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Infosys' growth falls in uncertain market

The Indian outsourcer may have also failed on execution of some of its strategies, analysts said

By John Ribeiro
October 12, 2012 05:17 AM ET

IDG News Service - Indian outsourcer Infosys blamed continuing global economic uncertainties for a slide in year-on-year revenue growth in U.S. dollar terms, which declined to 2.9% for the third quarter, from 16.7% a year earlier.

"It's still very choppy out there, and lots of uncertainty," Ashok Vemuri, head of Americas at Infosys, said on Friday. Although some economic indicators are moving up, it is not translating into speedy IT buying yet, he added.

The company has been blamed for poor execution in its expansion into value-added services like consultancy, technology platforms, cloud and mobility. Last month it said it had signed a definitive agreement to acquire Lodestone Holding, a management consultancy firm in Zurich with skills in the area of SAP software.

It takes some time to ramp up the wins, and the company is already seeing strong traction in value-added businesses, Vemuri said. The company's consulting business for example grew 3% quarter-over-quarter, he said.

Revenue for the quarter was $1.8 billion, while net income was $431 million, up by 4.9% from a year earlier, but lower than the 10% profit growth it posted in the same quarter last year.

The company's profit was hit by currency fluctuations, investments in setting up facilities for clients, and also in training staff in new technology areas such as mobility and cloud computing, Vemuri said. The company bagged six large deals in the quarter, he said.

Because of the deprecation of the rupee against the dollar, revenue growth was higher in rupee terms, at about 22%, while net profit grew 24%.

The company added 39 new clients in the quarter, and added 2,610 employees during the period to take the total number of staff to 153,761 as of Sept. 30.

Infosys, India's second-largest outsourcer, has maintained its forecast for its fiscal year ending March 31, 2013. Revenue is expected to be at least about $7.3 billion, up by 5% from the previous year.

"We expected that the company would revise upwards its revenue forecast for the year, as a result of the Lodestone acquisition," said Mridul Gupta, senior analyst at Everest Group. That the company did not revise its estimate suggests that it is facing pressure on pricing and that the market, despite recovering, is still very slow, he said.

Infosys has lagged in revenue growth recently behind the number-one Indian outsourcer, Tata Consultancy Services, leading some analysts to hold that the company has problems in execution. There has been management turmoil, reflected again on Friday when the company announced that the company's CFO, V. Balakrishnan, is moving from his job this month while retaining his position on the company's board, Gupta said.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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