The new programs include:  $50 million for a private equity fund (which has a target capitalization of $150 million) to invest in Pakistani companies that have technology at the core of their business or could benefit from technological upgrades; $100 million over the next five years to expand the ability of small and medium-sized enterprises to access credit through local commercial banks; and a trade mission that will send American business leaders to Pakistan, with the goal of facilitating new business ties between American and Pakistani firms to create new economic opportunities in both countries.

NetSol Technologies, Inc. (Nasdaq: NTWK) (Nasdaq Dubai: NTWK) is one company that is strongly positioned to benefit from these new initiatives. The California-based software provider’s technology center and programming team is located in Pakistan, with offices in Lahore and Karachi. NetSol Technologies Limited, the Company’s subsidiary in Pakistan, offers a wide array of enterprise software solutions and IT services to a variety of sectors.

The new programs represent a major boost for Pakistan and a potential opportunity for NetSol. The Company could benefit from the $50 million private equity investment fund in two ways. First, as a Pakistani company with technology at the core of its business, NetSol Pakistan may qualify to receive funding to advance its growth strategy. NetSol Pakistan’s impressive client list (which includes multinational corporations such as Mercedes-Benz, BMW and Yamaha), high-quality products, and strong growth potential make it an ideal recipient of technological development dollars. Second, Pakistani companies that receive funding to upgrade their technology systems may choose to “buy local” when selecting an enterprise software provider. NetSol has an established track record of improving operational efficiency for its blue-chip client base. Moreover, the Company offers cost-effective, scalable solutions that are uniquely attractive to businesses in emerging markets such as China and Pakistan. As a company operating in both the U.S. and Pakistan, NetSol could also see sales growth resulting from new economic opportunities created by the trade mission and the $100 million allocation for small and medium-sized Pakistani businesses. Overall, these programs are a significant step in U.S.-Pakistani relations that could spur further private investments in Pakistan’s technology sector and benefit the software industry as a whole.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

The report also predicted that the nation’s enterprise software market will top $6 billion this year. According to the report, the strongest growth will be seen in the industries of manufacturing, financial services, communications, and government. Chinese businesses have generally preferred to develop their software systems from within because of lower labor costs, but this practice has generally resulted in inefficient legacy systems that quickly become obsolete. A 2009 Gartner survey found that 46% of respondents in China planned to increase their software spending in 2010, significantly higher than other countries surveyed.

One company successfully capitalizing upon this emerging market is NetSol Technologies, Inc. (Nasdaq:NTWK) (Nasdaq Dubai:NTWK), a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide. In late May, NetSol secured two major projects worth over $3 million to implement its NetSol Financial Suite (NFS)™ Contract Management System with a major international automotive manufacturer’s captive finance company in the Asia-Pacific Region. Then, in June, NetSol announced that Sany Corp. of China, the largest concrete equipment manufacturer in the world, signed a contract of significant value to install NFS™ to run its newly formed finance company. The complete NFS™ suite of products will be deployed by Sany Corp. across its vast dealer network as well as its business back office centers across China.

On July 6, NetSol announced the successful implementation of its NFS solution by Minsheng Financial Leasing Co., Ltd., the Company’s first major banking-oriented financial leasing client in China. According to Minsheng, the system’s installment has helped it to normalize and standardize its business processes, increase Minsheng’s participation in the financing sphere, and significantly improve its operational efficiency. China’s rapidly developing financial leasing industry, which experienced a growth rate of 139% in 2009, is playing an important role in the nation’s growing adoption of advanced IT solutions. An increasing number of Chinese financial institutions are seeking to streamline their operations by replacing their initial IT systems with flexible, integrated enterprise technology solutions.

RedChip Visibility recently initiated research coverage of NetSol with a Strong Buy rating and a price target of $3.00, representing a potential upside of over 260%. As China’s enterprise software market continues to grow, investors would be wise to keep an eye on this promising company.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

NetSol Technologies (Nasdaq:NTWK) (Nasdaq Dubai:NTWK)

NetSol projects revenues in the range of $33.0 million and $35.0 million for fiscal year 2010, representing 25% to 32% year-over-year growth. The Company anticipates a return to GAAP net income for fiscal year 2010, versus a GAAP net loss of $0.30 per diluted share for fiscal year 2009. License revenues are projected to increase more than 100% over fiscal year 2009. NetSol’s third-quarter growth was attributed to new contracts in China and Thailand, rising demand in emerging markets, and a growing number of multi-national blue chip customers seeking global software solutions to meet their financing needs.  The Company is optimistic that it will achieve profitability for the fiscal year 2010.

Financial highlights from the third quarter fiscal year 2010 include:

• Revenues of $8.9 million, an increase of 77.8% from the same period last year.
• Net income per share totaled $0.02 versus a loss $0.19 for the same year-ago period.
• Gross margin increased to 61.3% compared to 10.7% in the same period a year ago.
• 100% sequential growth in net revenues from license fees.
• Net revenues from license fees totaled $3.64 million, a 1,022% increase year-over-year.

NetSol offers high-quality software solutions specialized by industry. Among its blue-chip client base are Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers, and government agencies. NetSol’s products and service offerings include credit and finance portfolio management systems; custom solutions for credit, lease and loan accounting, fleet management, and wholesale finance; SAP consulting and services; custom development; systems integration; and technical services. The Company has achieved the designation of ISO 9001, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. 

The Company’s multi-currency, multi-lingual IT solutions can be scaled from a core platform to maximize flexibility and affordability. Many companies are struggling with outmoded IT solutions which increasingly cannot handle the volume and complexity of their finance needs. These solutions cannot be updated, and therefore need to be replaced. NetSol is able to design, implement and support a new end-to-end solution in a short period of time. These solutions typically have longer life spans, with recurring revenues generated by service, support, and license upgrades. China, in particular, is a major growth driver of NetSol’s business. The Company has invested in China to increase local resources, allowing NetSol to further capitalize on the vast opportunities available there.

Joint ventures are another key driver of NetSol’s business growth, allowing the Company to expand into new global markets with local partners. The Company’s joint venture with the Innovation Group continues to perform well and offer promising growth opportunities. In addition, NetSol has seen growing sales activity with its Atheeb NetSol joint venture in Saudi Arabia. Launched in April 2009, the joint venture was formed to capitalize upon the rapidly growing Middle East market for IT services and software development.

NetSol’s proven IT enterprise solutions, combined with its global strategy and successful joint ventures, have positioned the Company to take advantage of the remarkable growth opportunities available in the worldwide applications software sector.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.