Tuesday, January 13, 2009

IT sector: Future to be bumpy

Despite a slightly better-than-expected Q3 numbers, the road ahead for Infosys Technologies and IT sector in general continues to be bumpy. Falling onshore revenues, fluctuating currency, slowdown in new projects, dwindling pricing and a flat-to-down client budget for 2009 are pointers to difficult times ahead. To add to the woes, the sector, already facing pressure due to a global slowdown and weakening rupee, suddenly finds itself dealing with corporate governance issues post the Satyam scam.

S Gopalakrishnan, CEO and MD, Infosys Technologies, said Q3 revenues are within guidance. However, the company has lowered its full-year guidance due to expected currency fluctuation. "The full-year guidance has been revised at 12-13% and constant currency at 17-18%."

He cautioned that pricing may remain under pressure as the environment is challenging, and may continue to trend downwards. "Our pricing is down 1.8% quarter-on-quarter, but the company is looking at pricing as a portfolio approach. However, pricing may be under pressure if macro situation remains bad. We continue to see pricing pressure in UK, but expect confidence in Europe to pick up in the long-term. We do not see any project cancellations, but flow of new projects may slowdown."

The management said some clients are looking at freezing budgets and expect more clarity in February. While, most clients say they are looking to increase allocations. The company expects clients' budget in 2009 to be 'flat to down'.

Commenting on the Satyam fiasco, Infosys said the scam by its peer will be test of credibility of Indian regulators, but won't affect IT outsourcing to India. "We need to manage trust of clients in times of trouble. We won't approach Satyam clients, but may consider if our company is approached by clients. "


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