Infosys issues downbeat forecast for 2009/2010 ; shares sink

Discussion in 'Stocks' started by ByLoSellHi, Apr 15, 2009.

  1. Infosys Forecasts Lower Earnings
    Published: April 15, 2009

    Filed at 2:00 a.m. ET

    BANGALORE, April 15 (Reuters) -
    Infosys Technologies Ltd (NASDAQ:INFY) 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. (NYSE:SAY)

    On Monday, mid-sized Indian outsourcer Tech Mahindra (OOTC:TMHAF) 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 (OOTC:TACSF) , 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 (NYSE:GS) , Philips Electronics (NYSE:pHG) , and BT Group (NYSE:BT) among its clients.

    An army of English-speaking engineers and cheaper wages has driven an outsourcing boom in India, but turmoil in global markets and a recession in the United States, which accounts for more than half the sector's revenue, have halted the scorching pace of growth.

    Infosys said it plans to add a gross of 18,000 employees in 2009/10, compared with 28,231 a year ago, and would freeze wages to rein in costs. However, it had no plans to cut jobs, it said.

    "The year would be challenging on the people front," said board member T.V. Mohandas Pai.

    The company said its cash and cash equivalents stood at 109.93 billion rupees as at end March.

    Shares in Infosys, valued at more than $16 billion in the market, jumped 19 percent in Jan-March, outperforming a nearly 3 percent gain in the sector index and a nearly 1.0 percent rise in the main index. ($1=50 rupees)
  2. Infosys Forecasts First-Ever Revenue Decline in Dollar Terms; Shares Fall

    April 15 (Bloomberg) --
    Infosys Technologies Ltd. forecast its first annual drop in dollar sales as customers pare orders during the global recession, sending shares of the Indian software-services provider to their biggest slump in five years.

    Revenue in the year ending March 31 will fall 3.1 percent to 6.7 percent to range between $4.35 billion and $4.52 billion, Bangalore-based Infosys, India’s second-largest software- services provider, said today.

    “The forecast doesn’t appear to be very good,” said Viswanathan Vasudevan, who helps manage $250 million, including Indian technology stocks, at Aquarius Investment Advisors Pte in Singapore. “The company has been known to be conservative in giving their annual guidance and I believe they are definitely playing it safe given the global recession.”

    Infosys said it expects to reduce prices as the worst recession in six decades in North America and Europe, which contribute 90 percent of sales, forces clients to trim spending. The software provider may also face stiffer competition in India after the sale of Satyam Computer Services Ltd. this week following a $1 billion accounting fraud.

    Infosys lost 4 percent to 1,352.6 rupees as of 11:05 a.m. in Mumbai trading, after falling as much as 7.8 percent, the most since May 17, 2004. The benchmark Sensitive Index rose 0.4 percent.

    Order Decision

    Customers are taking as long as 15 months to decide on orders, Chief Operating Officer S.D. Shibulal told reporters today. Chief Financial Officer V. Balakrishnan projected the company’s prices will fall 6.5 percent this fiscal year.

    Infosys said earnings per share will be 96.65 rupees to 101.18 rupees this fiscal year, less than the 98.3 rupees to 102 rupees predicted by analysts, based on the median of three estimates.

    Still, the rupee’s 21 percent drop against the dollar in the year ended March 31 bolstered the value of overseas earnings in the fiscal fourth quarter.

    Net income climbed 29 percent from a year earlier to 16.1 billion rupees ($323 million) in the three months ended March 31, beating the 15.6 billion rupee median of 20 analyst estimates compiled by Bloomberg in the past four weeks. Earnings per share increased to 28.16 rupees from 21.83 rupees.

    Fourth-quarter sales climbed 24 percent to 56.4 billion rupees. In January, the software exporter forecast revenue of 54.9 billion rupees to 57 billion rupees and earnings per share of 26.49 rupees for the three months ended March 31.

    A weaker rupee “provides some buffer to margins” for India’s software exporters, Julio Quinteros, a Goldman Sachs Group Inc. analyst, wrote in a note to clients on April 7. Quinteros has a “neutral” investment rating on Infosys.

    To contact the reporters on this story: Harichandan Arakali in Bangalore at
    Last Updated: April 15, 2009 02:16 EDT