(Source: The Times of India)
BANGALORE: Finally, a spot of relief in an otherwise gloomy market. Infosys Technologies on Tuesday announced that its net profit in the third quarter rose by 33%, higher than what many analysts had anticipated. But the deepening global economic meltdown and a squeeze on business contracts forced the technology bellwether to revise its annual forecast downwards.
The company's stock price rose by over 7% over the day on the back of the results, and the expectation that the troubles in Satyam Computer would encourage customers to move to companies like Infosys that have a reputation for good corporate governance. Speaking to the media on Tuesday, Infosys CEO S Gopalakrishnan said that the company's "robust and flexible operating and financial models" position the company well in the current uncertain economic environment.
The company's operating margin increased during the quarter, but this was primarily due to depreciation of the rupee. The company expects the next 12 to 18 months to be difficult. A significant squeeze of customer budgets is expected by mid-February. But Gopalakrishnan said the early indication from clients is that they would outsource and offshore more of their work, which would partly offset the budget cuts. On a constant currency basis, pricing declined by 1.8% during the quarter.
"The environment is challenging as clients are going through turmoil. At this stage we are comfortable with the pricing environment, but if things get worse, pricing will become more challenging," said S D Shibulal, COO at Infosys. Anand Lavi, analyst at research firm Tholons, added that Infosys missed the lower end of its revenue guidance for the third quarter in dollar terms due to weakness in certain industry verticals like telecom and banking and finance.
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