Infosys Share computers software companies

Infosys’s renewed cautious approach reflects uncertainties in the Western economies - its biggest market. It may be too early to draw any meaningful conclusion about the performance of the rest of the players just yet. That is because, over the past few quarters, Infosys’s performance has been at variance with the growth reported by TCS, HCL Tech and Nasdaq listed Cognizant. In seven out of the past 12 quarters, Infosys’s sequential sales and operating profit growth has lagged behind that reported by TCS and HCL Tech, which also means, Infosys’s peers are more aggressive in capitalising on opportunities.

Besides, though Infosys has reported a sustained traction in client addition, in line with peers, it is not yet reflected in its growth. This leads us to believe that Infosys’s inability to accelerate its financial performance has more to do with its past strategy of selecting profitability over greater volumes than overall business sentiments. Despite talks of drawing synergies through acquisitions, the company is yet to decide on how to deploy its Rs 19,495-crore strong cash balance.

Expect other IT biggies, including TCS and HCL Tech, who have focused more on expanding their reach and deliverables, to report a better performance in the next few days.
Source - Economic Times

It now expects to grow dollar revenue by 16.4% for FY12, much lower than its projection of a 19.1% increase three months ago. Also, EPS is estimated to grow by 14.5% compared with the earlier forecast of a rise of 16.8%. After the September quarter results, ETIG had sounded a warning to investors to not get carried away by the euphoria after the stock rose 6% when the company reported an aggressive forecast during the September quarter results.

The changing stance of Infosys’s management on growth expectations was worrisome enough to pull the stock down by as much as 8.4% on Thursday. Stocks of other top-tier IT players, including TCS, Wipro, and HCL Technologies, also fell by 2-4%, and following concerns over a possible deceleration across the board since Infosys’s performance has traditionally mirrored a broader trend in the sector.

Infosys Ltd (updated - 14 Jan 2012)
Infosys delivered a robust sequential growth in revenue and profits for the December 2011 quarter, fuelled by a weak rupee, in line with street expectation. A sharp 11% sequential weakening of the rupee boosted operating margins to a two year high of 31.1%, or 300 basis points, from the previous quarter, after considering incremental costs.

But, this windfall gain has failed to significantly prop up the company’s growth estimates for the current fiscal. And, much to the dismay of analysts, the management has in fact lowered its earlier growth forecast of dollar-denominated revenue and earnings per share, or EPS.

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Infosys Ltd (updated - 03 April 2012)
Over the last year, Infosys maintained a cautious stance on the business prospects of the technology sector, as the world teetered on the brink of a collapse. Analysts seem to believe it has now resolved most issues and could positively surprise the markets with its FY13 guidance.

The flow of positive data from the US, probably, makes this a convincing argument. First, pricing is not under pressure and, second, clients are not cutting budgets drastically, even if they are not increasing these. Analysts say the Infosys management has conveyed that it intends to lead the industry in terms of both revenues and margins.

Analysts have gone back to the drawing board to come up with fresh estimates on the company’s FY13 performance. Pankaj Kapoor of Standard Chartered sees FY13 dollar revenue growth guidance in the 13-16 per cent band (vs Nasscom’s 1114 per cent range for the sector) and ahead of the consensus estimates of 13 per cent FY13 revenue growth forecasts.

The outlook has turned positive after a series of downgrades last year, as the Street expects the pricing environment to be stable. Morgan Stanley, which expects Infosys to deliver an 18 per cent year-on-year growth, believes a guidance of over 16 per cent y-o-y dollar revenue growth for FY13 in April could ease market concerns around growth and profitability and be a key trigger for the stock.

So, where’s the downside risk? A few fundamental changes seem to be sweeping through the industry and these will impact the bellwether, too, experts believe. For starters, though budgets are set, actual spending could remain volatile. This effectively means it would be increasingly difficult to give a quarterly guidance if there is volatility in spending. Analysts believe the company could benefit if it moves away from its “high profile” quarter-on-quarter guidance and towards full year guidance.

Apart from this, deal tenures in verticals like manufacturing have also made it difficult to get a long-term perspective on the sector’s performance. However, analysts believe the company is back to focusing on basics and this is helping deal flow. According to Barclays, Infosys has a leadership position within the vertical, being the largest partner for each of the top-five customers. Manufacturing now accounts for 20 per cent of revenue from 13 per cent four years ago. The report adds, “Manufacturing has been the fastest growth vertical for the company (6.5 per cent compounded quarterly growth rate since March ’07) and the base effect of this could cause a slowing of growth relative to other verticals. However, increased outsourcing within the sector and Infosys’ positioning (account and product strategy) should imply enough drivers to sustain medium- to long-term growth.”
Source - Business Standard