A hesitant smile

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: on the EPS front in the second, third and fourth quarters to maintain its guidance of 19-21% growth in revenue year-on-year and 16-18% year-on-year growth in EPS. In fact, Infosys said 76% of its 100 large clients have flat or have slightly cut their technology budgets for calendar 2008 as against 2007 due to the slowdown in the US. “Nearly 19% of them are seeing major decrease in the technology budgets of up to 10%, while others are seeing less than 10% or flat. Discretionary spending will be under pressure and decision-makings are getting delayed. There have also been sporadic project cancellations — one or two projects,” chief operating officer S D Shibulal said, adding, the remaining 24% customers were seeing an up-tick in their tech budgets.

“Infosys results indicate decent IT services demand. Further, Infosys’ normal conservative stance should mean that guidance builds in most of the possible negatives. However, concerns remain on demand, given muted first quarter guidance and weakness in the financial sector. While we are confident of Infosys’ ability to meet guidance, out-performance would depend on demand in our view,” global investment bank JP Morgan said in its post-earnings report.

However, Infosys is confident of garnering more work offshore despite economic turbulence in the world’s largest economy and its biggest market — the US — that contributed 62% of the total revenue. “We believe that offshoring as a pie within the budget will increase in spite of softness in the budget,” chief financial officer V Balakrishnan said.

A couple of days later when its competitor and neighbour Wipro detailed its earnings, it once again brought the market situation is changing rapidly, which has a bearing on our immediate business dynamics. “However, we remain resilient, we remain agile and confident of another good year. Considering this, we have drawn up an aggressive plan to capitalise on the likely back-ended positive momentum for a profitable volume growth,” Wipro chairman Azim Premji said.

But then, the back-ended growth is also the big catch. “There have been sporadic project cancellations and large discretionary projects are on hold till they (the customers) get some stability,” executive director and chief financial officer Suresh Senapaty said. Which again means that Wipro, too, is betting on the third and fourth quarters to make up for its muted first half.