Changing Meralco's Leadership

It's one of the biggest business stories of the year. Family of the nation's largest power distributor gives up controlling stake to nation's largest telecommunications company. Tectonic shifts in the Philippines' corporate firmament of this magnitude happen once in a generation.

What does the main daily reduce it to? A family squabble.

Despite statements that all is well and that the family is still as tight-knit as ever, the Lopez family saga over the sale of most of the family’s shares in power distributor Manila Electric Co. (Meralco) to the Philippine Long Distance Telephone Co. (PLDT) group continues.

For the first time, Mike Lopez, son of Meralco chairman and chief executive Manuel Lopez, lashed back at people who say his father had known about the decision to sell down the family’s Meralco stake from day one.

“We were not privy at all to the negotiations from day one. Saying that we were, is a grave injustice to my dad’s name,” he told the Philippine Daily Inquirer in a telephone interview Wednesday.

Retiring the PSPT Ticker

So People Support, after seeing its stock drop to $8 in July, agreed to be bought by Aegis BPO, for $12.25 a share. The $250 million transaction is supposed to close this October, when the Philippine-based company becomes another part of India's sprawling Essar Group, which is into such businesses as steel, oil, and mobile phones.

Whatever happened to creating "shareholder value" when PSPT rejected the $15 per share offer of IPVG?

ACt 2: PeopleSupport

The dance has entered its next phase. After PeopleSupport (PSPT) rejected a bid by IPVG for $15 a share, it is now on the receiving end of a revised $17 all-cash counter offer. PSPT can no longer treat this bid in the same way it treated the first -- a brush off with a curt letter.

A copy of the IPVG (IP) letter to Mr. Rosenzweig available here.

It is unfortunate that the Board of Directors of the Company has not engaged us in serious discussions despite repeated attempts to have confidential dialogues regarding our proposal. We are also disappointed that the directors do not see the merit of our proposal despite the fact that it is directly beneficial to the shareholders of the Company.

However, upon careful deliberation of the recent initiatives, revised earnings guidance, and new strategic planning the Company announced in its statement of December 12, 2007, we are prepared to make a revised proposal to acquire the Company at a purchase price of $17.00/share. This new proposal represents approximately 34.81% premium to the Company’s 60-day weighted average closing price of $12.61/share including the close of market yesterday, January 10, 2008.

As the major shareholder of PSPT, much rests on how Chairman & CEO Lance Rosenzweig wants to finish this. If he is truly ready to give up PSPT, then he merely needs to extract as much cash as possible, and the best way to maximize the final price is to get another dance partner.

If he wants to hang on, he'll need to bring lots more ammunition vs IPVG, rather than just PowerPoints and press releases about how rosy the picture is for PSPT remaining an independent company. Many PSPT shareholders with lawyers on speed dial won't hesitate to sue if he gives up this opportunity to cash out. No need to bet what Galleon (24% owners of PSPT) are advising Lance to do.

It's been more than a month since IPVG made its first unsolicited offer, ample time for any other interested party to emerge from the woodworks. Our call: we are coming close to a final price.

Getting to 20% With Ayala

As eTelecare's (ETEL) shares tumbled, the Philippines' oldest conglomerate and owner of the country's biggest bank and biggest real-estate company made good on its intentions to boost its stake.

According to information reported by Ayala Corp. to US regulators, the conglomerate now owns 6.39 million ETEL shares, or 22.22% of the BPO. Ayala first bought into ETEL in June 2006, when press reports said it paid about 800 million pesos for 11% of the company, using LiveIt Solutions Inc. as its investment vehicle.

The shares may have just been transferred from one Ayala pocket to another. Check out Ayala Corp.'s US SEC filing. There are more layers in this than a wedding cake: Ayala wholly owns Azalea International Venture Partners Ltd., which wholly owns LiveIt Investments Ltd., which in turn wholly owns Newbridge International Investment Ltd. Newbridge, after all, was an original investor in eTelecare. In an early November filing, Ayala said additional investments in eTelecare were for "investment purposes."

Ayala Corporation currently intends, depending on market and other conditions, and in its sole discretion, to consider acquiring additional Shares of the Issuer and thereby increase its total beneficial ownership interest to 20% of total outstanding Shares on a fully diluted basis (or approximately 22% of the Issuer’s total current outstanding Shares on an undiluted basis), in order, among other things, to allow Ayala Corporation to account for its Shares under the equity method of accounting.

Even then, it's usually a good sign when a major shareholder puts it on record that it is the shareholder on record, instead of burying it in an offshore vehicle domiciled in some balmy tax haven. After all, Ayala will not want to get above the 20% threshold if it's expecting poor performance from ETEL going forward.

People Say The Price Isn't Right

On the same day that it rejected a cash bid from IPVG Corp. to buy the company for $15 a share, PeopleSupport came out with a bullish forecast, saying it would generate more revenue and earnings than analysts had expected.

LOS ANGELES (AP) -- PeopleSupport Inc., an offshore business process outsourcing provider, said Wednesday it expects its fiscal 2008 profit to beat Wall Street's expectations. The company forecast income between 65 cents and 81 cents per share in 2008, with revenue of $180 million to $190 million. Analysts polled by Thomson Financial predict earnings of 57 cents per share on revenue of $170.8 million.

Not all the pieces of the unfolding drama are visible on the board. The unsolicited IPVG bid, in the parlance of bankers, put PSPT "into play." Now the usual drill in this scenario is to reject the first buyout offer and holdout for more; from the shadows other bidders will emerge. You can be sure that teams from other BPOs are now crunching numbers with their favorite investment bankers to see if they should battle for PSPT and top IPVG's $15/share offer.

In the PSPT's press release, PSPT quoted its independent director Frank Perna as saying, “We have carefully reviewed the proposal and believe it to be inadequate and not to merit further attention. We have also reviewed the strategic plans in place for the Company and believe that the implementation of those plans is the best way to enhance shareholder value at this time."

The translation: we have a price at which we will sell.

eTelecare Loses It

How would you like to be the relationship manager at eTelecare Global Solutions who just lost a major account? The Manila-based company, which debuted on the Nasdaq just a few months ago, saw its shares drop below its IPO price after it disclosed that the "significant client" cancelled a program that brought in $15.6 million in revenue during the first half of 2007.

Customer churn is part and parcel of the BPO business, but when you are a newbie company touting the superiority of your outsourcing practices, losing a major customer deals a body blow to your reputation.

eTelecare expects 2007 annual revenues to be in the range of $240 million to $250 million, with net income of $19.2 million to $21.5 million, or $0.63 to $0.71 per diluted ADS. This compares to the previous guidance for 2007 annual revenues in the range of $250 million to $260 million, with net income of $22 million to $25 million, or $0.72 to $0.82 per diluted ADS.

Which customer did the BPO lose? From ETEL's prospectus:

As of December 31, 2006, we had 21 active clients for which we had performed 51 different programs since January 2006. We have a particular expertise in communications, technology and financial services. We also serve clients in the travel and hospitality, media and retail industries. Our largest clients in terms of revenue are American Express, AOL, Cingular, Dell, Intuit, Sprint and Vonage.

Blackstone Flag to Fly in Philippines

A Reuters news story in the NYTimes website says Blackstone Group has bought Intelenet Global Services of India, teaming up with its management in an 80-20 venture. The buyout price was in the region of $200 million.

This marks the first foray in the industry for Blackstone. And such big boys with deep pockets don't usually stop at one deal. Rollup strategy, anyone?

The British bank Barclays and an Indian mortgage firm, the Housing Development Finance Corporation, said separately that they each were selling their holdings in Intelenet, without disclosing the price.

Intelenet plans to expand its operations in Britain and begin services out of the Philippines and Mauritius, said its chief executive, Susir Kumar.

300? No 3,000

With money in the bank after selling shares to the public for the first time, eTelecare says it's busy adding capacity in the Philippines with plans to open a new 13,000 square meter site, its 13th office, in a few months. Triskaidekaphobians need not apply for any of the new jobs opening up, which will boost eTelecare's Philippine headcount past 10,000.

eTelecare Global Solutions, Inc. (NASDAQ:ETEL), a leading provider of business process outsourcing solutions, today announced it will invest in its sixth delivery center in the Philippines. The new center, located in the Annex@Shaw facility in Mandaluyong City, Metro Manila, will open in the third quarter of 2007 and employ more than 3,000 employees when fully deployed.
Funding for the new center comes from eTelecare’s recently completed initial public offering of American Depository Shares.
eTelecare is the first Philippine-incorporated business process outsourcing (BPO) company, and the second Filipino company overall, to trade on the NASDAQ stock exchange.
“Our successful U.S. IPO affirms that the Philippines is one of the top outsourcing delivery locations in the world, and that there is strong market demand for a high-quality multi-shore provider such as eTelecare,” says John Harris, eTelecare President and Chief Executive Officer.
“We plan to invest a significant portion of the proceeds from our IPO in further expansion in the Philippines,” added Fred Ayala, Chairman of eTelecare.

A Low Attrition Rate for BPO

Pop quiz. Genpact, which had US$613 million of revenue in 2006, had what attrition rate that year?

A. 15%
B. 24%
C. 32%
D. 43%
E. 55%
F. 61%

Before you answer, let's hear from Genpact, which is planning to sell shares to the public for the first time. Genpact's DNA comes from General Electric, the company that gave us Jack Welch and the mantra to either be No. 1 or No. 2 industry or get out, i.e. it was a "captive" serving the needs of GE Capital before becoming an independent company. Excerpts from its draft prospectus filed with U.S. regulators:

We have an experienced and cohesive leadership team and a culture that emphasizes teamwork, constant improvement of our processes and, most importantly, dedication to the client. Many members of our leadership team developed their management skills working within GE and many of them were involved in the founding of our business. As of March 31, 2007, we have more than 28,000 employees including over 5,500 Six Sigma trained green-belts, 300 Six Sigma trained black-belts and 60 Six Sigma trained master black-belts, as well as more than 4,500 Lean trained employees.

A key determinant of our success, especially as we continue to increase the scale of our business, is our ability to attract, train and retain employees in highly competitive labor markets. We manage this challenge through innovative human resources practices. These include broadening the employee pool by opening Delivery Centers in diverse locations, using creative recruiting techniques to attract the best talent, emphasizing ongoing training, instilling a vibrant and distinctive culture and providing well-defined long term career paths. We monitor and manage our attrition rate very closely, and believe our attrition rate is one of the lowest in the industry.

Ready?

The answer is C.

More info from Genpact:

Our attrition rate for all employees who have been employed by us for one day or more was 32% in 2006. A number of our competitors calculate employee attrition rates for their Indian employees who have been employed for six months or more. On this basis our Indian employee attrition rate for 2006 was approximately 21%, which we believe is relatively low for our industry based on statistics published by third parties such as NASSCOM. We attribute this low attrition rate to a number of factors including our effective recruiting measures, our extensive training and our strong culture.

Texas at Clark: Philippines Lands a Biggie

Texas Instruments chose the Philippines over China for a new 800,000 square foot (74,000 square meter) plant. The world's largest maker of chips for mobile phones will spend US$1 billion over 10 years to build out the factory. The plant will be located at Clark, a former U.S. airbase about an hour's drive north of the Philippine capital, and will employ 3,000 people by end of 2008.

"We have broken the myth of China here," said Ernie Santiago, executive director of the Semiconductor and Electronics Industry in the Philippines, Inc. (SEIPI). "It seemed before all roads are going to China, but we have made a point here that the Philippines is also a smart choice for investment. It will be a magnet, we expect other companies would follow," he said.
The Philippines supplies about 10 percent of the world's semiconductor manufacturing services, including mobile phone chips and microprocessors. Texas Instruments and Intel Corp are two of the biggest companies with manufacturing plants in the country.
Once the new TI plant comes onstream at the end of next year, Philippine electronics exports could jump by $3-4 billion per year, Santiago said.

The Bloomberg take was that human capital, and not cheap costs, was the deciding factor for TI choosing the Philippines over the perennial favorite China:

Texas Instruments in recent years has implemented a strategy of making about 80 percent of its chips and outsourcing the rest to reduce production quickly when demand weakens. The company's current management in the Philippines, where it has had a factory since 1979, gave that country the deciding edge over undisclosed locations in China, (TI's) Silcott said.
``We got a really experienced team, and we wanted to quickly bring up the factory,'' he said.

The Wall Street Journal had a similar take, arguing that the overall cost of doing business in China, especially taking into account rapid increases in wages for skilled labor, are no longer as cheap as they used to be:

Texas Instruments' executives visiting Manila Thursday said the highly skilled workers at its existing chip plant in the Philippines persuaded the company to open a second plant there, despite intense competition to attract Texas Instruments' investment from other Asian nations.

While China continues to be a major draw for technology companies -- Intel Corp. in March said it was planning a $2.5 billion chip-wafer manufacturing facility there -- Texas Instruments' decision to build another semiconductor testing and assembly plant in the Philippines may also reflect how rising costs in China are encouraging investors to consider other locations.

On Thursday, Kevin Ritchie, Texas Instruments' senior vice president of technology, said the Philippines' pool of educated, English-speaking workers tipped the company's decision. The new plant is expected to provide jobs for around 3,000 people.

Out-Doing the Outsourcers

Business Process Outsourcing is the current jargon of choice to encompass an industry helping the Indian and Philippine economies modernize. Do you date yourself when you say the term should just be simplified to "supplier"? After all, does not Toyota Motors, the world's most valuable automaker, rely on outsiders to provide key parts for its machines? Nowhere in their lexicon do they refer to it as BPO/KPO. In the electronics industry, the term is contract manufacturing, such as Microsoft leaving it up to Flextronics to manufacture the hardware for its Xbox.

Now when you hear the name Accenture, the first thing that comes to mind is "consulting." Here's an interesting piece from BusinessWeek. You would not normally associate the name Accenture with the "d-word".

To see how Accenture is offering hard-to-match services, take a look inside the company's Life Sciences Center of Excellence in Bangalore. The sprawling office building houses dozens of medical doctors, PhDs, pharmacists, math whizzes, and statisticians. They work alongside biology grads to prepare clinical trial reports for the world's top drug companies.These high-skill employees—all of them Indian—coordinate closely with business consultants who are on site with clients around the world. Accenture consultants help clients revamp the way they handle the trials essential to getting new drugs approved by regulators. Once those processes are sharpened, Accenture software programmers in Bangalore design databases and algorithms for storing and analyzing clinical data. Accenture people distribute electronic forms to physicians who conduct the trials. Accenture's physicians review the data to spot errors and, when necessary, get on the phone with doctors conducting the trials. When all the data are collected, they analyze them for safety and effectiveness and write reports. All told, Accenture has cut the average time to prepare reports from six months to a few weeks. Each day saved is worth about $1 million to a drug company.

But just as important, one client, Wyeth Pharmaceuticals Inc. (WYE ), says it has been able to hand off huge chunks of work to a partner that can perform them even better than it can. "We are launching drugs that otherwise would have been held up by our inability to handle the work," says Robert R. Ruffalo Jr., Wyeth's president of research and development.

Of course, few businesses like to refer themselves as "suppliers" because of the connotation that what they are providing is a commodity. But anytime a business changes its value proposition to the customer from "doing things cheaper" to "doing things you could not do," that supplier becomes a powerful force -- and then the buyer wouldn't care what term is used.

Using Your Accent With Accenture

Accenture is opening its seventh office in the Philippines in a massive expansion that will see capacity jump by about 50%, and employment by 36%, according to Philippine press reports. It's all good for those with the proper accents to man the call centers or the skills to do global accounting and programming, not to mention the ability to be productive in a time zone not of your own.

Note to managers: if your lease on office space with excellent telecommunications facilities is expiring soon, make sure you renew and lock in your rates. Landlords are seeing strong demand for prime space.

All Headline News gives us the Accenture capacity figure:

Accenture currently operates seven facilities in the Philippines, with a total of more than 10,000 contact center seats. Its latest and biggest facility is housed at the Robinsons Cybergate Tower II in Mandaluyong City, which has 5,000 contact center seats. Accenture is looking to end its fiscal year with a total of 15,000 seats, including the planned Cebu center, which will initially house 500 seats but will be ramped gradually.

While Inquirer says this about its headcount:

The company expects to have a total of around 15,000 employees in the country by the end of its current fiscal year in August.

Basilio Rueda, senior managing director of Accenture's Global Delivery Network, said that in the Philippines, call center operations exhibit the biggest growth in terms of employee count. In terms of revenue, application development contributes the highest at about 40 percent.

Here's the rub. If you assume a generous yield of one successful hire for every 10 applicants interviewed, that means Accenture has to churn through 40,000 people to get its workforce up from the current 11,000 -- by August.

The Shot Heard in Illinois

How much ammunition is left in the PLDT arsenal? They certainly have not been keeping their powder dry.

SPI, the wholly owned subsidiary of ePLDT Inc., which in turn is the wholly owned subsidiary of PLDT, said today it is spending at least US$44 million to buy Springfield Service Corp., a BPO assisting doctors in sending out bills and getting paid. Illinois-based Springfield adds 383 employees to SPI's headcount. Valuation is at 1.5 times forecasted revenue of $30 million in the year ahead. Last year, SPI spent $35 million for medical transcription company CyMed Inc. of Virginia, which had 2005 revenue of $19.6 million.

"The inclusion of Springfield's service offerings in our healthcare portfolio allows us to further strengthen our relationships with the more than 400 hospitals, multi specialty clinics and physician practices that we currently serve," said SPI CEO & President Ernest Cu.

You'll have to hand it to the SPI folks. They sold themselves for $135 million, and in less than a year have convinced their new master to open the checkbook for $79 million of additional spending. (No disclosure on the contingent liabilities building up on ePLDT's and SPI's balance sheets with respect to future payments. To eager bankers, take a number if you want to lend to the subsidiary of the subsidiary of the subsidiary. . . just make sure the loan guarantee you ask the parent is bulletproof.)

As the saying goes, "the time to strike is when the iron is hot," or as my Uncle Chot quipped: the purse strings are looser when the honeymoon is not yet over. Regardless of the envy competitors might feel of SPI's ability to use the balance sheet of mother PLDT (the Philippines' most valuable company with a market cap of $9.4 billion) to borrow and pay for its acquisitions, the BPO playing field is rapidly changing.

Buy, Buy, Buy

It may someday be common for a Filipino to have an Indian boss, as common as Indians reporting to American bosses. And as the BPO industry evolves in both countries, it will become common too for Americans to be reporting to Filipino or Indian bosses. In the race to grow, the homegrown champions of each country will be buying what they can't develop on their own, causing office workers in the India, the Philippines, and the U.S. will experience first hand what the phrase "flat world" means.

EXL is busy scouting for companies it can scoop up to bulk up, says India's Business Standard. Some are already on the acquisition trail: in 2006 ePLDT's SPI bought an American medical transcription company, while LiveIt, a unit of PLDT's cross-town rival Ayala Corp., bought Affinity Express of Chicago for $28 million.

EXL Service Holdings, an IT services provider, is on the lookout to acquire companies in Eastern Europe, the Philippines, South Africa and China. The company is looking to mitigate its risks by diversifying into delivery and support centres in other cheaper destinations and also offer capabilities to service clients from markets other than the US.

The acquisitions, in each of the geographies, could be in the range of $25-50 million in revenue and will add capabilities in the verticals such as research and analytics where EXL is already fast gaining ground. “We have almost $85 million in cash with the company and the ability to use stock options also lend us flexibility to do at least two of the acquisitions this financial year,” said Rohit Kapoor, president and chief financial officer of EXL.

For adding the voice-based services and clients, the company will look to the Philippines and in South Africa, EXL is on the look out for adding diverse business verticals to its BPO business. The company is also eyeing to service the domestic market. “Although the size of domestic BPO-ITeS market is nothing to boast about, but our international clients who have business in India have been talking to us to set up centres that will service the domestic markets.”

More Choices for Punters

Like a supermarket shelf that seems to proliferate with more and more brands to choose from, the financial market will soon offer us a surfeit of BPO companies in which to invest our retirement money.

Sutherland and Genpact, both from India, are among those queuing to sell shares to the public for the first time. They will join the battle for investors' capital, a fight already being fought by publicly traded companies PeopleSupport and eTelecare. As some in the Philippines like to quip, "the more, the many-er."

After the bumper debut by EXLService Holdings and WNS on Nasdaq and NYSE, respectively, Rochester, New York-headquartered third party BPO service provider Sutherland Global Services, is eyeing a US listing to raise close to $250 million. At the same time, it is also learnt that Genpact, one of the country’s largest BPO firms, is mulling a US listing through an IPO to raise over $600 million for the company and its promoters.

The company, previously part of US-based General Electric, is planning to offload about 15% equity through a public float on either Nasdaq or New York Stock Exchange later this year, sources said. The company’s major shareholders — GE and US-based private equity giants Oakhill Capital and General Atlantic — are likely to sell part of their holding through this IPO, which could value the company at around $4 billion.

Genpact has appointed three US-based investment banks — Morgan Stanley, JPMorgan and Citigroup — for the IPO and it may file the regulatory prospectus in the next few weeks, the sources said.

When BPO Demands, The Ecosystem Responds

Office workers working in the expanding BPO industry need offices to work, right? The beneficiaries of the BPO boom include property developers busy adding supply to meet demand. Manila's skyline is changing, as surely as Bangalore's. Maybe the pace is not as fast as Shanghai's, but the change is illustrative of how one industry can be the economic engine for the rest of the country.

Real estate developer Megaworld Corporation is riding mightily on the fast-growing business process outsourcing (BPO) sector and is investing P1.5 billion ($31.2 million) in a new office building exclusively aimed at BPO operators.
Megaworld expects to finish the construction of the 27-storey Global One Center, which will house BPO players, by early 2009. The new building, which will offer 42,000 square meters of office space, follows in the heels of other Megaworld properties catering mostly to IT and BPO companies.
The country's BPO sector - which includes call centers, outsourced accounting, and transcription firms, among others - is expected to grow 20 to 30 pecent annually, putting pressure on property developers, like Megaworld, to keep up.
Jericho Go, Megaworld's first vice president for business development and leasing, said they are set to build at least 500,000 square meters of office space aimed at the IT and BPO markets in the next five years, when demand is expected to peak.
Megaworld owns the Eastwood City Cyberpark, the country's first information and communications technology (ICT) park accredited by the Philippine Economic Zone Authority (PEZA), where IBM Philippines is the developer's biggest tenant. The Cyberpark is currently home to about 60 firms, half of which belong to the IT and BPO sectors.

Hither They Will Come

PeopleSupport's annual report has this to say as to why its profits rose in 2006:

Excluding the income tax benefits, the increase in net income was primarily attributable to growth in our customer management business, which enabled us to build revenues, and our move to the Philippines, which allowed us to reduce our operating costs, improve our margins and offer cost savings to our clients.

The point isn't that PeopleSupport will continue to be a profitable entity. It's that the relentless pursuit of it by companies in the U.S. makes it impossible for them to ignore the significant savings available, if only they locate in lower-cost countries like the Philippines. The hundreds of thousands of corporations seeking better bottom lines will continue to turn to companies such as PeopleSupport, eTelecare, Convergys, etc.

And when BPO companies sell customer-care services to a Fortune 500 company, and achieve 40% gross margins doing it, powerful incentives are created for even more people to enter the business. In that vortex of searching-for-savings will blossom the Philippines' sunrise industry.

Another BPO Stunner

Twice this month investors buying the BPO-growth story experienced heart attacks. In early March, PeopleSupport said it would not meet Wall Street expectations and disclosed that client Vonage would not renew a contract. Then on the last Friday of the month, ICT Group warned that earnings per share for the first quarter of 2007 would be a tenth of what they originally forecast.

Both stocks now sport charts showing steep cliffs where their prices plummted.

Here are the few paragraphs from ICT that prompted the tumble:

ICT GROUP, INC. (NASDAQ:ICTG), a leading global provider of customer management and business process outsourcing (BPO) solutions, today announced that the Company currently anticipates first quarter 2007 revenue of approximately $115 million and diluted earnings per share to be in the range of $0.02 to $0.04. This estimate compares with the Company's previous expectation of revenue in the
range of $116 to $118 million and earnings per diluted share in the range of $0.20 to $0.23.
The earnings revisions were primarily caused by capacity-related issues with two clients, both of whom are serviced exclusively from North American customer care centers.
John J. Brennan, Chairman and Chief Executive Officer, stated, "The volume of work associated with two of our clients exceeded what we had originally projected. As a result, ICT GROUP incurred significantly higher training and staffing costs as well as certain penalties that reduced revenue, all of which impacted profitability for the period."

While ICT Group maintained that 2007 revenue would exceed $500 million, Wall Street quickly abandoned the stock. One piece of bad news always elicits the Cockroach Theory -- you never find just one cockroach in your kitchen.

Support for PeopleSupport

Is it time to buy PeopleSupport, now that concerns about its loss of client Vonage ($14 million of revenue in 2006) led to a steep drop in its stock price? Or is it time to hang up on Chairman, CEO, and President Lance Rosenzweig?

Tasha Subedar's posting on Seeking Alpha has this:

Further, PeopleSupport sports a pristine Balance Sheet with $140.5 million in cash / securities (~5.75 per share) and no long term debt. This provides the Company with the much needed gun-powder to make investments in infrastructure as well as to make opportunistic acquisitions to broaden and complement its current capabilities and service offerings.

With its 38% drop, I believe that expectations have reset, and this results in the potential for tremendous upside. Note, also, that PeopleSupport would make a very attractive acquisition candidate for some of the larger BPO / Contact Center players, especially after last Friday's drop.

Fundamentally the long-term growth story has not changed a bit since PeopleSupport priced its secondary offering at $20 per share in November, 2006. BPO is here to stay and PeopleSupport represents one of the brightest prospects to continue to ride this strong secular growth theme.

Over at the Motley Fool, Rich Smith has this:

I must admit -- after reading those comments, I'm starting to get interested in PeopleSupport myself. Despite disappointing analysts with its fourth-quarter earnings and Q1 2007 guidance, the firm is growing its revenues rapidly, already
generates free cash flow, and has 41% of its market cap backed up with cash in the bank. Combine these strong fundamentals with a business sitting squarely in the middle of a long-term trend towards outsourcing in an increasingly "flat" world, and PeopleSupport looks like a strong contrarian pick to this Fool.

And finally, here's Frank Lara at 24/7 Wall Street:

Cry-babying aside, outsourcing is going to keep happening, so it's time for us to make some money off of the companies raking in the cash. PeopleSupport is a Business Process Outsourcing (BPO) provider - they reduce costs, improve performance and increase revenues for their customers with the majority of their services being performed in the Philippines. They brought in $62M in revenue for 2005 and $110M in 2006. PSPT is making a nice little profit, $22.8M in net income for 2005 and $14M. Their stock is trading near its 52-week low at under $12 a share and just fell from the $20's a few weeks ago.

Read PSPT's discussion on its latest quarterly earnings here.

ETEL Makes the Call

eTelecare Global had a decent debut on the U.S. stock market, climbing from its IPO price .

Shares of eTelecare Global Solutions Inc. (Ticker symbol: ETEL), a Philippines-based outsourcing firm, rose as much as 16 percent in their U.S. stock market debut on Wednesday, bolstered by prospects for continued growth for the offshore business process outsourcing industry.

Despite a declining broader market dampened by tensions with Iran and concern about the U.S. housing market, the company's American depositary shares opened up 2 percent at $13.75 before climbing to $15.75 in late-morning trading on the Nasdaq. Shares later returned some of the early gains, slipping to $14.80.

"This is a major business with big clients," said Francis Gaskins, president of IPO Desktop, an independent research firm based in Los Angeles. "Two other companies already opened the door for IPOs in the outsourcing business and this one is trading at a discount compared to its competitors."

While less spectacular than the 2006 IPOs of Indian competitors, it was good given the state of the U.S. markets, as one observer noted.

The company on Wednesday priced 5.5 million American depositary shares at $13.50 a share, raising $72 million with underwriters Morgan Stanley, Deutsche Bank Securities and Robert W. Baird.

The IPO opened at $13.75 and rose about 8% to end its first day of trades at $14.55.
"eTelcare is trading very nicely after a small initial premium," said Scott Sweet of IPO Boutique. "This is especially notable given the overall weakness in all the markets, and the geopolitical events that are contributing some anxiety to the traders."

Several BPOs have grown by acquiring other shops (i.e. ePLDT's SPI) in a bid to bulk up fast. Now that it has a new form of currency to exchange for other companies, what will ETEL be buying?