Global Economics

Wipro Profits Miss Forecast


India's tech giant Wipro is cautious about short-term prospects as its clients, half from the U.S., face weakening economies

India's third largest information technology outsourcer, Wipro Ltd, missed forecasts with a 15 per cent rise in quarterly profit, and said it was cautious in the near term, echoing its larger rivals.

Wipro, which offers system integration, software application development and back-office services, said net profit rose to 8.14 billion rupees ($190 million) in its fiscal first quarter to June from 7.10 billion a year ago under US accounting rules.

A poll had forecast a net profit of Rs 9.02 billion for Wipro, which counts telecoms gear makers Cisco, Credit Suisse, Nortel and Nokia Siemens Networks among its clients. Revenue rose 42.5 per cent to 59.62 billion rupees, as it added 31 clients during the quarter.

"In the backdrop of significant economic uncertainty, our financial services and retail businesses demonstrated resilience," Chairman Azim Premji said in a statement. "Given the environment we remain cautious in the near term." Wipro's earnings follow results from bigger rival Tata Consultancy Services, which narrowly missed forecasts, and second-ranked Infosys Technologies, which beat estimates.

Both companies were cautious about outsourcing prospects in the near term, as their major clients battle weakening economies. Wipro was confident of maintaining or improving margins despite an "adverse impact on margins in the September quarter", Chief Financial Officer Suresh Senapaty said.

Pricing had improved, he said, and the pipeline of orders "looked good", with much better business prospects in the second half of the year. Comparatively cheaper wages had helped Indian outsourcers ride an outsourcing boom for years, but the growth slowed last year when Wall Street banks took a hit from the subprime crisis and as the US economy lurched towards recession.

Although Indian outsourcers are rapidly expanding to Europe, Asia and the Middle East to cut their dependence on the United States, the country still accounts for roughly half their sales. India's software and back-office services export growth will slow to 21-24 per cent in 2008/09 from 29 per cent a year ago, lobby group National Association of Software and Service Companies said this month.

Shares in Wipro, which also has minor interests in computer hardware, consumer care and lighting, rose 3 per cent in the June quarter, trailing a 13 percent rise in the sector index but outperforming a 14 percent drop in the Mumbai index.


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