Wipro Shares Drop After ‘Dismal’ 1st-Quarter Sales Forecast
April 27, 2011, 6:40 AM EDTBy Ketaki Gokhale and Jay Shankar
(Updates with closing share price in fifth paragraph.)
April 27 (Bloomberg) -- Wipro Ltd., India’s third-largest software exporter, fell the most in almost two weeks after the company forecast first-quarter sales at its information- technology unit would remain little changed.
Revenue at the company’s biggest business division will range between $1.39 billion and $1.42 billion in the current quarter, Wipro said in a statement today. Sales at the unit in the three months ended March were $1.4 billion, Wipro said today while reporting fourth-quarter net income.
“This is a very poor guidance,” said Pralay Kumar Das, an analyst with Elara Securities India Pvt. in Mumbai. “The only way the stock could have gone up was if they had guided about 3 percent to 4 percent growth.” He rates the shares a “sell.”
Wipro joins bigger rival Infosys Technologies Ltd. in forecasting sales that trailed analysts’ expectations, signaling customers may be hesitant to sign long-term contracts because of concerns about the global economic recovery. In January, billionaire Chairman Azim Premji named T.K. Kurien as the chief executive officer to drive growth and expand overseas after the co-heads of the IT business resigned.
Shares fell 2.9 percent to 451.1 rupees at the close of trading in Mumbai, the most since April 15. The benchmark Sensitive Index, or Sensex, fell 0.5 percent.
Management Transition
“Their positioning in the market right now is weak,” said Ankur Rudra, vice president in charge of institutional equities at Mumbai-based Ambit Capital Pvt. “Also, there’s the added distraction of a management transition going on,” said Rudra, who also rates the shares a “sell.”
Wipro said on Jan. 21 that T.K. Kurien would take over as chief executive officer of its information technology business after Girish Paranjpe and Suresh Vaswani resigned as joint CEOs.
The company today said net income climbed 14 percent to 13.8 billion rupees ($310 million) in the three months ended March, in earnings based on International Financial Reporting Standards. That compared with the 13.68 billion-rupee average of 27 analysts’ estimates compiled by Bloomberg.
The company doesn’t give sales or profit forecast for all its businesses combined. Wipro also makes light bulbs, soaps and other consumer products.
“The June quarter is seasonally one of the strongest quarters, and the dismal guidance by the company indicates that recent changes in top management will take time to start reflecting in numbers,” KR Choksey Shares & Securities Pvt., a local brokerage, said in a note to clients. The brokerage recommends investors “hold” the shares.
Clients
The business environment is “positive” and the company is focusing on growth by “directing investments on momentum verticals,” said Chief Financial Officer Suresh Senapaty in a statement. The wage increases planned by the company effective June 1 would have an impact on the operating margins, he said.
Revenue in the quarter rose 18 percent to 83 billion rupees. That compared with the 82.4 billion rupees average of 46 analysts’ estimates compiled by Bloomberg.
Wipro, which provides services such as designing and building software programs, product-engineering and back-office support to companies including BP Plc, William Morrison Supermarkets Plc. and Pitney Bowes Inc. added 68 new customers in the quarter.
Wipro added a net 2,894 employees at its technology unit last quarter and ended the fiscal year with 122,385 workers, according to the statement.
Growth in global technology spending may slow to 5.1 percent this year from 5.4 percent in 2010 because of the “continued macroeconomic uncertainty,” Stamford, Connecticut- based research company Gartner Inc. forecast in January.
--Editors: Anand Krishnamoorthy, Vipin V. Nair.
To contact the reporters on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net; Jay Shankar in Bangalore at jshankar1@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
