Despite economic uncertainty in the U.S. and elsewhere, Infosys remains optimistic about growth. Even though IT budgets are flattening for many of its clients, the company said the proportion of IT budgets going offshore will continue to rise.
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Infosys Technologies' better-than-expected short-term business outlook glossed otherwise lackluster fourth-quarter results, which fell just short of market forecasts.
"The market was expecting the worst, but the Nasdaq-listed company has performed well and results are almost in line with market expectations," R. Ravi, an analyst at Karvy Stock Broking, said.
"In this quarter, the company has not factored pricing into its results, but it will probably get a modest price hike post-second quarter owing to an expected improvement in the U.S. economy," Ravi added.
Growth in Medium- to Long-Term
India's second-largest software company expects a 15.2 percent year-on-year rise in its first-quarter underlying earnings per share to 20.73 rupees (52 US cents) and 21.1 to 21.4 percent growth in total income to 45.70 billion to 45.82 billion rupees ($1.14 billion to $1.15 billion)
For fiscal year 2009, Infosys has projected a net income of 198.94 billion to 202.14 billion rupees ($4.98 billion to $5.06 billion), equivalent to year-on-year growth of 19.2 to 21.1 percent. The company anticipates full-year earnings per share before exceptional items of 92.32 to 93.92 rupees ($2.31 to $2.35), a rise of 16.3 to 18.3 percent.
"While there could be short-term challenges due to global economic uncertainties, we as a company see significant growth opportunities in the medium- to long-term," chief executive and managing director S. Gopalakrishnan said.
Expectations vs. Reality
The company posted a net profit of 12.49 billion Indian rupees ($312 million) for the quarter to March 31, 2008, compared with 11.44 billion rupees ($286 million) in the year-ago period. It had posted a net profit of 12.31 billion rupees ($308 million) in the preceding quarter.
Its fourth-quarter income came in at 45.42 billion rupees ($1.14 billion), a rise of 20.4 percent over last year and up from 42.71 billion ($1.07 billion) in the third quarter.
According to analysts polled by Thomson Financial, the Nasdaq-listed company's net profit for the quarter was projected at 12.55 billion rupees ($314 million) on revenues of 45.47 billion rupees ($1.14 billion).
The company's fourth-quarter results were also impacted by the late finalization of information technology budgets for the calendar year 2008 by some of its clients.
IT Flattening
Infosys said it expects IT budgets from the majority of clients to remain flat for 2008 as it sees a challenging environment in the short term.
"About 90 percent of our clients have said that the 2008 IT budget will be slightly lower than last year," the company said in a press conference.
Analysts are expecting a reduction of about 50 percent in the budgets from big companies owing to the U.S. economic crisis. However, the company said the proportion of IT budgets going offshore will continue to rise.
Infosys' shares closed 6.21 percent up at 1,510.8 on the Bombay Stock Exchange, while the overall Sensex closed at 15,833.60, up 0.16 percent.
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