GOOD AND BAD IN INFOSYS Q3

Good and bad in Infosys Q3
Country's second-biggest IT company, Infosys Technologies, raised fresh
concerns over the pace and depth of recovery in the IT sector by reporting lowerthan-
expected third quarter earnings due to wage costs, currency fluctuations
and sluggish European economic growth.
However, Infosys also revised its revenue guidance for the year upwards, as it
hopes that customers will give more outsourcing orders after the Christmas
vacation. Since April 2010, Infosys has revised its revenue guidance every
financial quarter.
So, here's looking into all that is good and not-so good in Infosys third quarter
results.
US revenue share declines
The software services provider said that it derived 65 percent of its revenues
from companies in North America, down from 67 percent a year earlier.
Customers in Europe accounted for 22 percent of sales, little changed from the
prior period. Infosys added 40 clients during the quarter, ending with a total of
612 customers.
Dip in company's cash chest
Second biggest IT company in India said that its cash and cash equivalents
declined by nearly 4 percent to Rs 14,819 crore for the quarter ended December
31, 2010.
As on December 31, cash and cash equivalents stood at Rs 14,819 crore, as
against Rs 15,401 crore on September 30, 2010, the software exporter said in a
filing to the Bombay Stock Exchange.
5,756 quit Infosys in Q3
Infosys seems to be continuing to face challenge on attrition front. The company
hired 11,067 employees in the quarter, but 5,756 left the company, so the net
addition was 5,311. Net hiring during Q2 was 7,646, and in Q4 of last year, it was
3,589.
The attrition rate on an annualised basis has gone up to 17.5% this quarter from
11.6% a year ago, and 17.01% in the preceding quarter. As on December 31, the
company had an employee strength of 1,27,779, as against 1,22,468 a quarter
ago and 1,09,882 a year ago.
Infosys BPO's strength declined to 17,978, from 18,560 at the end of the
previous quarter.
Back on campus
Infosys is back at campuses in a big way. The company plans to hire 26,000
freshers from over 200 campuses this fiscal against last year's 20,000. "We have
already given offer letters to 18,000 people. Some 11,000 people are under
training in Mysore and they will move into production in the next 3 to 4 months,"
said TV Mohandas Pai, head HRD head and Education and Research Infosys.
Client additions
Infosys added 40 new clients (many of them Fortune 500 companies) during the
third quarter, taking its active clientele to 612. The company’s client list includes
BT Group, BP and Goldman Sachs.
The first half of the year also saw Infosys bag nine big contracts in the $100
million range.
Narayana Murthy's successor
The big question that who will be replacing NR Narayana Murthy as chairman of
Infosys when he retires in August this year still remains with no answer from the
company. An Infosys top executive said that the issue was not touched upon in
the board meeting held prior to the company's earnings announcement. "Murthy
is retiring only in August, so we have another couple of quarters to decide," he
said.
Reworking employee composition
The company is reportedly reworking on its employee composition. According to
TV Mohandas Pai, head HRD head and Education and Research Infosys, almost 80
percent of the company's current talent pool consists of technologists. Infosys
aims to bring this down to 60 percent to accomodate a larger pool of employees
with 'business management acumen'. The company sees the transition taking
about 3-4 years.
Growth in high-margin business
The Q3 saw Infosys increase its contribution from the products business to 5.3
percent of revenues, up from 4.2 percent in the previous quarter.
The quarter saw the share from high-margin services such as consulting and
package implementation too going up. The growth suggests a revival in
discretionary spends of clients.
Telecom vertical lags
The telecom vertical continued to be a laggard. The segment declined marginally
during the quarter.
Files for 17 patents
During the third quarter, Infosys applied for 17 patent applications in India and
US. With this, Infosys has an aggregate of 270 patent applications (pending) in
India and the US. The company has been granted 18 patents by the US Patent
and Trademark office.
"We have been increasing our global footprint and diversifying into new areas. We
invested in research on new products and services which have been successfully
adopted and implemented by our clients," the company said.