Kamis, 26 Juli 2012
Pricing worries cloud outlook for India's IT industry
A squeeze on billing rates is clouding the outlook for India's IT industry, which is feeling the pain of discount demands from its key financial sector clients.
Infosys, India's No.2 software services exporter, said on Thursday pricing fell by 3.7 percent in the June quarter from the previous quarter, and larger rival Tata Consultancy Services (TCS.NS) said prices fell about 1 percent.
B. G. Srinivas, Infosys' head of financial services and Europe, told analysts the company faced pressure to discount from the financial sector, the firm's biggest client segment.
"When the overall budgets are under pressure, there is definitely a move to get more for less, and in that context, of course, there's competitive pressure as well," he said.
Bhavin Shah, the chief executive of Equirus Securities who forecast that Infosys would cut its full-year growth forecast to 5 percent, echoed that feeling.
"Given the weak demand environment when everyone obviously competes for a smaller piece of the growth pie, I expect further price erosion in coming quarters," said Shah, formerly a top JP Morgan Asia technology analyst who has an "underweight" rating on the IT sector.
"We believe that (economic) slowdown and lack of consolidation in the sector will manifest in reduced pricing power and profitability for TCS and the industry," Kotak Institutional Equities analyst Kawaljeet Saluja wrote in a note following the results.
Kotak downgraded both Infosys and TCS to "reduce" from "add."
"This mismatch between incremental growth available and higher growth aspiration for existing players is leading to aggressive pricing behaviour. Our channel checks indicate aggressive pricing by a Tier-1 player. Infosys' pricing decline is also worrying," he wrote.
Infosys and TCS lead India's $100-billion-a-year IT and back-office outsourcing industry, which gets some three-quarters of its revenue from customers in the United States and Europe.
Economic volatility pushed Infosys to forecast lower-than-expected growth for the full fiscal year on Thursday, sending its shares down 8.4 percent. The shares ended 1.5 percent lower on Friday, while TCS gained 1.1 percent.
Source: Free Articles from ArticlesFactory.com
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- Finding Your Niche With College Testing Even ...
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- High School Students Beware, Schools Are Checkin...
- Suggestions For Getting Through The SAT\\\'s ...
- Your Options For College Are A Little More Varie...
- Your College Environment Needs To Be A Place You...
- Making A Smooth Transaction From Home To Dorm Ro...
- Live Comfortably In A Dorm Room Decorating a ...
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- The Transition To College It is always a tryi...
- Keeping Expenses Down For The College Student ...
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- Dissertation Help: Finding Pearls out of Marbles...
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- Want to get an engineering job at the most popul...
- Pricing worries cloud outlook for India's IT ind...
- Know About Best Colleges In India To Pursue Engi...
- A Review Of The Top Universities In India That O...
- Why To Know About Top Arts, Architecture and Top...
- 3 Enterprising Techniques That Boosts E-Learning...
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- PriorityTextbook is the Best Place Online to buy...
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