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Wednesday , July 25 , 2012
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Wipro offers muted guidance

Mumbai, July 24: The technology titans have started to stumble in the first quarter — and aren’t holding out hope of a good and strong recovery in the quarter ahead.

On Tuesday, Wipro forecast muted guidance for the second quarter ended September 30 after just about meeting the Street’s expectation with the announcement of a net profit growth of 18 per cent year-on-year at Rs 1,580.22 crore. It had earned Rs 1,334.9 crore in the same period last year. Analysts had expected the company to report profits of Rs 1,590 crore.

But the market was hugely disappointed by Wipro’s forecast that revenues from its IT services business would hover between $1,520 million and $1,550 million in the quarter ended September 30, a 0.3 to 2.3 per cent sequential growth. This was way below analysts’ expectation of 1 to 3 per cent growth.

The stock plunged 4 per cent at one stage after the Azim Premji-controlled company came up with its flat guidance for the September quarter. It closed nearly 3 per cent lower at Rs 346 on the BSE.

During the quarter, total revenues stood at Rs 10,653 crore, a rise of 24 per cent over the comparable period last year.

Wipro is the second company after Infosys to have disappointed on revenue guidance. Analysts said its muted outlook was an indication of the challenges that domestic firms were facing in the US and Europe.

Wipro had gone for a management rejig last year when it scrapped the joint CEO model and named T.K. Kurien as the chief executive in February last year.

The view on the Street is that Wipro’s management rejig has still to yield results. “Wipro is still in the process of realigning its capabilities and positive results from organisation restructuring exercise are yet to be seen,” said Ankita Somani, research analyst at Angel Broking.

Emkay analyst Manik Taneja, who was disappointed by the numbers both on the profits and the dollar revenue front, said the company might have to wait for its efforts to bear fruit.

“While we appreciate Wipro’s steps over the past one year wherein the company is taking the necessary steps to address the inherent account mining woes, we believe that Wipro’s turnaround still remains a work in progress and the difficult macro environment will delay the success on the moves,” he said in a note.

Wipro has signed an agreement with Lornamead Group to acquire the Yardley business in the UK and rest of Europe excluding Germany and Austria for an undisclosed sum.

Meanwhile, Wipro chief Azim Premji, who had recently said India was functioning without a leader, today wanted Prime Minister Manmohan Singh to be given a fair chance for rolling out reforms.

Premji’s observations come on the heels of Tata group chairman Ratan Tata stating it was unfair to single out Singh for the country’s economic woes.