INFY ($74-$66)...P/E 57....Meets Estimate, Cautious guidance.
Thursday January 10, 11:01 am Eastern Time
Infosys meets Q3 estimates, outlook cautious
(UPDATE: Recasts throughout)
By Anshuman Daga
BANGALORE, Jan 10 (Reuters) - Indian software giant Infosys Technologies Ltd on Thursday reported one of its slowest ever quarter-on-quarter profit and sales growth in line with estimates, but the company indicated the worst is not over.
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India's second-largest software exporter, which usually delivers more than it promises, said prices were under heavy pressure from slowdown-hit clients in its main U.S. market.
``We continue to see cancellations. There continues to be fog on the windshield,'' managing director Nandan Nilekani told a news conference in Bangalore.
The company is now betting on volumes to drive growth.
Infosys serves about 300 diversified global clients such as Nortel Networks and Monsanto with its 10,500-strong workforce split almost equally between India and client sites abroad.
The company reported before market hours a net profit of 2.06 billion rupees ($42.56 million) for October-December, up just two percent from the previous quarter. The net profit exactly matched a median forecast of a Reuters poll.
It said third-quarter revenue rose 1.6 percent to 6.61 billion rupees, a shade below the poll's estimate of 6.7 billion. ``We believe Infosys has entered a phase of lower growth where revenue will grow at a slower rate accompanied by pricing pressure,'' said Sanjiv Goswami, analyst at SSKI Securities.
From the year-ago quarter, Nasdaq-listed Infosys (NasdaqNM:INFY - news) posted a 24 percent growth in October-December profit as sales rose 23 percent.
Infosys shocked markets last April when it forecast revenue would grow only 30 percent this year after averaging 85 percent annual growth in the previous five years.
It gave no estimates for the financial year starting April.
Infosys' shares fell as much as 5.5 percent on the Bombay Stock Exchange after the results were announced as investors once again booked profits as they did on Wednesday following a five-day market rally led by technology stocks.
But the stock partially recovered to end at 4,254.20 rupees, down four percent, dragging down other tech shares.
Infosys' shares are trading at about 35 times its estimated earnings per share for the year to March 2002, lower than rival Wipro Ltd whose stock commands a price-to-earnings ratio of about 45, analysts said.
TOUGH TIMES
Narayana Murthy, Infosys' chairman and chief executive officer, termed the October-December ``the most challenging'' both for Infosys and the Indian software sector and said short-term business uncertainties remained and the outlook for the long-term was cautious.
He hands over the mantle of CEO on March 31, 2002 to Nilekani, but will continue as chairman and take on a new role as ``chief mentor''.
In the past quarter, Infosys added 33 new clients, including Texas Instruments, against 28 clients in the second quarter.
``Our biggest problem is not in client acquisitions, but that most clients are not ramping up work because they don't have visibility and they are into a significant cost-cutting mode,'' Phaneesh Murthy, global head of sales at Infosys, told Reuters.
``The environment continues to be quite challenging as the events of September 11 have created further cost-cutting measures, which have reduced spending and investments some more.''
Infosys said volumes last quarter grew 3.4 percent over the July-September quarter, but prices fell 3.2 percent.
(US$1 equals 48.4 Indian rupees) |
