Leaving - leave: what did the large foreign IT companies in Russia come to a year after the announcement of the demarche from the country
After February 2022, many major international IT vendors announced a demarche from Russia against the backdrop of geopolitical events and sanctions - the termination of sales and service to Russian customers. TAdviser analyzed the data of more than two dozen such companies published in the financial accounting database of the Federal Tax Service to find out what they came to in about a year. It turned out that most local offices of large foreign IT companies had collapsed revenue and profit, but as of the 1st quarter of 2023, the majority continue to have existing legal entities in Russia, although they reduced staff. Some in 2022, apparently, decided to jump into the "last carriage" and record income.
SAP CIS: Litigation in "sleep mode"
The German vendor, ON SAP like many others, in early 2022 announced the suspension of sales of its products in, Russia but for a long time did not turn off support for existing customers. And from January 2023, the company decided to completely block access to its system to Russian customers, through which technical support was provided at normal times - receiving software updates, security patches, placing applications for solving various problems.
The latter is associated with the 8th package of EU sanctions against Russia, which includes a ban on the provision of IT consulting services to Russians. SAP assessed that its technical support contains consulting elements.
Despite the fact that in 2022 the Russian office was curtailed in terms of sales and personnel, the legal entity continues to operate at the beginning of 2023. A source close to the company previously told TAdviser that it may still exist in sleep mode for some time. But, apparently, the legal entity does not sleep at all: according to the data in the file of arbitration cases, through it in 2022-2023. litigation with Russian customers is actively underway. Moreover, the vendor not only acts as a defendant in customer claims, but also acts as a plaintiff, demanding large amounts from customers.
Microsoft: A Quiet Observer
As of March 2023, the decision to liquidate the Russian office of Microsoft - Microsoft Rus LLC - is not being considered, follows from the explanations to the balance sheet and financial accounting of the company, published in April in the database of the Federal Tax Service. Microsoft Corporation "will continue to monitor changes in existing restrictions and make decisions on activities in the Russian Federation, based on the further development of the situation," the document says.
In 2022, against the background of the Russian-Ukrainian conflict, Microsoft announced the suspension of new sales of products and services, as well as the reduction of many aspects of business in Russia "in accordance with legislative restrictions." During 2022, the staff of the Russian office, with the exception of two people, were fired. As of the end of December 2021, the company employed 376 people, as indicated in the explanations to the financial reporting.
Oracle Russian Office: Bankruptcy
The Russian legal entity of the American corporation Oracle, which decided to leave the country, suffered net losses of more than 1 billion rubles at the end of 2022, and in addition, in 2022, Russian customers threw claims against the vendor in court due to defaulted obligations - a total of about 1 billion rubles. On February 6, 2023, the Moscow Arbitration Court introduced the initial procedure for monitoring (bankruptcy) in the Russian office of Oracle - Oracle Computer Equipment JSC.
In the first quarter of 2023, the main legal entity Oracle in Russia formally continues to operate, it will have a long time to do, given the numerous litigation and bankruptcy process.
Cisco Systems: liquidation of spare parts for almost 2 billion rubles
After the termination of sales and the suspension of licenses, the American Cisco destroyed its spare parts for equipment in Russia in the amount of about 1.9 billion rubles, follows from the reports of its Russian office. "The reserves were physically destroyed in January 2023, in connection with which, as of December 31, 2022, a reserve was accrued to reduce the value in the full amount of the value of the reserves - 1,864,002 thousand rubles," the published documents say. Such a provision for impairment of reserves was not created either at the end of 2021 or 2020.
Both main legal entities of Cisco in Russia suffered major losses in 2022: Sisko Systems LLC - in the amount of 1.8 billion rubles, Cisco Solutions LLC - in the amount of 3.7 billion rubles. At the same time, in the 1st quarter of 2023, both legal entities continue to function.
IBM: Big sell-off
Unlike Cisco, IBM in Russia - IBM WEA LLC - decided not to liquidate its spare parts, but to sell them. In February 2023, the company sold its spare parts worth about 848.1 million rubles with VAT. The buyer paid their full cost, it is said in the explanations to the financial account, but who acted as the buyer is not specified there.
At the end of 2022, the Russian representative office of IBM completed commercial activities in accordance with the decision of the group's management, according to the explanations to the report on the company's financial results, published in the database FTS in April 2023. This decision assumes the preservation of legal existence in Russia. In connection with the reduction in the staff of IBM WEA in 2022, more than 95% of employees were laid off. Severance pay for employees in connection with the reduction is more than 536 million rubles. It was repaid by the end of 2022.
Dell EMC Russian Development Center: Revenue Growth
The Russian development center Dell EMC - LLC "St. Petersburg Development Center EMS" - received a record revenue in the year of termination. He increased turnover by 49%, to 2.7 billion rubles excluding VAT - the largest indicator for the entire time of his activity. From the explanations to the financial accounting of the company, published in the database of the Federal Tax Service, it follows that the revenue was brought by the implementation of the software. True, the company completed the year with a loss of 32.4 million rubles.
St. Petersburg EMS Development Center is part of Dell EMC, which belongs to the Dell Technologies group of companies. The founder of the Russian legal entity is EMC Corporation, which Dell acquired in 2016.
As of April 2023, the St. Petersburg EMS Development Center no longer sells, does not serve and does not support products in Russia, it is said in the explanations to its financial reporting. This is due to the fact that in 2022 Dell Technologies, against the background of the Russian-Ukrainian conflict, decided to stop business in Russia. By the end of 2022, almost all of the development center's staff - about 450 people - had been laid off.
Harman Connected Services in Russia: record order from Americans before leaving
Nizhny Novgorod software developers for Mercedes and JBL headphones received a record order from the Americans before they were fired. As TAdviser found out, in 2022, the revenue of Harman LLC, the development center of Harman Connected Services (owned by Samsung Electronics) in Nizhny Novgorod, increased by 38%, to 2.4 billion rubles. Net profit amounted to 113.5 million rubles.
The case when the effect of the "last carriage" worked. An analysis of the financial results of Harman LLC shows that this is the largest annual revenue volume during the company's operation since 2006 - from that moment its financial indicators are publicly available.
From the explanations to the financial accounting of Harman LLC, published in the database of the Federal Tax Service, it follows that the vast majority of the turnover - more than 2.38 billion rubles - was brought to the R&D Center in 2022 by software development services and other services provided to foreign legal entities associated with it. Of these, 2 billion rubles fell on work performed for the US-based companies Harman Connected Services Inc. and Harman International Industries Incorporated.
Since January 2023, the main activity of the Nizhny Novgorod R&D Center has ceased - software development. But at the same time, at the time of publication of the financial accounting in the 1st quarter of 2023, the company "has no intentions to liquidate," said in the explanations to the financial accounting of the company.
Luxoft: an increase in the volume of orders of its remaining Russian subsidiary in 2022
In 2022, Integriti Solutions LLC, which is almost 100% owned by Swiss-based Luxoft Global Operations GmbH, increased revenue by 97% to 3.5 billion rubles. Net profit amounted to 155.7 million rubles.
From the explanations to the balance sheet and financial accounting of Integriti Solutions, published in the database, FTS it follows that the vast majority of revenue in 2022 - more than 2.63 billion rubles - was brought to it by development services ON for its direct founder, Swiss Luxoft Global Operations GmbH. The ultimate owner of the latter, in turn, is Luxoft Holding Inc.
Epam: unprecedented billion-dollar dividends from the Russian "daughter"
The effect of the outgoing train worked in the case of the international developer ON Epam. Thus, in 2022, Epam Systems Inc., based USA at Epam Systems Inc., twice decided to pay dividends on the retained earnings of its Russian subsidiary Epam Systems LLC, of which it is the 100% owner. This follows from the explanations to the balance sheet and financial statements of the Russian Epam Systems for 2021 and 2022, published in the database. FTS Russia The total amount of dividends amounted to about 7.99 billion. rubles
First, on March 1, 2022, Epam Systems Inc, registered in Pennsylvania in the United States (Epam global headquarters), decided to accrue and pay the only participant in the Russian Epam Systems, i.e. itself, dividends totaling 2.75 billion rubles. An analysis of the financial results of the Russian "Epam Systems," available in the database of legal entities "Kontur. Focus" for the period since 2010, shows that such an amount of dividends assigned to itself at the same time by foreign legal entities Epam from the retained earnings of the Russian one is already a record for this period. And, probably, for the entire duration of the Russian Epam Systems, since until 2010 its turnover and profit were much less.
In addition, the American Epam Systems Inc single-handedly made another decision on the distribution of the accumulated net profit of the Russian Epam Systems to dividends - in December 2022. This time in the amount of about 5.24 billion rubles.
Abbyy: leaned on software development
Even before the end of January 2022, the company transferred the rights to the vast majority of its products from Russia to its American legal entities. And after February 2022, Abbyy "disowned" its Russian business, taking it beyond the perimeter - to the Content AI company, whose founders were former managers of the Russian Abbyy. AI Content is positioned as Abbyy's technology partner.
Abbyy's largest legal entity in Russia, Abi Production, completed 2022 with revenue losses and a net loss. Moreover, in the reporting period, the revenue structure of ABBYY Production changed. She received almost all the revenue for software development services and earned almost nothing on license payments (royalties). It's very different from how it used to be. So, in 2021, Abi Production received 3.1 billion rubles from royalties - more than two times more money than from software development services for the same period.
At the beginning of 2023 - at the time of publication of explanations for financial reporting for 2022 in the database of the Federal Tax Service, ABBYY Production expected to receive support from the founders in the amount necessary to finance its operating activities in the "foreseeable future."
An analysis of the data in the FTS database shows that as of the 1st quarter of 2023, most large foreign IT companies legally remain in Russia, although they do not conduct more commercial activities here. Some of them sold Russian business to local top management, but this is observed mainly among companies in whose activities focus on consulting.
In 2023, according to TAdviser forecasts, it can be expected that foreign IT companies will more actively launch the processes of liquidation of their Russian legal entities as organizational issues are resolved and litigation is completed.
Author: Natalia Lavrentieva
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