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Infosys numbers miss estimates

Mumbai, Jan. 13: Infosys Technologies uncharacteristically failed to meet the Street’s expectations of revenue and profits in the third quarter and sent a frisson of fear through the outsourcing industry by failing to match market forecasts for the crucial fourth quarter (January-March).

The triple whammy sent the stock tumbling and sparked jitters over the performance of the entire technology pack, which is usually treated as the poster boy for India’s service sector that accounts for more than 57 per cent of the country’s GDP.

Infosys indicated that it was well on its way to becoming a $6-billion company by the end of this fiscal, but that did nothing to assuage fears over the brittleness of India’s outsourcing story.

The Bangalore-based company clocked a net profit of Rs 1,780 crore for the quarter, a rise of 14.2 per cent over the corresponding period last year. But the number fell short of the Street’s consensus estimate of Rs 1,820 crore.

For the third quarter, Infosys reported revenues of Rs 7,106 crore, a jump of nearly 24 per cent over Rs 5,741 crore in the same period of 2009-10. However, analysts had forecast Infosys to report revenues of nearly Rs 7,200 crore.

To top it all, Infosys gave a very muted guidance for the fourth quarter and the full year ended March 31.

It said for the year ending March 31, 2011, revenues were likely to be in the range of Rs 27,408 crore to Rs 27,481 crore and EPS in the region of Rs 118.68 to Rs 118.90.

In dollar terms, revenues for the year are expected to be in the range of $6.04-6.06 billion, a growth of 25.7-26.1 per cent. The Street was looking forward to a growth forecast of 27-28 per cent in dollar revenues. For the fourth quarter, revenues are projected to be in the range of Rs 7,157 crore to Rs 7,230 crore.

Analysts said while the third quarter was generally a weak quarter for the sector, other internals did not make for good reading. For instance, a cause for concern was that the volume growth (that contributes to the topline) of 3.1 per cent was the lowest over the past four to five quarters. However, pricing increase of 1.6 per cent during the period was in line with analyst estimates.

“It (the numbers) was a tad disappointing because of lower volume growth and the muted outlook for the fourth quarter,” said Rohit Kumar Anand, analyst at PINC Research. Anand, who has a buy rating on the stock, told The Telegraph that he expected Infosys to do well in the next fiscal as IT spending in the US was expected to improve.

The top management of the IT services behemoth was more cautious in their outlook.

“The weaker economic recovery in developed markets coupled with high unemployment and risk of sovereign default could impact industry growth,” said S. Gopalakrishnan, CEO and managing director.

Investors pummelled the stock, which fell 4.82 per cent, or Rs 162.65, to close at Rs 3,212.30.

The company said it had added 40 clients in the quarter with a gross addition of 11,067 employees. As on December 31, the company had 1,27,779 employees.

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