On March 9, 2006, at Arsenal Stadium in Highbury, north London, the home crowd erupted in joy as the referee signaled the end of the match. Approximately 30,000 Arsenal fans, along with millions of football enthusiasts worldwide, had just witnessed a remarkable conclusion in the realm of global football. The formidable Real Madrid had been eliminated from the Champions League Round of 16 for the second consecutive year. This was no ordinary Real Madrid team; it was the ‘Galácticos’—a dazzling roster of football’s elite stars, including Zinedine Zidane, David Beckham, Roberto Carlos, Ronaldo, and Raul.
A few years earlier, Real Madrid’s ambitious president Florentino Pérez had launched the Galácticos project, aiming to sign the world’s best (and priciest) players for staggering fees without hesitation. In July 2000, Pérez acquired Portuguese star Luis Figo for €62 million, setting a world record at the time. He broke that record the following year by signing Zidane for an astonishing €73.5 million. Over the years, Ronaldo, Beckham, Robinho, and others were brought in for eye-watering sums. However, the outcomes of this strategy were far from impressive. Between the 2003-04 season and 2005-06, Real Madrid failed to secure any trophies. The players and management faced relentless scrutiny from the media, and fans were left in despair. Following a series of humiliating losses, Pérez resigned in 2006, marking yet another failure of the ‘buy-at-any-price’ approach.
Does the Galácticos era offer any insights for the millions of investors in India’s IT services sector?
The December quarter (Q3) is typically a challenging period for the country’s IT services firms due to seasonal furloughs and fewer working days in their primary markets of the US and Europe. Nevertheless, the Q3 performance of large-cap IT companies has raised alarm bells. Tata Consultancy Services (TCS), the largest IT services firm, reported its steepest Q3 revenue decline since December 2015. With Q3 FY25 revenue at $7.54 billion, it fell 1.7% from the previous quarter, marking its worst quarterly performance since K. Krithivasan became CEO in June 2023. The primary cause was a downturn in its two key markets—US and Europe—responsible for about 78% of its revenue. Revenue from the US, its largest market, decreased by 1.5% sequentially and 2.4% year-on-year, with nearly all sectors, particularly healthcare, manufacturing, and BFSI, experiencing declines. Meanwhile, Infosys, another major player based in Bengaluru, reported a 0.9% revenue growth in dollar terms, surpassing analyst expectations, although this figure was somewhat misleading.
