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Challenges unfold at Wipro, is the company failing?

The latest financial results from Wipro, have raised concerns and disappointment among analysts and even the company's founder, Azim Premji.

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13 Dec 2023 9:30 PM IST

The latest financial results from Wipro, have raised concerns and disappointment among analysts and even the company's founder, Azim Premji. The company reported misses on various fronts, including revenue, EBITDA margins, and profit after tax (PAT) for the July to September quarter.

The challenges at Wipro are linked to the leadership changes initiated in 2020 when Thierry Delaporte took over as CEO. Delaporte outlined an ambitious plan to accelerate growth, primarily through acquisitions and securing high-value deals of $500 million and above. One significant acquisition was the $1.4 billion deal with London-based consulting firm Capco, aimed at enhancing Wipro's value-added services and expanding its client base.

However, the strategy seems to have faced challenges. A substantial portion of Wipro's revenue growth under Delaporte resulted from acquisitions, involving a significant cash outlay of nearly $2 billion. The sustainability of this approach became questionable, especially when the companies acquired, such as Capco, faced slowdowns.

Additionally, Delaporte implemented a restructuring initiative that included laying off nearly one-third of the top executives (250 out of 750) within a year. While seeking new talent, the replacements came with higher salaries, contributing to a 3.5% shrinkage in profit margins. The Chief Growth Officer hired to secure large deals was unable to secure any mega-deals during the three-year period.

While the IT industry as a whole faces challenges due to global economic conditions, Wipro's performance seems to lag behind its competitors. Despite market difficulties, Wipro's rivals managed to secure at least nine deals over $1 billion during the same period, highlighting Wipro's relative underperformance.

This situation has led to Wipro's revenue declining in each quarter of the calendar year, marking the first time in its history. As the company grapples with these challenges, there are ongoing discussions about potential restructuring and even calls for a change in leadership, with the Chief Growth Officer already resigning. The path forward for Wipro remains uncertain as it seeks to address the issues affecting its performance in the highly competitive IT sector.

Wipro software solutions 
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