Satyam profit growth disappoints

IT outsourcing has boomed as firms look to cut costs

Satyam, India's fourth-biggest software company, has posted earnings for the first three months of the year that have missed analysts' expectations.

It said net income rose 19% rise in the January to March period to 4.67bn rupees ($117m; £59m).

But the rise was smaller than expected and it joins bigger rivals Infosys and Wipro in missing earnings forecasts.

India's outsourcing boom has given way to slowing profit growth, as the credit crisis has hurt US and European firms.

The value of outsourcing to India in 2007 - the remote servicing of information technology (IT) or other business processes by staff based in India - was estimated at $47.8bn.

Almost half of this was generated by US companies, which are now showing signs of cutting budgets in the face of stricter lending conditions and a slowdown in consumer spending.

Despite these problems, Satyam predicted robust full-year profits.

New focus

Satyam chairman and founder B Ramalinga Raju said its revenue in the year to 31 March 2009 would grow between 23.9% and 25.9% under Indian accounting standards.

Some analysts have been forecasting an increase of 22-24%.

But wage growth of 12-14% could affect profit margin, the firm said.

"Because of economic challenges in major markets, we are increasing our focus on ways the organisation can sustain continued growth," said Mr Raju.

"Diversification, with regard to industry, region, and service is one way to maintain success," he added.

Satyam won the tender to be the official software provider for the 2010 FIFA football World Cup in South Africa and the 2014 event in Brazil.