Infosys Guiding Through Rough Surf Of Offshoring

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Infosys Guiding Through Rough Surf Of Offshoring
Vivian Wai-yin Kwok, 04.15.08, 9:05 AM ET

HONG KONG -

India's second-largest software company, Infosys Technologies, posted slightly lower than expected profit growth for the quarter ending in March. The software exporter continues to contend with the challenges of rupee appreciation eroding its competitive edge and weaker demand from the United States, which accounts for the lion's share of its business.

Infosys said Tuesday that the net profit in the quarter from January through March grew 9.6%, to 12.5 billion rupees ($313.5 million), from 11.4 billion rupees ($285.9 million) a year ago. Earnings per American depositary share of the Nasdaq-listed Infosys increased to $0.55, from $0.46 in the corresponding quarter a year earlier. Although the company had included a $5 million benefit from a tax charge reversal in its net profit calculation, the result was slightly weaker than the average of 12.6 billion rupees forecast by 15 brokers in a Reuters poll.

Quarterly sales came in at 45.4 billion rupees ($1.1 billion), up 20.4% from last year. The software company, whose clients include major U.S. accounting and financial firms, managed a modest diversification in its geographic markets. The share of its revenue derived from North America slipped to 60.7%, from 62.6% a year earlier, as sales in Europe grew to 29.3%, from 26.6%. India and the rest of the world remained flat, contributing about 10% of sales during the quarter.

Facing struggles from slackening demand from the U.S. market, as well as the stronger rupee, which had appreciated 11% over the past twelve months, Infosys forecast Tuesday that sales in the current financial year, starting this month, would grow 19%-21%, to $5.0 billion-$5.1 billion, slowing from a rise of 35% last year. Earnings per American depositary shares are estimated to be $2.31-$2.35, with a year-on-year growth of 16.7%-18.7%.

In an interview with Reuters on Tuesday, Chief Financial Officer V. Balakrishnan admitted there are short-term challenges but maintained that the outlook is favorable for the medium to long term. Based on a survey done by Infosys, according to Balakrishnan, 76% clients were planning either to cut or simply maintain their information technology budgets over the coming year.

Nevertheless, Infosys (nasdaq: INFY - news - people ) investors remained confident, sending the shares of Infosys up by 6.2%, or 88.50 rupees ($2.20), to 1,510.40 rupees ($37.89), after the announcement of its results.

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