Infosys beats Q1 fcast, flags tough environment

By Sumeet Chatterjee

BANGALORE (Reuters) - Infosys Technologies Ltd marginally raised its full year forecasts after beating estimates with a 17 percent rise in quarterly profit, helped by currency gains but warned of a challenging global environment.

India's second-biggest software services exporter, said staff strength fell in the last quarter for the first time and it expects contract prices to drop further due to pressure from battered clients.

Its rivals Tata Consultancy Services and Wipro also face competition from big players such as IBM, Accenture and Hewlett-Packard who have raided their home-turf and are winning contracts.

"The broad numbers are better than estimates," said Apurva Shah, head of research at broking firm Prabhudas Lilladher in Mumbai. "The guidance is more a signalling tool indicating the degree of pessimism or gloom has come down. But it is not yet back to normal to lift the overall forecast."

The business environment was turbulent and punctuated by long decision making cycles and a recovery in technology spending was likely only by mid-2010, Infosys' Chief Operating Officer S.D. Shibulal said. He expects prices to fall by 5 percent in the year ending March 2010.

Kicking off the sector's results, Infosys forecast consolidated revenue to fall 3.1-4.6 percent to $4.45-$4.52 billion in the full year.

The company, which counts Goldman Sachs, Philips Electronics, BT Group Plc among its clients, expects earnings per share to decline 11.1-12.4 percent in dollar terms. That compares with its April forecast of earnings to fall 11.1-15.1 percent and revenue to decline 3.1-6.7 percent.

Nasdaq-listed Infosys, which started in 1981 with $250 borrowed from spouses of its seven founders, said its staff strength fell by 945 in the last quarter to 103,905.