India's Infosys surprises with 20.7 pct profit growth

Indian software giant Infosys Technologies reported a forecast-beating first quarter net profit jump of 20.7 percent Friday, soothing concerns about the impact of a global economic slowdown.

The country's second-biggest software firm began the earnings season for the key outsourcing sector by saying net profit over the three months to June hit 13.02 billion rupees (302 million dollars) from 10.79 billion a year earlier.

A weaker Indian rupee had boosted the bottom line, Infosys said in a statement, adding revenue rose 23.47 percent to 49.71 billion rupees for the quarter.

Indian software companies tend to get much of their income from the US, billing in dollars. A weaker rupee can help them to price their services more competitively and convert their dollar income into greater local currency.

Infosys chief executive S. Gopalakrishnan said an uncertain global economic environment could still hit IT spending in the short term, but added the firm saw "several growth opportunities" as customers wanted greater efficiency.

"Though margins were impacted due to increases in salary and visa costs, they were offset by a weaker rupee, which depreciated to 43.04 levels from 40.02 during the quarter," chief financial officer V. Balakrishnan told AFP.

Growth in the outsourcing sector, which covers activities such as software writing and call centre provision, has helped the Indian economy to expand rapidly over the last few years.

Infosys said it had added 49 new clients and 3,192 new employees over the quarter. Its shares rose 3.86 percent to 1,876 rupees Friday after earnings data, but closed sharply down 129.75 rupees or 7.18 percent to 1,676.45.

The firm predicted revenue of 212.7-216.2 billion rupees for the year to March 2009, representing growth of 27.5-29.5 percent. In dollar terms, the forecast was 4.97-5.05 billion dollars, indicating growth of 19-21 percent.

"As expected, Infosys revised its rupee guidance upwards for revenue growth," said Religare Securities analyst Anurag Purohit, adding his firm expected Infosys and other IT stocks to perform positively in the short term.

Citigroup said in a research note that its positive view on some IT stocks remained unchanged, saying outsourcing firms stood to gain from the fact that international clients were focused on cutting costs.

Infosys said the rupee would remain volatile.

"The rupee will be volatile, and under pressure due to the widening trade deficit," said Balakrishnan.

The rupee was quoted at 42.72 against the dollar on Friday.

Based on US accounting standards, revenues at Infosys rose 24.5 percent to 1.15 billion dollars over the first quarter against the same period last year, the company said.

North American revenue was flat for the year but constituted 62.6 percent of the total, while European revenue accounted for 27.3 percent, it added.

The US remains the largest market for Indian outsourcing firms. The sharp US economic slowdown has raised concerns about how they will fare in the future.

However, the outsourcing firms have expanded to Europe, Latin America and the Middle East to boost revenues in the increasingly difficult global economic environment.

Infosys Technologies was founded just 26 years ago by a group of software professionals led by N.R. Narayana Murthy, now the firm's chief mentor. Its growth has become emblematic of India's recent economic development.

© 2008 AFP

Related stories:

Indian software firms cautious despite strong Q1 results
Two of India's key software exporters, Wipro and Satyam Computer, posted higher-than-expected first quarter results Friday, but gave a cautious revenue outlook amid uncertain US economic conditions.
India's TCS first quarter net profit up seven pct
India's largest software exporter Tata Consultancy Services said Wednesday its first quarter net profit rose by seven percent on weak economic conditions across global markets, dealers said.
Dell 2Q profit drops 17 percent and stock plunges
(AP) -- Computer maker Dell Inc. said Thursday its fiscal second-quarter profit fell 17 percent, hurt in part by PC price cuts. Both earnings and margins fell short of Wall Street estimates, and Dell shares plunged.
Japan's Fujifilm slashes profit forecast by 23 percent
Japan's Fujifilm Holdings Corp. on Thursday lowered its profit forecasts for the financial year to March by about one quarter, blaming a worsening global economy and high material costs.
Oracle's Ellison grabs top spot on best-paid list
(AP) -- Oracle Corp. founder Larry Ellison, a longtime fixture on the list of the world's richest people, is now ensconced atop The Associated Press' rankings of the top-paid chief executives in the United States.
Taiwan's Asustek posts lowest profit in eight quarters
Taiwan's Asustek Computer Inc., the world's largest motherboard maker by shipments, posted Wednesday its lowest quarterly net profit in eight quarters for the April-June period.
Siemens wants out of PC venture with Fujitsu: report
The German engineering group Siemens wants to sell its half of a computer joint venture with Fujitsu of Japan, a press report said on Monday, quoting people familiar with the matter.
Profits up over 47 pct at Taiwan's Acer
Taiwan's Acer Inc. said Friday its net profit for the second quarter rose 47.5 percent from a year earlier on expanded notebook computer shipments.

News discussion:

Technology news