Wipro's IT revenue growth slows in an uncertain market

The company has given muted guidance for the next quarter

Wipro, one of India's top outsourcers, reported slow revenue growth in U.S. dollar terms for the quarter ended March 31, and issued muted guidance for the next quarter, reflecting an uncertain outsourcing market.

The company posted revenue growth of over 20 percent in its IT services business in the same quarter last year, and has seen growth declining steadily since then.

The market for IT services is growing very slowly, but Wipro's slow growth also has to do with its inability to change with the market, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm in Pune, India. Wipro's offerings are still technology-centric and focused on low-cost services, while customers are looking for how technology can directly help in their business, he said.

Unlike some other vendors with strong domain expertise in vertical markets, Wipro's skills are still largely horizontal, despite its attempts to focus on a few verticals, Apte said.

Wipro said revenue from its IT services business was US$1.54 billion for the quarter, up by 9.7 percent from the same quarter last year. The company has other businesses including consumer care and lighting, and does not break out the profit from its IT business.

The company's IT revenue for the fiscal year ended March 31 was up 13 percent at $6 billion.

IT revenue growth was higher in the quarter in rupee terms at 21 percent, mainly because of the depreciation of the rupee against the U.S. dollar.

The company's total revenue was up 19 percent in the quarter at 98.7 billion Indian rupees (US$1.9 billion as of March 31, the last day of the period reported).

Shares of the Bangalore-based outsourcer dipped by over 7 percent in trading on the Bombay Stock Exchange after the company forecast that its IT revenue for the next quarter would be in the range of $1.52 billion to $1.55 billion.

Wipro's performance was in sharp contrast to that of India's largest outsourcer, Tata Consultancy Services (TCS), which on Monday said the outlook was strong for the company. TCS said revenue for the quarter was $2.6 billion, up 18 percent from the same quarter last year, while net profit, at $585 million, was up by 10.6 percent.

Infosys, India's second largest outsourcer, disappointed analysts by missing its guidance, and giving a muted forecast for the year ahead, citing a challenging market. The company's revenue for the quarter was $1.77 billion, up 10.5 percent from the same quarter last year, but lower than the $1.8 billion the company forecast in January.

Infosys said it expected its revenue growth in the current fiscal year would be between 8 percent and 10 percent, which is lower than the 11 percent to 14 percent growth the National Association for Software and Services Companies (Nasscom) has forecast for the industry this year.

Wipro's IT services business, which accounted for 76 percent of the company's revenue, had 135,920 employees at the end of the quarter, after cutting 814 staff. It added 41 new customers in the quarter. The company gets most of its IT services revenue from the U.S. and Europe, which together accounted for about 80 percent of revenue in the quarter.

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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