solution from Reliance Industries may finally be awarded to some company other than Ramco, due to the complexities involved. In addition, its software subsidiaries which include those based in Europe and the US have run up combined losses in excess of the net profits earned by Ramco.

Kodak India

For the first four months of the current year, Kodak showed a growth of 18 per cent, which has accelerated to 22.6 per cent for the first half. Traditionally, Kodak India reports a higher rate of growth in the second half of its financial year.

The company's operations have been hit in the first half mainly due to thedepreciation of the rupee vis-a-vis the dollar, since it imports its jumbo rolls denominated in US dollars. So far, it has put the company in a delicate position vis-a-vis its rival Japanese brands Konica and Fuji, imports of which are denominated in yen.

To that extent, Kodak has embarked on a rationalisation drive since last year mainly by reducing employee costs. The company has taken a higher charge of Rs 4.4 crore against the voluntary retirement scheme (VRS) costs. But profits were lower by 11.2 per cent even prior to this charge. There is no further charge expected for the rest of the year against the VRS. In all probability, there will not be another VRS in the next financial year. Multinational corporations have shown a tendency to write off all VRS- related costs, or for that matter all deferred revenue expenditure in the year in which it occurs. Phillips India charged Rs 57 crore worth of VRS expenditure for 1997 to its profit and loss account for that year, incurring a Rs 19-crore loss in thebargain. Kodak India writes off its entire advertising expenditure amounting to almost 3-4 per cent of sales in the year in which it occurs, thus making its profits very conservative.