They are the first India-based major to report each quarter and are therefore seen as the bellwether for the offshore services brigade – indeed for the global IT services market. So when Infosys says that times are tougher than expected, the market gets worried. Indeed, Infosys’ shares are down 8%, and most of the other majors are off too, but not by quite as much.
It’s not that Infosys ‘missed’ the numbers in Q3 (to 31st Dec.). Indeed, headline revenues came in at $1.8b (+14% yoy), albeit at the low end of guidance. And operating margins were at their highest for two years (31%). But on the other hand, the Rupee was also at its weakest since I have been tracking the company – almost 15% down yoy and 11% down qoq; this gave Infosys a 440bps margin boost!
The cause? Management downgraded next quarter’s guidance, leaving revenues barely flat qoq. In fact, if you take out the expected contribution from Aussie BPO firm, Portland Group, that Infosys acquired just before Xmas, Q4 revenues would actually be lower than in Q3. We haven’t seen a sequential decline in Infosys’ revenues since March 2009. And, yes, “it’s the global economy, stupid!”
So, much wringing of hands in Bangalore – and beyond. The rest of the India-based majors report over the next couple of weeks, and it would be surprising if their mood was significantly different. As usual, eligible TechMarketView subscription service clients will be able to see our full analysis of the players – and their impact on the UK market – in the next edition of OffshoreViews.