Infosys forecasts lower earnings
Bangalore, April 15, 2009
Infosys Technologies Ltd issued a downbeat forecast in dollar earnings for 2009/10 on slowing outsourcing momentum, sending its shares down as much as 7.7 percent, after the company beat estimates with a 29 percent rise in quarterly net profit.
India's second-largest software services exporter expects earnings for the year to March 2010 to fall by 11.1-15.1 percent to $1.91 to $2 a share and operating margins to slip 300 basis points as clients demand fee cuts in a tough economic environment.
Revenue for the year ending March 2010 would fall 3.1-6.7 percent to between $4.35 billion and $4.52 billion, the company said, after revenue rose 11.7 percent last year and after growing by more than 30 percent over the past few years.
"Guidance is not that impressive. It points to a cautious outlook and lack of business drivers in the bottomline," said Kevin Trindade an analyst at KR Choksey Shares and Securities.
By 10.42 a.m. (0512 GMT), Infosys shares fell 4.6 percent to 1,343.85 rupees in a Mumbai market down 0.6 percent.
India's $60 billion outsourcing sector, which provides an array of services from software coding to managing computer networks and call centres, face headwinds such as weak demand, cut-rate prices and rising competition from global rivals.
The forecast for 2009/10 assumes a 6.5 percent drop in prices on the back of a 3 percent fall in the March quarter, Infosys said.
"The deal pipeline continues to be fairly strong. The challenge is in closing them because the decision making is taking time," chief operating officer S D Shibulal told reporters.
The sector has also been dented by a large accounting fraud at Satyam Computer Services. On Monday, mid-sized Indian outsourcer Tech Mahindra won an auction for a controlling stake in Satyam.
After the acquisition, Tech Mahindra will become the country's No. 4 IT services exporter, and could be in a stronger position to compete for large deals with leader Tata Consultancy Services, Infosys and third-ranked Wipro.
Infosys, which develops applications, designs supply chains and offers back-office services, said net profit rose to 16.13 billion rupees ($323 million) in January-March, its fiscal fourth quarter, from 12.49 billion reported a year ago.
A Reuters poll of 13 brokerages had estimated a net profit of 15.66 billion rupees for Infosys, which counts Goldman Sachs, Philips Electronics, and BT Group among its clients. - Reuters