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Wednesday, 9 January, 2002, 17:26 GMT
Infosys kicks off earnings season in India
Infosys Technologies Ltd, Bangalore, India
Infosys - the first Indian software firm to list on Nasdaq
By Sanjeev Srivastava in Bombay

India's premier software firm, Infosys Technologies, kicks off India's corporate earnings season on Thursday morning in the southern city of Bangalore, when the company announces its profits for October, November and December.

India's second largest software exporter, Infosys, earns over 70% of its revenue from the US.


What we will be waiting for is some kind of a positive guidance from Infosys management about the coming quarters

Sushil Choksey of Rosy Blue, Bombay stock brokerage
Quarterly numbers as well as future guidance from the company will be the first indication of whether or not the worst is over for Indian software exporters who earned $6.2bn for the country last year.

Weaker demand and pressure on billing rates because of a slowdown in the US economy forced Infosys management to revise its growth estimates to 30% in April last year after posting an annualised average growth of 85% in the previous five years.

Shaken

The profit warning from the technology giant, Infosys, shook investor confidence and resulted in a share price crash of Indian software companies, many of which traded at less than a fifth of the peaks they had touched in the heady, bull days of 1999-2000.

Analysts expect the company to comfortably meet its quarterly targets and post a profit of about 2.05bn rupees ($42m; 30m), that would be a 24% jump in profits over the same three months in the previous year.

Meeting these consensus numbers should not be a problem for Infosys - the first Indian software firm to list on Nasdaq with several leading companies amongst its nearly 300 clients - which has a reputation for consistently beating estimates.

More importantly from the analysts point of view, there may be a hint from the company about a possible recovery in the coming months.

Looking to the future

"The numbers of last quarter will not be so important. What we will be waiting for is some kind of a positive guidance from Infosys management about the coming quarters.

"Also it will be interesting to note how many clients the company has added in the last quarter and whether or not they see some easing of pressure on billing rates," said Sushil Choksey of Rosy Blue stock brokerage firm in Bombay.

While analysts like Mr. Choksey are cautiously optimistic about Infosys management coming out with a positive guidance on the back of tentative signs of recovery in the US economy, not everybody shares this view.

French brokerage firm, Credit Lyonnais Securities Asia, has said in a report that the outlook for Indian software companies still appears uncertain.

"A positive guidance is unlikely to come this quarter as most of the US companies are moving to quarterly budgeting and, therefore, the outsourcing visibility for the whole year from existing clients remains hazy," the report points out.

Investor nerves

The stock markets turned jittery on the eve of Infosys results and the company stock which had spurted 18 % this year, lost nearly half of those gains in nervous trading on Wednesday.

Infosys results will be followed by other leading Indian technology firms like Satyam Computers Services, Wipro and HCL Technologies.

However, as in the past, numbers from Infosys - a company set up nearly 20 years ago by seven technology entrepreneurs with a capital of $250 - will set the trend for the Indian technology sector.

See also:

10 Oct 01 | Business
Infosys profits beat forecasts
10 Jul 01 | Business
Infosys profits jump
10 Oct 00 | South Asia
Boomtime for Indian software giant
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