Infosys 3rd-Qtr Profit May Have More Than Doubled
on New Orders
By Arijit Ghosh
New Delhi, Jan. 5 (Bloomberg) -- Infosys Technologies Ltd., India's fastest
growing company by earnings, may have more than doubled third-quarter
profit, helped by new orders for developing software from companies such as
Cisco Systems Inc.
The country's second-biggest software maker by market value, may have
earned 1.68 billion rupees ($36 million) in the three months ended December,
or 128 percent more than 737.9 million rupees in the year-ago period, an
average of 15 analysts polled by Bloomberg showed. Infosys is expected to
have sold 5 billion rupees in software services, from 2.3 billion rupees last
year.
Despite concerns of a slump in the U.S. economy, ``they have not seen any
slowdown in business,'' said Anil Tewari, an analyst with Goldman Sachs
(Asia) LLC in Hong Kong. ``That's because they have a good business model
and orders from a wide variety of large companies.''
Infosys has seen its earnings per share surge at a compounded rate of 78.5
percent over the last five years, making it India's fastest growing company. It
has got a boost from its growing list of customers and more orders from
existing clients such as Cisco. Infosys' programmers write code for the world's
biggest Internet equipment company at a much lower cost than rivals
worldwide. The cost advantage should prove an attraction to other companies
at a time when the U.S. economy is slowing.
``The company would have got 44 percent higher rates from its clients this
quarter, from the quarter last year,'' said Hitesh Zaveri, an analyst with
Prabhudas Lilladher Ltd., in Mumbai.
The board of Infosys is expected to meet in Bangalore on Tuesday at 8.30
a.m. local time. The results will be announced before the stock market opens.
New Orders
In the quarter, Infosys among other orders, bagged a contract from Nortel
Networks Corp. -- which has been one of its oldest customers -- to devise
software to help the Canadian company move from the various standards of
mobile communication, such as GSM wireless standard, to Universal Mobile
Telecommunications Systems, or UMTS, which can receive data as much as
100 times faster than GSM.
Such orders will help Infosys, which is increasingly looking to tap the growing
market for mobile commerce technologies and services, to boost sales.
``As a company we are placing our bets on wireless applications,'' Phaneesh
Murthy, senior vice president for worldwide sales at Infosys, said in an
interview in November. ``From 50 people who are working on wireless
technologies, we plan to increase the number to 325 in a year.''
According to researcher Gartner group, companies will have completed $7
trillion worth of transactions on the Internet by 2004. Forty percent of these will
be done using mobile devices, said Gartner.
Analysts also expect Infosys to bag more orders from businesses such as
U.S. based YadaYada Inc. to develop software that will helps Internet users
access the net through hand held devices. Infosys earned 31.4 percent of its
revenue by writing such e-commerce software in the second quarter.
Slowdown
Still, growth over the second quarter is expected to be slower. The company's
profit may rise 9.3 percent over the previous quarter. That's the slowest since
September 1999.
Analysts also expect margins to fall by as much as 0.5 percentage points to
34.5 percent in the quarter.
``The company is cutting down on its dot com exposure which will hit
margins,'' said Bhaskar Laxminarayan, who helps manage $400 million in
Indian stocks for Alliance Capital Management Ltd., in Singapore. ``I would
only start worrying if the margin falls more than 100 basis points.''
Two salary increases through the year and a larger pool of employees is also
expected to hit margins. The company may have added about 690 employees
in the third quarter, analysts said.
Infosys' American depositary receipts, which trade on the Nasdaq exchange,
fell 44 percent in 2000 on concern a slowdown in the U.S. economy may hit
sales at the company. The shares fell 4.4 percent to $99 yesterday.
The company's local shares fell 0.3 percent to 6,077 rupees in early trading.
The stock's fortunes ``will depend on what the management says about the
future,'' said Alliance's Laxminarayan. ``Any negative body language would
make investors decide,'' to sell. |
