Outsourcer Infosys forecasts first-ever annual revenue decline

[dhilipkumar]

Outsourcer Infosys forecasts first-ever annual revenue decline

After the economic recession bit into its fourth-quarter financial results, offshore outsourcing vendor Infosys Technologies Ltd. today forecast its first-ever annual revenue decline during the fiscal year that started this month.

Infosys, India's second-largest outsourcer, predicted that its revenue will total between $4.35 billion and $4.52 billion in the fiscal year that ends next March. That would be down by 3.1% to 6.7% from the business level in the just-finished fiscal year. The company added that revenue in the current quarter could fall by as much as 8.2% on a year-to-year basis.

The global financial crisis has hurt many of the company's clients, said Infosys, which was the first large Indian outsourcer to report earnings for the last quarter.

For its fourth quarter, Infosys reported a revenue drop of 1.8% year to year, to $1.12 billion. Full-year revenue rose 11.7%. to $4.7 billion. Net income increased 2.6% to $321 million in the quarter and 10% to $1.3 billion for the fiscal year as a whole.The outsourcing market is going through difficult times as customers postpone new contracts and the implementation of IT projects, said Siddharth Pai, an India-based partner at Technology Partners International Inc. Outsourcers are also under pressure to reduce their prices, Pai said.

He added that vendors in India are particularly exposed to the market contraction because they depend more on project work than on annuity revenue from services such as software maintenance or infrastructure management. New projects tend to be more vulnerable to IT budget cuts than those other things are, according to Pai.

One silver lining, Pai noted, is that the appreciation of the U.S. dollar against the rupee will boost revenue for companies when numbers are reported on the basis of the Indian currency.For instance, while Infosys is predicting a full-year revenue decline in U.S. dollar terms, it expects revenue to grow 1.7% to 5.7% when calculated in rupees.

The squeeze on outsourcers is also reflected in decreased hiring by Infosys. The company added 1,772 employees in the fourth quarter, down from 2,772 new hires in the previous three months. During the full fiscal year, it hired 13,663 new workers, down from 18,946 a year earlier. Total employee head count at the end of March was 104,850, Infosys said.

The company added 37 customers in the fourth quarter but said its count of active clients fell from 583 in the third quarter to 579.