Monday, August 25, 2008

Indian Outsourcer Infosys Posts Big Third Quarter Gains

Indian tech services provider Infosys Technologies continues to ride the outsourcing boom, as the company on Thursday posted a 47% increase in third quarter revenue and a 50% increase in earnings.

For the period ended Dec. 31, revenue was $821 million while per share earnings rose to 39 cents. The company also added 43 new customers and more than 6,000 employees during the period. "By almost every measure, it was a very solid quarter for us," said Infosys CFO V. Balakrishnan, in an interview.
For the full fiscal year 2007, ending March 31, Infosys expects revenue of $3.09 billion, which would represent a 43.6% gain from the previous year's revenue.

As an offshore outsourcing pioneer, Infosys is benefiting from U.S. corporations' desire to cut costs by sending tech work to low-cost India. India-based service providers captured 11% of all outsourcing revenue generated last year, up from 8% in 2005 and 2% in 2004, according to a survey released Wednesday by market watcher Technology Partners International.

The downside facing Indian outsourcers, including Infosys, is rising labor costs as more companies compete for the services of the country's young tech pros. Balakrishnan says wages for Indian programmers are rising at roughly 13% to 15% annually. "We expect this will continue for the foreseeable future," he says. Still, Balakrishnan doesn't expect the situation to significantly affect the company's profit margins in the near future. "We have many ways to control costs," he says.

Infosys will be on the hunt for acquisitions this year, Balakrishnan says. The company will look to add capabilities in markets where outsourcing is gaining steam, including Japan, Germany and France. Infosys may also look to buy out service providers specializing in hot, vertical markets such as health care, life sciences, and entertainment. "These will be smaller, highly focused companies that will not be difficult to integrate," says Balakrishnan.

Infosys ADRs (NasdaqGS: INFY) were trading up more than 3% on Thursday afternoon.

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