Infosys Profit Gains 7.7%, Beats Estimates on Orders

Oct. 9 (Bloomberg) -- Infosys Technologies Ltd., India’s second-largest software exporter, reported second-quarter profit rose 7.7 percent, beating analysts’ estimates, after winning more business from its customers.

Net income increased to 15.4 billion rupees ($332 million), or 26.83 rupees a share, in the three months ended Sept. 30, from 14.3 billion rupees, or 24.97 rupees, a year earlier, Bangalore-based Infosys said today. That beat the 14.9 billion rupee median of 15 analyst estimates compiled by Bloomberg.

Chief Executive Officer S. Gopalakrishnan reduced prices to retain business from customers in the U.S. and Europe, his largest markets, amid the worst recession since the 1930s. Infosys won orders from Australia’s Telstra Corp. and the U.K.’s BP Plc after the two clients sought to decrease the number of suppliers to cut costs.

“It is a very positive result; the environment is getting much more stable,” said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. “We are in for a little uptick; things have stabilized and margins will improve from these levels.”

U.S. technology demand will begin to increase in the three months ending Dec. 31, followed by a global recovery in 2010, research firm Forrester Inc. said last month. White House adviser Lawrence Summers said yesterday there has been a “substantial return to more normal conditions” in the U.S., and cited economists’ estimates that the world’s largest economy returned to growth in the third quarter.

Raises Forecast

Infosys rose 1.7 percent to 2,249 rupees at 9:56 a.m. in Mumbai trading. The stock has doubled this year, compared with the 75 percent gain for the benchmark Sensitive Index and industry leader Tata Consultancy Services Ltd.’s 145 percent advance.

Sales will range from $4.60 billion to $4.62 billion in the year ending March 31, Infosys said, raising its July forecast of between $4.45 billion to $4.52 billion.

“The business climate has improved,” Gopalakrishnan said in a statement today. “Clients are now looking to invest in a few strategic initiatives and relationships to maximize value from the economic opportunities when the downturn ends.”

Second-quarter sales at Infosys climbed 3.3 percent to 56 billion rupees, matching analysts’ median estimate.

Infosys designs and builds software programs, maintains computers and provides back-office support to Citigroup Inc., Goldman Sachs Group Inc., BT Group Plc and other clients.

Strong Recovery

Forrester continues to expect a strong recovery in the US information technology market in 2010, with 7.7 percent growth, led by consulting services, the research firm’s analyst Andrew H. Bartels wrote in a report dated Sept. 29. Vendors need to look beyond the downturn and get prepared for a strong recovery in late 2009 and 2010, he wrote.

“I would say the recovery is already under way for them,” Anu Jain, who helps manage about $428 million at Mumbai-based IIFL Private Wealth Management Ltd., said before the results. “Growth isn’t an issue, the market is rebounding, they are getting good volumes, they are able to negotiate good prices.”