Infosys Turns to Outsider to Shake Things Up and Spur New Growth

NEW YORK (TheStreet) -- In a move that came as no surprise to anyone who follows this company, Infosys (INFY), India's second-largest enterprise consulting company, is replacing co-founder S.D. Shibulal as CEO.

What is a surprise is Infosys went outside of the company in its choice for Shibulal's successor, picking Dr. Vishal Sikka, former chief financial officer at German software company SAP (SAP). He becomes CEO as of Aug. 1.

The move demonstrates the extent of the board's desperation to turn Infosys' fortunes around. The CEO post has only been held by its co-founders since the company's inception in 1981. But persistent stock declines has forced the board's hand to usher an entirely new era.

Infosys shares, currently around $54, are down nearly 5% year to date and 30% over the past three years. Investors want to know how much value Sikka, who will be inducted into Infosys' board this weekend, can harvest out of an underperforming stock.

The IT consulting industry, in which Infosys competes against IBM (IBM) and Accenture (ACN), is still ways away from returning to its once-robust levels. So Sikka has his work cut out for him.

I don't think Sikka will be any worse than Shibulal. In fact, he'll be an upgrade to Infosys' two other co-founders Kris Gopalakrishnan and Narayana Murthy. The latter returned last June as executive chairman. He will step down effective June 14 but retain his role as chairman emeritus.

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