With Slowing U.S. Sales, Infosys is Seeing Far More Growth from Europe (INFY)

 |  Includes: INFY, WIT
by: Himanshu Pandya

Infosys (NYSE:INFY) is seeing better times than during the previous quarter in the form of slightly higher margins from their clients and more business from Europe, which is growing faster. The addition of new customers accounted for 5 % of their quarterly revenue. Additionally, European business contributed 25 percent of Infosys’s revenue. According to Infosys CFO V. Balakrishnan, “The European business is growing much faster than US. The growth (in Europe) is coming predominantly from the UK. France and Germany are growing but not as fast as UK” (source: Reuters).

Infosys is looking to focus on its fast growing European markets so as to reduce its over-dependence on US markets. To accomplish this, it is looking to acquire companies with an annual revenue of $100-200 million for inorganic growth in areas where these companies can come and fill the strategic gaps that Infosys has in services, or a geographic or technologic area. The depreciating INR also helped to improve the margin a bit. According to CEO V. Balakrishnan, there were concerns in the market about a possible slowdown of the U.S. economy, but Infosys saw an opportunity in this. “Our take on that is even if the economy slows down, to some extent it only accelerates off-shoring. So, that will be good for players like us."

In the meantime, competitor Wipro (NYSE:WIT) recently made a few acquisitions of its own including buying European based ‘Enabler.’

INFY 1-yr chart:

INFY 1-yr chart