Wipro Ltd., India’s third-largest software exporter, replaced the co-heads of the company’s main computer-services business after posting sales that missed analysts’ estimates.
T.K. Kurien will take over as the chief executive officer of the information technology business, Wipro’s largest, from next month after Girish Paranjpe, 52, and Suresh Vaswani, 51, resigned as joint CEOs, the company said in a statement today. Billionaire Azim Premji remains chairman and managing director.
Premji promoted Paranjpe and Vaswani less than three years ago to lead Wipro through the global financial crisis. Their resignation may hurt client relationships and “disturb” Wipro’s growth momentum, said Rahul Jain, an analyst with Dolat Capital Market Ltd. in Mumbai.
“Both the CEOs quitting is a bit of a negative surprise for Wipro,” said Sandeep Muthangi, an analyst at India Infoline Ltd. in Mumbai. “Senior-management attrition has been fairly high at Wipro, and this could be a precursor for another round of high-level attrition. It also seems very abrupt to me.”
Third-quarter revenue increased 12 percent to 78.3 billion rupees ($1.7 billion), the Bangalore-based company said, missing the 80.5 billion rupee average of 47 analyst estimates compiled by Bloomberg. Profit rose 10 percent to 13.2 billion rupees, in line with estimates.
Shares Fall
Wipro fell 4.5 percent, the biggest decline in three months, to 455.95 rupees at the 3:30 p.m. close of trading in Mumbai. The company joined Infosys Technologies Ltd. in indicating that a weaker global economic recovery may undermine growth in India’s software-services market.
Vaswani worked at Wipro for more than 25 years, serving at different times as chief executive officer of Wipro’s joint venture with Acer Inc. and president of Wipro Infotech.
Paranjpe joined Wipro more than 20 years ago. He and Vaswani were promoted to joint CEOs of Wipro’s IT business in 2008. The two are also resigning from their positions on the company’s board of directors.
“It hurts the company,” said Dolat Capital’s Jain. “What’s important is who replaces them. The immediate momentum has been disturbed.”
Wipro engaged two CEOs for the IT business to get “diversity in thinking” during the “uncertain environment” in 2008, Chief Financial Officer Suresh Senapaty told reporters in Bangalore.
‘New Environment’
“Now if you go into the new environment there’s a unanimous view that there is growth, there is an uptick in IT spend and outsourcing,” he said. “From that point of view, all you need to do is drive growth, and therefore it was thought appropriate by the company that we need to have one CEO.”
The operating profit margin for the main IT division was “flat” in the quarter, Senapaty said. Wipro’s 10 percent growth in third-quarter profit was slower Infosys’s 14 percent increase and market leader Tata Consultancy’s 30 percent.
“Wipro is lacking in terms of growth,” said Jigar Shah, a Mumbai-based analyst at Kim Eng Securities India Pvt. “The company is doing well, but not as well as its peers.”
Wipro provides computer services such as designing and building software programs and back-office support to companies including BP Plc, William Morrison Supermarkets Plc and Pitney Bowes Inc. The Indian company added 36 clients in the quarter, compared with 29 three months earlier.
Forecast
Revenue from the information-technology services business may increase as much as 5 percent from the prior quarter to $1.41 billion in the three months ending March 31, Wipro said. The company derived 43 percent of the unit’s revenue from the U.S. and 21 percent from Europe last quarter.
Orders won by Wipro during the quarter included a three- year contract from Vodafone Essar Ltd. to build and manage its fixed-line phone-services business.
Wipro, which also makes soaps, light bulbs and hydraulic equipment, had a net addition of 3,591 employees at its technology unit last quarter, ending the period with 119,491 workers, the company said in the statement.
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