Featured Company News - Infosys CEO Vishal Sikka Quits as Differences Widens Between Founder and Board
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LONDON, UK / ACCESSWIRE / August 21, 2017 /Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Bangalore, India based Infosys Ltd (NYSE: INFY), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=INFY. The Company announced on August 18, 2017, that Dr. Vishal Sikka had resigned from his position as Managing Director and CEO with immediate effect. The Infosys Board accepted Vishal's notice of resignation and has appointed him as the Executive Vice Chairman of the Company with immediate effect to enable a smooth transition. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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The Company is tasked with the job of finding a suitable candidate for the CEO and Managing Director' post, which would happen before March 31, 2018. Vishal in this period will report to the Board and concentrate his efforts on improving strategic initiatives, key customer relationships, and technology development. In the interim period Mr. U. B. Pravin Rao has been appointed Interim Chief Executive Officer and Managing Director. Pravin Rao will report to Vishal and work under the supervision of the Company's Board.
In a separate communication, on August 19, 2017, Infosys' Board has approved the share buyback of approximately INR 13,000 crores (approximately $2 billion) at INR1,150 per share. The buyback represents approximately 4.92% of the Company's equity.
Reason for Vishal's exit
Vishal's decision to resign follows an email from Infosys founder Narayana Murthy which was leaked to the media. The email mentions that some of Infosys' independent directors and advisors had told Narayana Murthy that "Vishal Sikka was more Chief Technology Officer (CTO) material than Chief Executive Officer (CEO) material". The email further states that Narayana Murthy did not have anything against Vishal however he questioned the Company's Board performance, with which he had a problem.
Vishal has not directly named Narayana Murthy behind his decision and in his resignation letter he states:
"It is clear to me that despite our successes over the last three years, and the powerful seeds of innovation that we have sown, I cannot carry out my job as CEO and continue to create value, while also constantly defending against unrelenting, baseless/malicious, and increasingly personal attacks."
Infosys' Board supports Vishal
The Board of Directors and the founders of Infosys led by Narayana Murthy have been having major disagreements. Narayana Murthy has repeatedly questioned the decisions taken by the Company and accused the Board of lapses in corporate governance. He had major issued with decisions regarding the hike in Vishal's, executive compensation to top management, certain acquisitions, exit packages of certain executives, etc.
Infosys' Board has come out in full support of Vishal and has blamed Narayana Murthy for his exit. The Board said:
“Mr. Murthy's continuous assault, including this latest letter, is the primary reason that the CEO, Dr. Vishal Sikka, has resigned despite strong Board support. Mr. Murthy's campaign against the Board and the Company has had the unfortunate effect to undermine the Company's efforts to transform itself. The Board has been engaged in a dialogue with the Founder to resolve his concerns over the course of a year, trying earnestly to find feasible solutions within the boundaries of law and without compromising its independence.”
In fact, the Board had been contemplating reaching out to Narayana Murthy and offering him a formal role on the Board. However, in view of the recent developments, Infosys co-chairman Ravi Venkatesan in an official statement clarified that the Company had no intention of asking Narayana Murthy to play a role in the governance of the Company.
However, Narayana Murthy has strongly refuted the allegations.
Vishal joined Infosys in 2014 when he was handpicked by Narayana Murthy. He took over as CEO as six founders including Narayan Murthy, Kris Gopalakrishnan, Nandan Nilekani, S. D. Shibulal, N. S. Raghavan, and K. Dinesh stepped down together. Vishal was a member of the Executive Board at SAP SE before he joined Infosys and was leading the former company's products and technologies, including all of product development, and driving innovation globally. He was with SAP for more than 12 years and held several leadership roles of increasing importance and responsibilities.
Vishal has created the ‘Timeless Software,' a framework which articulates the principles of renewing existing processes and landscapes without disruption to customer environments. The principles of Timeless Software provide the foundation to ensuring there is no longer a trade-off between leveraging breakthrough innovation and ensuring the consistency, reliability and coherence of systems and user experiences. Vishal also has tremendous experience in the areas of research in artificial intelligence, intelligent systems, programming languages and models, and information management.
Vishal has a BS in Computer Science from Syracuse University and a Ph.D. in Computer Science from Stanford University.
Vishal's contribution at Infosys
Vishal came in at a time when the Company was lagging in industry growth. However, during the last three years as CEO, Vishal has managed to help Infosys revenue grow from $2.13 billion in Q1 2015 to $2.65 billion in Q1 2017. Vishal has also been credited with the increased cash flows from $4.9 billion in June 2014 to $6.1 billion in June 2017. During his tenure as CEO, the Company has disbursed over INR 19,000 Crores as dividend to its shareholders. The amount includes the dividend distribution tax.
On the business side, Vishal made great strides in transforming the Company based on software, especially artificial intelligence (AI), and innovation. He also contributed positively by improving the Company's revenue mix, revenue per employees, and reduced attrition rates. During his tenure, the Company acquired Panaya and Skava – cloud-based applications for business. The acquisitions would allow the Company to strengthen its product portfolio and add 1% to total revenue of the Company. The Company also built an AI platform called Nia and created a system that can take 36,000 queries per second through its banking platform Finacle.
Last Close Stock Review
At the close of trading session on Friday, August 18, 2017, Infosys' stock price declined 7.16% to end the day at $14.79. A total volume of 33.59 million shares were exchanged during the session, which was above the 3-month average volume of 5.45 million shares. The Company's shares are trading at a PE ratio of 15.06 and have a dividend yield of 3.11%. At Friday's closing price, the stock's net capitalization stands at $36.37 billion.
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