Wipro outlook points to uneven recovery for IT outsourcers

BANGALORE Fri Apr 19, 2013 2:38pm IST

People walk in the Wipro campus in Bangalore June 23, 2009. REUTERS/Punit Paranjpe

People walk in the Wipro campus in Bangalore June 23, 2009.

Credit: Reuters/Punit Paranjpe

Related Topics

Stocks

   

BANGALORE (Reuters) - Wipro Ltd's(WIPR.NS) weaker-than-expected quarterly sales forecast highlighted a gap in performance among India's four biggest IT exporters and a still shaky recovery in client demand.

Wipro, India's third-largest software services provider, joined No. 2 player Infosys Ltd (INFY.NS) in delivering tepid revenue guidance, citing a delay in the closure of deals. The forecasts contrast with a more bullish outlook issued by industry leader Tata Consultancy Services (TCS) (TCS.NS) that had raised expectations IT spending by clients in the United States and Europe was improving.

"If Wipro had been able to make a recovery, then it would have told you that there is a rising demand tide that is lifting most of the boats," said Kuldeep Koul, an analyst at ICICI Securities in Mumbai.

Wipro, whose customers include Apple Inc (AAPL.O), projected fiscal first-quarter revenue for its IT services business in a range of $1.58 billion to $1.61 billion - a decline of 0.6 percent to a rise of 1.6 percent over the previous quarter. Analysts had expected a rise of 1 to 4 percent.

A more sanguine TCS, which does not issue specific revenue guidance, said it expects full-year revenue growth to beat the forecast issued by the National Association of Software and Services Companies (NASSCOM).

NASSCOM expects export growth in the fiscal year that started this month of 12 to 14 percent, a figure widely used as a proxy for overall industry growth. In the just-completed year, export revenue in the $108 billion sector rose 10.2 percent.

Further ratcheting up what is already a competitive sector, U.S.-listed Cognizant Technology Solutions Corp (CTSH.O) has been steadily gaining market share.

"Very clearly Cognizant and TCS are going in one direction - TCS is much ahead and then there's also HCL Technologies, and Mahindra Satyam if you look at their last few quarters," said Sudin Apte, CEO of Offshore Insights, an outsourcing advisory firm based near Mumbai.

"The bottom line is that things have changed dramatically, and what clients want, requirements, the account management, and expectations on capabilities have all changed. In the new environment some companies have adapted themselves and others have not yet," Apte said.

DELAYED DEALS

Some of the deals that Wipro had expected to close in the March quarter had been delayed to the current quarter, Suresh Senapaty, Wipro's chief financial officer, told reporters.

"While we don't give a specific guidance and we're starting the year with a little weaker guidance ... our expectation would of course be that we'll do better in the current fiscal than what we did last year," he said.

In another sign that a robust recovery in demand remains elusive, U.S.-based IBM Corp (IBM.N), which employs roughly 100,000 people in India, on Thursday missed earnings estimates as it struggled to close deals in the United States and Europe.

Last week, Infosys gave a full-year dollar-revenue growth forecast of 6-10 percent. That dimmed investor hopes that it will soon benefit from a strategic revamp aimed at boosting revenue from software products and consultancy-led services. Its shares plunged 21 percent.

On the other hand, TCS and HCL Technologies (HCLT.NS), ranked fourth in the industry by revenue, both reported strong results this week.

"The signals that are coming out from the results of different companies are very different from each other," said Gajendra Nagpal, CEO of Unicon Financial Intermediaries in New Delhi. "But there are pockets of encouragement as far as specific companies are concerned."

In its fourth quarter ended March 31, Wipro's consolidated net profit rose 17 percent to 17.29 billion rupees from 14.81 billion rupees a year earlier, compared with the 17 billion rupee average of 19 brokerage estimates according to Thomson Reuters I/B/E/S.

Shares of Wipro did not trade on Friday because Indian financial markets were closed for a public holiday.

(Aditional reporting by Prashant Mehra and Aradhana Aravindan in MUMBAI; Writing by Tony Munroe; Editing by Chris Gallagher)

FILED UNDER:

Monetary Policy Committee

Reuters Showcase

Microfinance

Microfinance

Funding the unfunded: India helps small business borrow to grow  Full Article 

Insurance Sector

Insurance Sector

UK healthcare firm Bupa sees strong growth in India  Full Article 

Sensex Rises

Sensex Rises

Sensex edges up; consumer and healthcare stocks rise  Full Article 

Market Eye

Market Eye

FTSE adds nine Indian firms as large-caps in Asia-Pacific ex-Japan index   Full Article 

Indian Ocean Diplomacy

Indian Ocean Diplomacy

PM Modi to ramp up help for Indian Ocean nations to counter China influence  Full Article 

ECB Bond-Buying

ECB Bond-Buying

ECB raises growth forecasts, to start printing money next week  Full Article 

China Economy

China Economy

China signals "new normal" with lower annual growth target  Full Article 

Pharma Sector

Pharma Sector

Panel recommends waiving late-stage trials for some drugs  Full Article 

E-commerce

E-commerce

China backs e-commerce expansion in win for Alibaba, JD.com  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage