Infosys holds its own

It was somewhat of a relief to see that there was no ‘bad news’ from (currently) second-ranked India-centric services firm, Infosys, last quarter as management left FY guidance (to 31st March) intact. Headline revenues for the last 3 months of the calendar year grew by 6% yoy to $1.91bn, also 6% higher than the prior quarter. This includes a contribution from Lodestone, the Zurich-based SAP-focused consultancy that Infosys announced it was to acquire in September (see Infosys buys ‘Swiss Axon’). Management expects Lodestone will add $104m to Infosys’ FY results this year, broadly in line with Lodestone’s $216m annual revenues in 2011, given that the deal completed on 22 October, i.e. just over 5 months’ contribution. Lodestone gave a welcome boost to Infosys’ European revenues, which grew 14% (constant currency) over the prior quarter.

Infosys’ operating profits returned to growth (4%) after three quarters of consecutive decline, though not enough to protect margins, which at 25.7% were over 5 points lower yoy and 60bps lower than the prior quarter. Infosys lost the ‘margin crown’ to TCS in the prior quarter (see TCS tops Infosys on growth and margin) but we will have to wait till Monday to see whether TCS can hold on to it. Infosys management is ‘cautiously optimistic’ about the final quarter of its FY despite a 'difficult' economic environment.