Infosys predicts first ever revenue drop after tough quarter

The global recession is beginning to hurt Indian outsourcers

India's second largest outsourcer, Infosys Technologies, forecast its first ever full year revenue decline after the global recession bit into its fourth quarter results.

The company's revenue will decline 3.1% to 6.7% to between $4.35 billion and $4.52 billion this fiscal year, which ends March 31, 2010. Revenue in the current quarter is forecast to decline as much as 8.2%.

The global financial crisis has hurt many of Infosys' clients, the company said in a statement. Infosys is the first large Indian outsourcer to report earnings for the quarter.

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India's second largest outsourcer, Infosys Technologies, forecast its first ever full year revenue decline after the global recession bit into its fourth quarter results.

The company's revenue will decline 3.1% to 6.7% to between $4.35 billion and $4.52 billion this fiscal year, which ends March 31, 2010. Revenue in the current quarter is forecast to decline as much as 8.2%.

The global financial crisis has hurt many of Infosys' clients, the company said in a statement. Infosys is the first large Indian outsourcer to report earnings for the quarter.

Infosys saw revenue decline 1.8% year-on-year to $1.12 billion in the fourth quarter, which ended March 31. Full year revenue rose 11.7% to $4.7 billion.

Net profit rose 2.6% to $321 million in the quarter, while full year net profit increased 10% to $1.3 billion.

The outsourcing market is going through difficult times, as customers postpone new contracts, and the implementation of current projects, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International (TPI). Outsourcers are also under pressure to reduce their prices, he added.

Indian companies are more exposed to the contraction in outsourcing worldwide because they are more dependent on project work than on annuity revenue such as in the area of software maintenance or infrastructure management, Pai said. While customers continue to need to maintain their existing infrastructure and software, new projects tend to be more vulnerable to budget cuts, he added.

The appreciation of the U.S. dollar against the Indian Rupee will however boost companies' revenue in Rupees, Pai said.

Although full year revenue will decline in U.S. dollar terms, when calculated in Rupees, Infosys expects it to grow 1.7% to 5.7% according to Indian GAAP (Generally Accepted Accounting Principles).

The squeeze on outsourcers is also reflected in decreased hiring.

The company hired 1,772 employees in the quarter ended March 31, down from new hires of 2,772 a quarter earlier. It added 13,663 new employees during the year ended March 31, down from 18,946 a year ago. Total number of employees at the end of March were 104,850.

The company added 37 clients in the quarter to March 31, but active clients were down to 579 from 583 a quarter earlier.

The company's results were reported in accordance with International Financial Reporting Standards (IFRS).

The IDG News Service is a Network World affiliate.