Infosys sales outlook cut slams shares

Indian IT heavyweight Infosys Ltd cut its sales forecast more deeply than expected as global economic uncertainty eroded tech spending, depressing its shares as much as 10% and slamming hopes for a second-half recovery. While Infosys’s June quarter net profit rose 33% as expected, rival Tata Consultancy Services exceeded expectations by posting a 38% annual jump in quarterly profit later yesterday. The dull global economy, heavy competition for market share and sharp currency fluctuations have slowed the pace of growth for Indian outsourcing companies, although in recent quarters Infosys has been underperforming key rivals, including market-leading TCS. Infosys, India’s No 2 software services exporter, had long been considered the industry bellwether for its habit of achieving and usually exceeding revenue forecasts. Infosys, noting a sharp fall in pricing, said it sees revenue in dollar terms rising 5% to $7.34bn in the fiscal year to March 2013, down from its April estimate of 8-10% growth. Most analysts were expecting Infosys to trim its growth forecast to 6%-8%. “Infosys’ guidance is bad and it will have implications for the sector as well. It clearly reflects a slowdown in Europe and in the US and (problems with) the company’s internal policies,” said Paras Adenwala, a fund manager at Capital Portfolio Advisors. Infosys shares fell as much as 10.2% to Rs2,219, their lowest in nearly three months, before ending the day 8.36% lower. Infosys, whose customers include Bank of America and BT Group, reported net profit of Rs22.89bn ($413mn) in the quarter. Revenue rose 28.5% to Rs96.16bn as it added 51 clients in the quarter. It added a net 1,157 employees, lifting its headcount to 151,151. After it gave disappointing guidance during its April results announcement, Infosys came under fire from investors for what some said was an overly conservative approach that put it at a disadvantage to rivals, adding to pressure on CEO SD Shibulal, who took the reins last year.

TCSIndia’s biggest outsourcing firm TCS yesterday posted a 38% rise in first quarter net profit, beating market estimates, aided by a jump in outsourcing orders and a weak rupee. TCS or Tata Consultancy Services, part of the steel-to-tea Tata conglomerate, reported a consolidated net profit of Rs32.8bn ($596mn) for the three months to June, up from 23.8bn rupees a year earlier. Analysts expected TCS to post a profit of Rs31bn. “We saw strong growth across all industries driven by robust volumes from key markets like North America, Europe and Latin America,” TCS chief executive N Chandrasekaran said. “Looking ahead, we continue to see good demand from global corporates as they navigate an increasingly complex environment,” he added.

DNBSolid second-quarter earnings helped DNB to make progress towards meeting its capital goals, reducing the chances that Norway’s biggest bank will need to raise capital or cut its dividend again. DNB, one of the biggest lenders to the struggling shipping industry, beat forecasts with a 29% rise in second-quarter net profit yesterday, as gains on derivatives contracts and lower-than-expected loan losses offset a disappointment on net interest income. Its common equity Tier 1 capital ratio, calculated according to the Basel II transitional rules, increased to 9.6% at the end of June, up from 9.3% by end-March. Local regulators have told banks to hold at least a 9% core Tier 1 capital by mid-year. To improve its capital position DNB cut its dividend earlier this year and said it aimed for 10% Tier 1 capital by the end of 2012. Quarterly net profit rose to 4.58bn Norwegian crowns from 3.55bn crowns a year earlier, beating market expectations of 3.81bn crowns. The figure includes a 1.1bn crown fair-value adjustment gain from basis swap derivatives, reversing some of the negative impact from 2.4bn crowns of losses from such contracts in the first quarter.

SAP defies tech gloomGermany’s SAP, the world’s largest maker of business software, delivered a stronger-than-expected rise in profits led by robust sales, defying a weakening trend that has hit rivals. SAP said its software revenues, when measured by IFRS accounting standards, rose 19% to a record €1.06bn ($1.3bn) for the second-quarter.  It had previously predicted a 15%-20% increase at constant currencies. Quarterly operating profit before special items rose 15% to €1.17bn, above the Thomson Reuters I/B/E/S average analyst estimate of 1.11bn euros. “The results are much better than the market had come to expect recently,” one stock market trader said. “Very sound set of figures, given the macroeconomic uncertainties and the poor results of some competitors,” said DZ Bank analyst Oliver Finger. Analysts pointed to robust demand for cloud computing, favourable exchange rates and the purchase of cloud-software developer SuccessFactors. Cloud computing provides software, storage and other services from remote data centres over the Web and holds the promise of reducing costs and improving efficiency. The company didn’t give an outlook and the general feeling is that technology spending might weaken further as the eurozone’s debt crisis deepens and US job creation stagnates. There has been plenty of evidence of a weak second-quarter in the tech sector. US software firms Qlik Technologies and Informatica Corp as well as Indian software services provider Infosys have issued estimates below market forecasts.