Sequentially, net profit falls 1.2% on Euro/US crisis
July 12, 2012
By V. Ganesh
Infosys stocks dwindled by 8% Thursday after the company said it was cutting its revenue guidance by half for the year. Infy reduced its revenue guidance 5% to $7.34 billion down from its April estimate of 8-10% growth.
Announcing its first quarter results, the company said it continues to witness slowdown for the second straight quarter, accompanied by negative growth in US and Europe, as certain clients are shying away from outsourcing engagements.
The company has posted a decrease of 1.2% in the first quarter net profit to Rs 2,316 crore on a sequential basis. However, its revenues were up 8.6% to Rs 9,616 crore. Reasons for this loss were attributed to delayed decision making and a ‘one off’ revenue loss on the cancellation of a European project worth $15 million.
Also, the company lost $30 million in hedging as a result of a weak rupee.
Infosys experienced a 32% growth in net profits on a year-on-year basis, but said that it will no longer give out guidance at the end of every quarter.
“Our guidance is a statement of facts and there is a lot of uncertainty in global markets and hence we will not issue guidance from next quarter,” said S.D. Shibulal, CEO of Infosys. This sent the scrip tumbling by Rs 211 or 8.4% and closed at Rs 2,260.
The company also expects some pricing declines due to change in their solutions portfolio and increased pricing negotiations. “Overall, we consider pricing stable,” Mr. Shibulal added.
The slowdown contagion is affecting its primary business geographies in the US and Europe and has spread to most of its verticals.
US saw negative growth of 8.4% and Europe saw de-growth of 7.2% over the previous quarter. These two areas contribute to about 80% of the company’s revenues.
“Apart from testing services and IT infrastructure management, all the other service lines have seen negative growth,” said Shashi Bhusan, Senior Research Analyst at Prabhudas Lilladher.
The Tinderbox Daily 