The Hindu Business Line : Infosys unfazed by slump in telecom vertical

Chennai, July 14 Despite a slump in revenues from its top client, and a slump in onsite revenues for its Australian subsidiary, Infosys Technologies feels that it’s business as usual.

The attached table gives us the numbers for the telecom vertical and the Australian subsidiary. Revenues from its top-most client, a telecom player in Europe, dropped between the March and June 2008 quarters. In the same period, telecom revenues, even without top client’s contribution, saw a slump of just over 2.1 per cent in dollars, while growing about 3.3 per cent in Indian Rupees. Given the rupee’s slump against the dollar in the period, it is natural that rupee revenues rise even as growth in dollars seems muted.

New trend?

Significantly, revenues from its Australia subsidiary, in US dollars, also slumped about 8 per cent in the same period, while net profit slumped 62.5 per cent. This is a new trend, as revenues rose from $ 33 million, and net profit rose from $ 5 million between the quarters ended December 2007 and March 2008.

From the above, one conclusion that can be reached is that telecom as a vertical, in general, and Infosys’ Australian telecom client Telstra, in particular, are showing signs of trouble.

Asked if such a conclusion is accurate, Mr V. Balakrishnan, Chief Financial Officer, Infosys, told Business Line, “At the end of the day, we have a portfolio approach to our growth. We do not want to comment on any specific client. However, if you look at the numbers, the fall in contribution from the telecom vertical is largely due to the fall in revenues from the large client.”

He also felt that quarterly changes in numbers cannot be relied upon to derive a trend in business. He said, “Quarterly revenues could vary due to multiple reasons including the (start of a) project, onsite-offshore mix, new clients growth, etc.”

Good traction

He clarified that the company is seeing good traction in Australia. He also cited the fact that revenue contribution from the Australian market increased sequentially by 3.4 per cent from US$54.35 million in the March 2008 quarter $ 56.21 in the June 2008 quarter.

“Revenue reported under Infosys Australia is only the onsite income related to the subsidiary.” In other words, although onsite revenue slumped a bit, overall revenues from Australia, including revenues from delivery of software from India, grew.

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