Infosys Ltd. (INFO) posted first-quarter
profit that beat analyst estimates as India’s second-largest
software services company pared costs and won more orders.
Net income rose to 28.9 billion rupees ($480 million) in the three months ended June from 23.7 billion rupees a year earlier, Bengaluru-based Infosys said in a statement today. That beat the 26.5 billion-rupee median of 33 analysts’ estimates compiled by Bloomberg. The company maintained its full-year forecast for sales growth.
Billionaire N.R. Narayana Murthy, who returned as chairman in June 2013 to help revive growth, boosted margins by cutting costs and is set to hand control of the software exporter he co-founded to Chief Executive Officer designate Vishal Sikka. Infosys won contracts last quarter from companies including Orange SA and Boston-based Eastern Bank.
“Infosys’s renewed focus on traditional service lines and cost initiatives could lead to revenue growth stabilizing,” Abhiram Eleswarapu, a Mumbai-based analyst at BNP Paribas SA, wrote in a June 20 note to clients. Margins would also recover even as the new management takes “time to settle in.”
Infosys kept its April forecast for full-year sales growth in U.S. dollar terms of 7 percent to 9 percent.
Infosys climbed 2.7 percent to 3,380.80 rupees as of 9:21 a.m. in Mumbai trading, while the benchmark S&P BSE Sensex Index fell 0.1 percent. Industry leader Tata Consultancy Services Ltd. gained 1.6 percent.
“We saw positive trends in our large deal wins during the quarter,” U.B. Pravin Rao, chief operating officer, said in the statement. “This momentum will hold us in good stead as we focus on increasing volumes.”
Sikka, 47, who was named last month to succeed S.D. Shibulal, spent 12 years at German business software supplier SAP AG and will be the first non-founder to head Infosys. The India-born California resident, who assumes charge Aug. 1, has his task cut out as Infosys seeks to retain its importance as companies move computing tasks to “cloud” programs, rather than writing the code themselves.
More than a dozen executives have left Infosys since Murthy returned in June 2013 to help revive revenue growth. Murthy stepped down as executive chairman last month and will leave the company on Oct. 10.
Worldwide information technology spending growth will slow to 4.1 percent this year, compared with an earlier projection for 4.6 percent, researcher International Data Corp. said May 16.
“IT spending has been volatile since the beginning of the year,” Framingham, Massachusetts-based IDC said in the report. A slowdown in mobile-device sales will also contribute to lower growth, even as cloud computing continues to disrupt traditional IT budgets, according to the report.
The company reported a net addition of 879 employees in the quarter, and its attrition rate accelerated to 19.5 percent, compared with 18.7 percent in the three months ended March.
“Employee attrition rates are worrisome and we are implementing various initiatives to retain good talent,” Rao said.
To contact the reporters on this story: Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net; Suresh Seshadri in Bengaluru at sseshadri1@bloomberg.net
To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner, Subramaniam Sharma
Net income rose to 28.9 billion rupees ($480 million) in the three months ended June from 23.7 billion rupees a year earlier, Bengaluru-based Infosys said in a statement today. That beat the 26.5 billion-rupee median of 33 analysts’ estimates compiled by Bloomberg. The company maintained its full-year forecast for sales growth.
Billionaire N.R. Narayana Murthy, who returned as chairman in June 2013 to help revive growth, boosted margins by cutting costs and is set to hand control of the software exporter he co-founded to Chief Executive Officer designate Vishal Sikka. Infosys won contracts last quarter from companies including Orange SA and Boston-based Eastern Bank.
“Infosys’s renewed focus on traditional service lines and cost initiatives could lead to revenue growth stabilizing,” Abhiram Eleswarapu, a Mumbai-based analyst at BNP Paribas SA, wrote in a June 20 note to clients. Margins would also recover even as the new management takes “time to settle in.”
Infosys kept its April forecast for full-year sales growth in U.S. dollar terms of 7 percent to 9 percent.
Infosys climbed 2.7 percent to 3,380.80 rupees as of 9:21 a.m. in Mumbai trading, while the benchmark S&P BSE Sensex Index fell 0.1 percent. Industry leader Tata Consultancy Services Ltd. gained 1.6 percent.
CEO Succession
First-quarter revenue was 127.7 billion rupees compared with the 128 billion rupee median of analyst estimates.“We saw positive trends in our large deal wins during the quarter,” U.B. Pravin Rao, chief operating officer, said in the statement. “This momentum will hold us in good stead as we focus on increasing volumes.”
Sikka, 47, who was named last month to succeed S.D. Shibulal, spent 12 years at German business software supplier SAP AG and will be the first non-founder to head Infosys. The India-born California resident, who assumes charge Aug. 1, has his task cut out as Infosys seeks to retain its importance as companies move computing tasks to “cloud” programs, rather than writing the code themselves.
More than a dozen executives have left Infosys since Murthy returned in June 2013 to help revive revenue growth. Murthy stepped down as executive chairman last month and will leave the company on Oct. 10.
Industry Spending
Infosys, which designs and builds software programs, maintains computers and provides IT and outsourcing services for customers including the District of Columbia and Toyota Motor Corp., added 61 clients last quarter.Worldwide information technology spending growth will slow to 4.1 percent this year, compared with an earlier projection for 4.6 percent, researcher International Data Corp. said May 16.
“IT spending has been volatile since the beginning of the year,” Framingham, Massachusetts-based IDC said in the report. A slowdown in mobile-device sales will also contribute to lower growth, even as cloud computing continues to disrupt traditional IT budgets, according to the report.
The company reported a net addition of 879 employees in the quarter, and its attrition rate accelerated to 19.5 percent, compared with 18.7 percent in the three months ended March.
“Employee attrition rates are worrisome and we are implementing various initiatives to retain good talent,” Rao said.
To contact the reporters on this story: Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net; Suresh Seshadri in Bengaluru at sseshadri1@bloomberg.net
To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner, Subramaniam Sharma
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