Infosys cuts revenue forecast citing European crisis

The Indian outsourcer reported revenue and profit growth in its fiscal third quarter

Infosys cut its revenue growth forecast for its fiscal year ending March 31, citing slowing demand in Europe which is hit by a debt crisis.

The company, which is India's second largest outsourcer, said Thursday that revenue growth for the year would be 16.4 percent, down from the 17.1 percent to 19.1 percent it had projected in October.

"There is still a lot of uncertainty," said Ashok Vemuri, member of the board and head of Americas at Infosys, in a telephone interview.

While the economic indicators in the U.S. appear to be looking up, the outlook for Europe is still dim, Vemuri said. The company is investing in its operations in Japan, Australia, China, and Latin America to increase revenue from these markets.

Customers are delaying purchase decisions because of the uncertainty about the economy, and this is affecting IT services companies across the world, said Siddharth Pai , partner at market intelligence and advisory services firm, Information Services Group (ISG).

Infosys and most other Indian outsourcers earn most of their revenue from North America and Europe.

For the quarter ended Dec. 31, the company's revenue was US$1.8 billion, up by about 14 percent from the same quarter in the previous year. Net profits at $458 million were up 15.4 percent. Revenue and profit growth was more than double in rupee terms mainly because of the fall of the Indian rupee against the U.S. dollar in which the company earns most of its revenue.

Infosys has been attempting to move from services priced around the number of staff working on a project, to value-added services around consulting and development of products and intellectual property.

Fixed price contracts accounted for 41 percent of revenue in the quarter, as compared to 37 percent in the previous quarter, mainly on increased consultancy contracts, Vemuri said.

Some banks for example are asking Infosys to not only run some operations, but to also transform the bank's processes, creating opportunities for some of the outsourcer's platforms, including one for fraud surveillance, he added.

Infosys added 3,266 employees in the quarter, taking the total to 145,088 employees at the end of the quarter. The company continues to invest and plans to add 49,000 staff in the fiscal year, Vemuri said.

Infosys expects its fiscal year revenue to be about $7 billion. Uncertainty will continue in the next fiscal year, Vemuri said.

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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