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Bangalore-based mid-sized IT firm MindTree has completed the restructuring to convert the wireless products business of its wholly-owned subsidiary MindTree Wireless Pvt Ltd into a design services business. The restructuring will entail costs of $3.6-3.9 million (significantly less than original estimates of $12-14 million) through people separation, legal fees, asset write-offs and payments to vendors for cancelling contracts, it said on Wednesday.

The firm also said it plans to merge this unit with itself soon.

MindTree said though it was getting good traction from clients for its white-labelled smartphones business, it discovered that contracts with large global service providers would have entailed more commitment and risks for inventory management and marketing due to change in market conditions. Due to this, it decided to change the business model to design services.

MindTree Wireless was established as a subsidiary of Kyocera Wireless Corp in August 2003 and employed over 600 people as of early 2010, with its development centre located in Bangalore. MindTree had acquired Kyocera Wireless last year for an upfront payment of about $6 million (about Rs 29 crore), besides other payments linked to revenues for the next two years. The acquired company was said to have annualised revenues of around $20 million and was making profits.

The company provided wireless product development, software engineering and product testing services for mobile handsets and wireless products firm California-headquartered Kyocera’s global product portfolio, other than developing customised wireless handsets for Indian telecom service providers. The deal was to give a strong footing to MindTree in the product engineering services space, one of its key focus areas.

Recently, Singapore-based Nalanda Capital, which invests in listed Indian companies, had increased its holding in MindTree by 1.7% to 8.4% through open market transactions. Nalanda has initially bought into MindTree in February last year, buying close to 2% stake from venture capital firm Walden International (a pre-IPO investor who is gradually diluting its holding).

Walden currently holds around 10% stake in MindTree that also has the backing of names like Government of Singapore (believed to be through an investment arm) and Global Technology Ventures.

MindTree had been in the midst of deal activity over the recent past. In April, it snapped up three-year-old, Sequoia-funded 7Strata IT Services Pvt Ltd, a Chennai-based remote infrastructure management (RIM) services co-founded by former Yahoo India MD and ex-Sify honcho George Zacharias.

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