European crisis hits profits of Infosys

BANGALORE - Infosys Technologies’ quarterly summary presents a surprise drop in the profits due to a weak European economy which in turn could curb new orders and dampen a recovery for India’s outsourcing sector.

Such were the views expressed by the top executives of the company, a leader among India’s software and IT services exporters at Bangalore on Tuesday.

The company, a trendsetter for India’s 60 billion dollars IT services sector, added 1,026 staff in April-June, its slowest pace of addition in four quarters, indicating a rebound from the global recession in the sector may be bumpy.

Ranked number two among India’s outsourcing companies, its profit fell 2.6 percent for quarterly period April-June while its sales contribution from Europe dropped to about 20 percent from nearly a quarter a year ago and 23 percent in January-March.

The disappointing profit and hiring sent its shares down as much as 3.8 percent in a steady market. Trading volume was nearly seven times the daily average over the past 30 days.

The shares ended 3.4 percent lower in its worst single day fall in more than a year after hitting a record high on Monday (July 12).

Nonetheless, Kris Gopalkrishnan, Chief Executive Officer of Infosys expressed optimism in overcoming the hurdles.

“There is optimism about our performance and where we are and what we see ahead of us. The way I look at it is now, there are some distant clouds in the horizon and we don’t know, whether they are simple rain clouds, then everybody will be happy, or, you know, there is a cyclonic storm ahead of us. You know, this is based on what is happening around the world, in Europe and other parts of the world,” said Gopalakrishnan.

The company, which counts Goldman Sachs among its more than 550 customers, forecast its 2010/11-dollar revenue to rise 19 percent to 21 percent, higher than 16-18 percent projected in April.

Known for its conservative outlook, Infosys has raised its full-year revenue growth forecast in dollar terms in the last three consecutive quarters.

Infosys and local rivals Tata Consultancy Services and Wipro have raised salaries by 10 to 20 percent on average to keep their staff from being poached by global rivals.

S D Shibulal, Chief Operations Officer, and Director of Infosys said that the problem in Europe is visible in the recent results of the company.

“Europe, as the percentage has come down, you know, as you know, Europe entered the recession behind North America. Europe still has challenges in various areas, and that is being reflected in these results,” observed Shibulal, COO and Director, Infosys.

Bangalore-based Infosys, whose sprawling campuses elsewhere in India house pizza and Subway outlets and golf courses, and local competitors have been targeting Europe and Asia Pacific over the past few years after a slowdown in the United States hit sales in their biggest market. (ANI)