ARM Ltd: Out of the Woods

Until August 1996, there was no stopping for this Hyderabad-based company. A strong
technology company, with the vision of designing and developing indigenous telecom equipment, Advanced Radio Masts Ltd (ARM Ltd), by 1995, had emerged as the top private telecom manufacturing company in the country. In fact, its annual revenues were worth Rs 200 crore and it was only sixth behind VSNL, MTNL, ITI, Hindustan Cable Ltd, and TCIL in 1994-95. It was also the period, when it had become aggressive and was en route to transform itself as the total telecom solutions provider, from being merely a manufacturer. It was also contemplating on going public too. 

However, destiny willed something else. The Central Bureau of Investigation (CBI) conducted a search of certain records at the company premises and interrogated the then managing director, Paturu Ramarao, allegedly for undue favours showered on it in 1993-94, by the then communications minister Sukhram. The allegation was that Sukhram acceded to the request of the company to vary the quantity ordered and restore the arbitrarily reduced price of 2/15 MARR (crystal and synthesized) systems and Ramarao was implicated with corruption charges. Ramarao, in view of the charges, stepped down from the board of 
directors on his own and transferred the entire shareholding to a trust,
managed by independent professionals. Its list of woes only compounded further when DoT imposed a ban
on the company in August 1997 for 24 months. 

Devoid of the man who had steered the company to higher pedestals of growth and cornered by the ban, the company had the daunting task of emerging out of the crisis. Extending full co-operation to the investigating agencies and appealing for lifting the ban, ARM was exonerated within eight months of the ban in April 1998. And the company today has once again established itself as one of the leading suppliers to DoT and has regenerated its growth profile by entering into services and software, besides forging important strategic business and technical partnerships. 

The Recuperation Strategy
Undoubtedly, Paturu Ramarao was a leader in his own right and a key arm for the company’s vision, growth, and success. The mute point, however, is that no organization ends with one person if the roots are strong. For a comeback, what ARM needed to do was to mobilize its funds and resources, reengineer strategies, and build confidence in the workforce, so things could fall in place easily. And what it did was leverage upon its strengths to get back on track.

ARM’s inherent strength has always been its established infrastructure for R&D and
production. With over 1,000 employees the company has four manufacturing, five services, and one R&D divisions and is spread across five locations at Hyderabad with a covered space of 2.81 lakh sq. ft. It was able to offer technology conducive to the Indian environs at competitive prices. Several of players who have been watching ARM closely in Hyderabad, without hesitation, state that they have quality products and are competitive on prices. The company, many believe, has the largest range of communication hardware and software products amongst Indian manufacturers. 

In the process, it was able to attract an equity participation of $18.7 million by
Chase-Oppenheimer. And it also embarked on a quality certification drive.ARM’s strategy in the affected phase has been to come out with new products and improvise on the existing products. Strategically, it focused on three core activities: Enhance customer base, increase support to services sector, and enter services sector. Earlier its major customer was the DoT. But it repositioned it self in such a way that the non-DoT sector is the largest customer base today. The other important thing that it realized and did was to extend service support. Since its entire range of products is targeted at the telecom sector (cellular and basic service operators, the power sector (for transmission and distribution), and network access (for ISP and corporates), it has built in sufficient experience in project management and execution.

As a result of this it has won major orders like the Costa corridor backbone network of Tata Cellular covering 21 sites and backbone network for Srinivas Celcom in Tamil Nadu. It also did a point-to-multipoint TDM/TDMA network for VSNL covering five sites, VSAT network covering 700 stations for the Highway Automation System (HAS) SPARSH project, fibre optic project for DRDO, Bharti, and Tata Teleservices, besides wireless and wireline access network for Satyam Infoway, among others. In a way, the company has silently emerged as a total solutions provider.

During the adverse phase, too, silently went on forging relationships and winning major orders. One good excavation for the company during this phase was the non-DoT market. While close to 80 percent of its revenues were coming from the DoT market before 1996, currently this component has come down to about 20 percent. ARM’s revenues since 1997-98 have seen an upward turn. While its revenues had dropped under Rs 100 crore during 1995-96 to 1997-98, the figure went over the Rs 150 crore mark in 1998-99. And in 1999-00, this is expected reach the Rs 200 crore line, and by 2000-01, it aims to touch the Rs 250 crore figure. The dip during 1995-98 is understandable primarily for two factors. One, the DoT market was a no entry zone for it and two, it had to reorganize and refocus to tap the new potential. In the process, it went on to enlarge its customer base to basic, cellular, ISPs, Railways, and electricity boards. 

Now that it has already made a comeback and neutralized the affected phase, it now wants to leverage upon it expertise in the converging technologies, its strength of offering innovative and cost-effective solutions, and integration of the in-house developed products with
hardware/software products from the strategic tie-up partners. 

The two key markets that it will focus in the next decade are telecom software development activity for domestic and international markets and the ISP and web-services arena. Given the past experience and its survival of difficult phases, it seems that for ARM the entire episode is turning out to be shot in the arm in a new emerging area of competition.

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