Wipro Ltd.'s (
WIT) Q3 results met expectations with nearly 9% quarter-over-quarter increase in profits, but lower Q4 expectations are impacting the shares negatively in trading today. The company now expects revenues from IT services in Q4 to be around $1.05 billion, which is approx. 5 percent less sequentially in dollar terms.
The revenue guidance includes Citi Technology Services Ltd.,
Citigroup's (
C) in-house IT services provider in India, which Wipro acquired in December, 2008 for $127 million with an expected 2008 revenues of about $80 million.
The current global downturn is clearly impacting the Indian IT Services providers, clouding visibility beyond the current quarter. Wipro had a compounded annual growth rate (CAGR) of 25% over the last five years, exhibiting stability, profitability, and growth from its inception and through down markets for IT services. However, the current slowdown is expected to impact growth significantly over the coming quarters, and CY2009 may mark the low point for the company.
Similarly,
Infosys Technology (
INFY, Hold) had also announced a decent Q3 but provided a revised Q4 outlook significantly lower than previously expected. For Wipro going forward, a continued decline in gross and operating margins, heightened competitive challenges, rising labor costs, the strengthening of the Indian rupee, and its close ties with
General Motors (
GM) are concerns. Add to this the continued impact from the
Satyam Computer (
SAY, Sell) fallout and revelation of the World Bank debarment, and the picture is not so pretty for the quarters ahead.
In the meantime, conflicting news keep swirling around the future of the beleaguered Satyam. Larsen & Toubro Ltd., an Indian engineering and construction firm with roughly 4% stake in Satyam, was earlier rumored to be in talks to "rescue" the company. Larsen & Toubro came out today and flatly denied speculation of any such venture. The local Indian media keeps spinning out names of various potential suitors, none of which has been confirmed to date.
In other words, the saga continues.
