FINANCIAL RESULTS: Infosys up, but not to the Mark

Satyam’s Q4 net up 164%

Investors may finally take cheer from
Satyam’s Q4 results that were announced recently. Hyderabad-based Satyam,
which makes software for over 150 Fortune 1000 companies including GE,
Sony Corp and Ford Motor Co, has recorded a net profit of Rs 1.11 billion
and revenues of Rs 3.84 billion during January-March this year.

SATYAM COMPUTER Services, India’s third-largest listed software
exporter, reported that its net profit had soared 164% in January-March
over the previous year, soundly beating market expectations. Satyam said
its Q4 net profit rose to Rs 1.11 billion ($23.8 million) from Rs 420.9
million a year earlier, on revenue that surged 85.5% to Rs 3.84 billion.

A Reuters’ poll of 12 analysts had forecast Satyam’s net profit for
the period would surge 102% to Rs 838.62 million, on sales of Rs 3.53
billion, up 72%. For the full year, Satyam’s net rose 134% to Rs 3.16
billion, on sales growth of 82.9% to Rs 12.42 billion.

…But Bismuth gets boot in the

The ‘restructuring process’ in Satyam
has just commenced. And the first to feel the effect is the CEO of its US
subsidiary Robert Bismuth who has been asked to quit. Firm officials,
however, say the move has nothing to do with the US slowdown and is only
aimed at reducing Satyam’s overseas operational costs.

India’s third-largest software exporter said net profit rose to Rs 182
crore ($39 million) in the January-March quarter, from Rs 93.4 crore in the
year-ago period. That fell short of a consensus estimate of Rs 185 crore in a
Reuters poll of 12 brokerages released earlier. R Ravi, analyst, ICICI
Securities, Mumbai, said, "The results are extremely good and in line with
market expectations. The future course of stock will be decided by what the
management says in the conference call later in the day." Yeshwant Kini,
analyst, SG Securities, Mumbai, said, "It seems to be in line with
expectations. We had forecast a fourth quarter net profit of Rs 184 crore
against which they have achieved Rs 182 crore."

Meanwhile, Mahesh Vaze, analyst, Motilal Oswal Securities said, "It is
below my expectations. The result will have a negative impact on the entire
sector. I also expect some sort of a ‘read my lips’ kind of caution on the
outlook." The growth in sales, however, surpassed expectations. Total
income in the January-March quarter rose to 572 crore from Rs 286 crore. The
poll had estimated net sales at Rs 561 crore, up 102.31% from a year earlier.

"We were expecting net profit to grow sequentially by 15%. These numbers
are bad, there has been margin contraction
and a slowdown in the topline. I expect the double whammy effect to continue in
the next two quarters," said a strategist at a domestic research house in
Mumbai. Many analysts anticipate growth rates will come off the boil because of
the slowdown of the US, the main buyer of the country’s booming software
service exports.

"One of the things for the net profit is that the rupee did not
depreciate as it did in the previous quarter. It is almost flat. The effect
generated in the past quarter obviously was not there in the latest
quarter," said Anil Tewari, analyst, Goldman Sachs, Hong Kong. Results of
Infosys, which in 1999 became the first Indian firm to list on the Nasdaq, were
awaited by a market looking for signs of a slowdown in the phenomenal growth
rates of major domestic software companies. The results came ahead of trading in
the stock market. 


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