Earnings

Wipro's Quarter Profit Rises 1.7%, Forecast Muted

Reuters

Wipro, India's third-largest software services exporter, reported a slightly smaller-than-expected 1.7 percent rise in quarterly net profit, and forecast muted growth amid fears a weak U.S. economy will hit outsourcing demand.

Wipro on Friday forecast its combined global information technology business revenue, including services and products, would rise to $1.06 billion in the April-June period, its fiscal first quarter, from the March quarter's $1.03 billion.

"The global economic outlook has changed significantly since the beginning of the calendar year," Chairman Azim Premji said in a statement. "It poses challenges and at the same time, opens up new opportunities. Given the uncertainty in the environment, we remain cautious but resilient."

The Indian stock market is closed on Friday for a local holiday. Trading resumes on Monday.

Wipro, which offers IT solutions such as systems integration, software application development and back-office services, said January-March net profit rose to 8.75 billion rupees ($220 million), from 8.6 billion rupees a year ago.

A Reuters poll had forecast a mean net profit of 8.8 billion rupees for Wipro, which counts Cisco, Nortel, and Credit Suisse among its clients.

Wipro said wage increases in the March quarter impacted margins by 100 basis points. It added 29 new clients in the quarter, and won three multi-year, multi-million dollar deals.

Wipro said Girish Paranjpe and Suresh Vaswani had been appointed joint-CEOs of its IT business.

Wipro reported its earnings after India's No. 2 software exporter, Infosys Technologies, had posted a near-10 percent rise in profit and gave a confident medium-term outlook, but sounded a note of caution on its near-term prospects.

Growing evidence of a U.S. recession is a major concern for India's $64 billion software services sector, which gets more than half its revenue from the world's largest economy.

Comparatively lower wages and competent English-speaking workers have helped India's software services firms thrive by winning outsourcing contracts from overseas clients like Goldman Sachs, Airbus and Qantas.

But the boom of recent years has now given way to rapidly slowing profit growth, as export-driven software services companies battle to acquire new customers and raise prices in a sluggish economy.

Most software firms' sales cycles are growing longer as their western clients either delay or put on hold non-essential spending on technology in an uncertain business environment.

Indian software exporters get the bulk of their revenue from banks and financial firms, sectors which have been battered by the turmoil in global financial markets.

Top software services exporter Tata Consultancy, which is expected to report a 17.2 percent rise in its quarterly profit on Monday, said last month that two of its 15 biggest clients had delayed some projects during the March quarter.

Shares in Wipro, majority-owned by its billionaire chairman, fell 19 percent in the March quarter, less than a 22 percent decline in the IT sector index and a 23 percent drop in the main index.

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