Wipro's revenue growth continues to slide

Like its peers, Wipro has been affected by uncertainty in the market for offshore services

Wipro said Friday its IT services business grew only 4.6 percent in U.S. dollar terms in the quarter ending Sept. 30, a much slower rate of growth reflecting a weak global economy.

The Indian outsourcer said revenue from IT services in the quarter was US$1.54 billion. The Bangalore-based outsourcer had posted revenue growth of 16 percent for the same quarter a year prior. It forecasted revenue for the next quarter to be closer to $1.6 billion.

Wipro's Indian competitors have also been affected by slow growth in the market for outsourcing services. Infosys, the second largest outsourcer, blamed continuing global economic uncertainties for a slide in year-on-year revenue growth in U.S. dollar terms in the quarter, which declined to 2.9 percent from 16.7 percent a year earlier.

India's largest outsourcer, Tata Consultancy Services, did better, with growth only falling to 13 percent in the quarter compared to 26 percent in the same period last year.

Wipro said Thursday that its board decided to demerge its non-IT businesses such as in consumer care, lighting, hydraulics and medical diagnostics into a new company to provide more focus for its IT business. Infosys and TCS are pure-play IT services companies.

The demerger will help improve profit margins, said Suresh Senapaty, Wipro's chief financial officer, in a conference call on Thursday.

But analysts think that moving out the small non-IT businesses from the company will alone not help. The company needs to focus on using technology to solve business problems, rather than just emphasize on technology, cost-cutting, and increased productivity, said Sudin Apte, principal analyst and CEO of research firm Offshore Insights.

IT services accounted for 79 percent of Wipro's total revenue in the quarter. The company added 2,017 employees in its IT services business in the quarter, taking the total number of staff to 140,569.

IT services revenue grew 23 percent in rupee terms from the same quarter a year earlier, largely because of the depreciation of the Indian rupee against the dollar. The company's revenue growth in rupee terms was 17 percent.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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