Infosys' Shares Fall Despite Higher Profit

[HenryTo]

Contrary to popular belief, there is a skilled labor shortage in India - is this (and the anti offshoring trend in the U.S.) being reflected in INFY's stock price?
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Infosys' Shares Fall Despite Higher Profit
Tuesday July 12, 9:54 am ET
By S. Srinivasan, Associated Press Writer
Indian Software Firm Infosys' Shares Decline 4.1 Percent Despite Higher Profits

BANGALORE, India (AP) -- India's second largest outsourcing company, Infosys Technologies Ltd., said Tuesday its profit for the April-June quarter rose 47 percent from a year earlier to $122 million, but its stock fell 4.1 percent because of market expectations of higher quarter-to-quarter growth.

The company, which subcontracts for Western firms -- from software engineering to back-office work -- attributed its performance to strong demand for such outsourcing and increased corporate recognition among global clients.

It also painted a rosy future for outsourcing, saying new projects had been signed at prices about 3 percent higher than earlier projects, signifying a "stable pricing environment."

The company's first quarter profit rose considerably from the $83 million earned in the same quarter a year ago, according to the company's financial results published under U.S. Generally Accepted Accounting Principles. That came out to be 45 cents per share, higher than the company's forecast of 44 cents.

The net profit would have been $3.44 million higher except for the depreciation of the euro and pound against the Indian rupee during the quarter, the company said. Infosys derives 23.9 percent of its revenues from those currencies and their depreciation led to losses upon conversion to rupees.

Total sales rose 42 percent to $476 million from $335 million in the same quarter a year ago. That beat the company's earlier sales estimate of between $459 million and $463 million.

However, the stock market was disappointed over the growth compared with the January-March period. Sequential growth was only 4 percent in rupees and 4.6 percent in dollars.

On the Bombay Stock Exchange, the company's shares fell 4.1 percent to 2,219.95 rupees.

"The sequential growth is a disappointment given that the growth profile of the company quarter-to-quarter is typically much higher, 10 percent or so," said analyst Apurva Shah of Ask-Raymond James Securities.

"But I am not too concerned over the medium-term prospects because the growth traction is there and the company has given better guidance for future revenues," he said.

Many Western companies have cut costs by farming out software work, engineering design and customer service to countries such as India, where wages are lower and skilled workers plentiful.

India earned $17.2 billion from offshore outsourcing during the fiscal year that ended in March 2005.

Infosys Technologies: http://www.infy.com