Wipro Ltd, the No.3 Indian software exporter, projected revenue growth below market expectations as uncertainty over recent management shakeup and a struggling global economy weigh on new outsourcing orders.
Shares in Bangalore-based Wipro fell more than 3 percent on Wednesday on the disappointing outlook, despite the company posting forecast-beating quarterly earnings.
No. 2 software services provider Infosys last week reported a quarterly profit that missed expectations and warned it could face slow client spending, while Tata Consultancy Services flagged concerns about global economic uncertainty.
Wipro forecast revenue from its IT services unit, which accounts for three-quarters of its total revenue, of $1.44 billion to $1.46 billion in the second quarter to end-September, indicating a rise of 2.1 to 3.5 percent from the first quarter.
The forecast is based on a rupee exchange rate of 44.9 rupees to a dollar.
Analysts had expected at least a 4 percent sequential rise in IT services revenue forecast.
"Given that this quarter is a seasonally strong quarter for the Indian IT sector, Wipro's growth forecast is decent but not outstanding," said Rohit Anand, a sector analyst with Mumbai-based PINC Research.
"It will take at least two to three quarters for Wipro to show the benefits of the management restructuring on its financial performance," he said.
Wipro has been struggling to keep up with sector leaders Tata Consultancy and Infosys in winning large outsourcing contracts and reorganised its management earlier this year to boost growth.
The company is seeing "early signs of positive momentum" after the management reorganisation, Wipro's billionaire chairman Azim Premji said in a statement.
Wipro said IT services revenue rose 0.5 percent in April-June to $1.41 billion from the quarter ago, and Anand said he had expected the company to report more than 1 percent rise.
Shares in Wipro, which the market values at about $23 billion, fell as much as 3.3 percent to their lowest in nearly two weeks at 401.40 rupees in the Mumbai market that was up 0.3 percent.
Wipro's global rival IBM on Monday raised its full-year profit forecast after second-quarter results beat Wall Street estimates, raising hopes that 2011 will be a good year for the technology sector.
Wipro, also listed on the New York Stock Exchange, in February reorganized its key IT outsourcing business in an effort to win more clients, barely three weeks after it surprised markets by removing the joint chiefs of the business and naming company veteran T.K. Kurien as the new chief executive.
BEATS FORECASTS
Wipro, which develops software applications, integrates IT systems and manages call centres, said consolidated net profit rose 1.2 percent to 13.35 billion rupees ($300 million) in the June quarter from 13.19 billion a year ago.
Revenue rose 18 percent to 85.64 billion rupees, as it added 49 new clients in the quarter and western clients increased spending on outsourced services to cut costs and boost efficiency amid global economic uncertainty.
This compares with a Reuters poll forecast of a profit of 13.16 billion rupees on revenue of 83.91 billion rupees for Wipro, which counts Citigroup, Cisco and Credit Suisse among its clients.
Wipro, which also makes computer hardware and electric bulbs, increased its IT services workforce by 4,105 employees in the quarter to 126,490.
Operating margins at its IT services business fell to 22 percent from 22.1 percent in the March quarter and 24.5 percent in year-ago period, hurt by salary hikes in April-June.
Still, the rate of attrition at Wipro rose to 23.2 percent from 20.9 percent in the preceding quarter, and was higher than 14.8 percent at Tata Consultancy and 15.8 percent at Infosys.
Intensifying competition from global rivals Accenture and IBM has forced Indian technology firms including Wipro and Tata Consultancy to hike salaries as much as 15 percent this year.
The rupee's rise is another concern for the $60 billion outsourcing sector, which exports a large chunk of its services to the United States but chalks up expenses in rupees.
Shares in Bangalore-based Wipro fell more than 3 percent on Wednesday on the disappointing outlook, despite the company posting forecast-beating quarterly earnings.
No. 2 software services provider Infosys last week reported a quarterly profit that missed expectations and warned it could face slow client spending, while Tata Consultancy Services flagged concerns about global economic uncertainty.
Wipro forecast revenue from its IT services unit, which accounts for three-quarters of its total revenue, of $1.44 billion to $1.46 billion in the second quarter to end-September, indicating a rise of 2.1 to 3.5 percent from the first quarter.
The forecast is based on a rupee exchange rate of 44.9 rupees to a dollar.
Analysts had expected at least a 4 percent sequential rise in IT services revenue forecast.
"Given that this quarter is a seasonally strong quarter for the Indian IT sector, Wipro's growth forecast is decent but not outstanding," said Rohit Anand, a sector analyst with Mumbai-based PINC Research.
"It will take at least two to three quarters for Wipro to show the benefits of the management restructuring on its financial performance," he said.
Wipro has been struggling to keep up with sector leaders Tata Consultancy and Infosys in winning large outsourcing contracts and reorganised its management earlier this year to boost growth.
The company is seeing "early signs of positive momentum" after the management reorganisation, Wipro's billionaire chairman Azim Premji said in a statement.
Shares in Wipro, which the market values at about $23 billion, fell as much as 3.3 percent to their lowest in nearly two weeks at 401.40 rupees in the Mumbai market that was up 0.3 percent.
Wipro's global rival IBM on Monday raised its full-year profit forecast after second-quarter results beat Wall Street estimates, raising hopes that 2011 will be a good year for the technology sector.
Wipro, also listed on the New York Stock Exchange, in February reorganized its key IT outsourcing business in an effort to win more clients, barely three weeks after it surprised markets by removing the joint chiefs of the business and naming company veteran T.K. Kurien as the new chief executive.
BEATS FORECASTS
Wipro, which develops software applications, integrates IT systems and manages call centres, said consolidated net profit rose 1.2 percent to 13.35 billion rupees ($300 million) in the June quarter from 13.19 billion a year ago.
Revenue rose 18 percent to 85.64 billion rupees, as it added 49 new clients in the quarter and western clients increased spending on outsourced services to cut costs and boost efficiency amid global economic uncertainty.
This compares with a Reuters poll forecast of a profit of 13.16 billion rupees on revenue of 83.91 billion rupees for Wipro, which counts Citigroup, Cisco and Credit Suisse among its clients.
Wipro, which also makes computer hardware and electric bulbs, increased its IT services workforce by 4,105 employees in the quarter to 126,490.
Operating margins at its IT services business fell to 22 percent from 22.1 percent in the March quarter and 24.5 percent in year-ago period, hurt by salary hikes in April-June.
Still, the rate of attrition at Wipro rose to 23.2 percent from 20.9 percent in the preceding quarter, and was higher than 14.8 percent at Tata Consultancy and 15.8 percent at Infosys.
Intensifying competition from global rivals Accenture and IBM has forced Indian technology firms including Wipro and Tata Consultancy to hike salaries as much as 15 percent this year.
The rupee's rise is another concern for the $60 billion outsourcing sector, which exports a large chunk of its services to the United States but chalks up expenses in rupees.
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