Mr Narayana Murthy is back, but does this mean that Infosys is back? Only time will tell, but this is good for morale:JPMorgan

Mr Narayana Murthy is back. Infosys (OW) announced that Mr Narayana
Murthy is back in the company in an executive capacity. Effective June 1, he is the
Executive Chairman of the company subject to shareholder approval at the AGM
due on June 15, 2013. This development will likely have all stakeholders
(including investors) positive in anticipation; we believe it raises confidence and
likely buys Infosys more time with investors. We expect a positive stock reaction to
this news. We dissect the positives and the (possible) strikes/negatives from this
development.

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 Positive 1: This is an implicit acknowledgment by Infosys that it does not
have the requisite leadership to deal with today’s challenges.
Acknowledgment of thorny issues is a starting point of getting down to deal
with them. Until now, what investors habitually get as explanation from Infosys
on its protracted lagging performance is the same mantra – macro-challenges,
weakness in discretionary spending, aggressive price posturing by peers, flat-todeclining budgets, commoditization et al.
 Positive 2: This will do much to raise the morale and confidence of Infosys
employees - especially those in critical roles we term “value zones” which
impact customer touch-points/perceptions. These “value zones” refer to
roles such as sales and marketing professionals, mid- to senior-level
professionals at the rank of project managers, delivery heads who interact
externally with clients and internally with (Infosys’s) account managers.
 Positive 3: Mr Murthy now will likely be at the forefront of Infosys’s
actions. Until now, presumably any role that he might have been playing was
limited to within the company and that too largely at senior management or
board level. This development now paves the way for Mr Murthy to assume
more visible/external postures - interacting with clients, overseeing execution,
setting and executing on strategy (after rethinking and revamping elements of
Infosys strategy if deemed necessary).
 Positive 4: This announcement buys more time with investors and other
stakeholders. Disillusionment with Infosys’s performance is extreme – patience
of fundamental, long-term significant shareholders was severely taxed. By now
imbuing investors with a sense of hope and optimism, this development gives
Infosys a longer rope.
 That said, we must not lose sight of the (possible) strikes/negatives of this
development and implications thereof which we discuss herein.