CEOs on Outsourcing: Infosys, IBM, Satyam, Convergys, AsiaInfo and Wipro

Quotes from CEOs and CFOs on recent earnings conference calls, discussing their companies and markets:

Infosys Technologies Limited CEO Nandan Nilekani

We have had sequential growth as you have seen of 10.1%. This happens to be the third consecutive quarter where we have delivered double digit revenue growth in dollar terms. So we believe that this is an endorsement and validation of our strategy of building the brand, building our transformation capability, and our investments is enriching and synergizing our portfolio of services, so that we can create compelling value propositions for our client.

While we have grown 10.1% this quarter, we have also given our guidance for the next quarter, where we expect revenues to grow between 4.6% to 4.9%. And for the year, we expect revenues in dollar terms to grow at 43.6% in this fiscal year.

The revenue for this quarter was at $821 million, and our earnings per ADS has gone up to $0.39 from $0.26 in the previous quarter, with an addition of 43 new clients.

While we have grown at double digits in dollar terms, in rupee terms our growth has been more modest. It has been at 5.9%, essentially because the rupee appreciated at around 3.8% for the year, and therefore we lost about 145 crores of revenue due to rupee appreciation.

• Excerpted from the full Infosys conference call transcript.

IBM CFO Mark Loughridge

Now, let me turn to the businesses, starting with Services.

Our two services segments, Global Technology Services and Global Business Services together delivered external revenue of $12.8 billion, up 7% as reported and 3% at constant currency.

Signings for services this quarter were $17.8 billion at constant currency, up 55% over last year. At spot rates, we signed $20.3 billion. Our shorter-term signings were $6.2 billion, up 16% year-to-year. Our longer-term signings were $11.6 billion, up 89% year-to-year. This quarter we signed 14 deals larger than $100 million, and our backlog has increased to an estimated $116 billion. This strong finish to the quarter allowed us to grow signings for the full year, for both short term and long term.

Turning to the segments, Global Technology Services delivered revenue of $8.6 billion, up 7% as reported and 4% at constant currency. Strategic Outsourcing revenue was up 7% as reported and up 4% at constant currency. Signings doubled year-to-year, with strong growth in all geographies.

Business Transformation Outsourcing revenue was up 8% as reported, and up 5% at constant currency. BTO signings were down 57% year-to-year. We continue to see opportunity within the BTO business, particularly in Finance and Accounting, Human Resources and Procurement.

Integrated Technology Services revenue was up 8% as reported and up 6% at constant currency. We continue to see progress from the changes we’ve implemented to improve the Integrated Technology Services business, including streamlining our offerings and aligning skills, to address higher growth and higher value areas.

The acquisition of Internet Security Systems added to our capabilities in security and intrusion protection, and contributed to the ITS growth. ITS signings were up 20% this quarter, with growth in all geographies. As in the third quarter, the strongest growth came from the regions where our transformational actions were implemented first. We’re encouraged by our progress in ITS.

Turning to margin, Global Technology Services pre-tax margin was 9.3%, down year-to-year as compared to a particularly strong fourth quarter of 2005, but in line with full year margins adjusted for the impact of the ISS acquisition. We continue to make investments in sales, delivery and business development skills across our entire set of offerings, as well as invest in strategic outsourcing infrastructure and BTO capabilities. Looking forward, we will continue to optimize resources and processes to increase productivity, and improve flexibility and scalability. This activity may be skewed a bit more towards the first half of 2007. The goal of these actions is to drive labor cost savings and increased customer satisfaction within service delivery.

Global Business Services delivered revenue of $4.2 billion, up 6% as reported and up 3% at constant currency. The constant currency growth represents a 7 point improvement since the growth rate at the end of the first half, as we’ve expanded our focus from Operational Transformation to a focus on Profitable Growth.

Our signings this quarter reflect the strong demand for both our shorter-term and longer-term offerings. Shorter-term signings were up 14% year-to-year, where we saw strength in the larger higher value add engagements. Longer-term signings were up over 200% year-to-year, driven by our global delivery capabilities in the Application Management business. Longer-term signings were up 17% for the year. Global Business Services’ pre-tax profit was up over 30% year-to-year, and the fourth quarter pre-tax margin improved 2.3 points to 11.8%. Margin improvement was driven by improved utilization, strong contract management and delivery, and stable to improved pricing...

• Excerpted from the full IBM conference call transcript.

Satyam Founder B. Ramalinga Raju

I am pleased to report that the company has achieved 7.7% sequential revenue growth in Q3 in US$ terms. This translates to 3.7% growth in rupee terms under consolidated Indian GAAP.

The growth differential is in view of this 3.7% rupee appreciation against the US dollar in Q3. The revenue growth was accentuated by a 11% offshore volume increase. This has resulted in increase of offshore contribution to revenue for the sixth consecutive quarter. A significant positive development in Q3 performance is the expansion in EBITDA margins by over 200 basis points on account of enhanced operational efficiency and reduced cost of delivery. Consequently, EPS at Rs. 5.14 was higher than the guided figure of Rs. 5.11.

We are encouraged by the continued expansion of our business in Europe. In Q3, the contribution of the region increased to 19%. Q3 was yet another quarter, which saw an increase in the contribution of consulting and enterprise business solutions, which now is 42% of the revenue. Satyam's ability to architect innovative and extensible solution frameworks in this area has led to higher growth, enhanced customer intimacy and strong brand equity. It is also a reflection of our increased involvement in partnering with customers to deal with transformational issues effectively.

The top 10 customers of Q3 have witnessed a sequential growth of 14% on the back of large deals won by us during the year. This is a testimony to the maturity of our processes and service offerings to successfully transition the projects to our globally integrated delivery models. We are considering a strong pipeline of deals in every major vertical industry we serve in the Americas, Europe, as well as the rest of the world. We are also seeing significant strategic opportunities beyond traditional IT in our integrated engineering services business, further strengthening our large deal capabilities.

Our net addition of associates in Q3 was 2,746.

• Excerpted from the full Satyam conference call transcript.

Convergys CEO Jim Orr

Convergys revenue was $720 million in the fourth quarter, up 8%. This brought our full year revenue to an historic high of $2.8 billion. Operating income of $253 million was up 13% for the full year. For the fourth quarter, operating income was $58 million. Operating results in the quarter included an approximate $13 million net charge related to our previously announced restructuring plan. This charge reflects the aggressive actions we've taken to further streamline the organization. We will continue to pursue initiatives that drive efficiencies by rationalizing facilities, increasing productivity and managing our costs in 2007. These actions support our dedication to further profitability improvement.

Fourth quarter GAAP earnings per share of $0.32 doubled over the previous year. We again had strong cash flow in the quarter and 2006 free cash flow of $257 million was the highest in five years. We are proud of our record, delivering positive free cash flow every year since our IPO nine years ago. This is a function of management attention as well as the strength of our business model.

Customer Care revenue and operating income grew in the fourth quarter. Revenue increases allowed us to strengthen our leading position in the opportunity rich $50 billion customer care outsourcing market. We also deployed additional products and services to address the more than $230 billion in-house contact center market. Our continuing operating improvement in Customer Care reflects the positive impact of our focus on productivity and cost initiatives, and our recognition as the industry leader based on our ability to deliver value for clients.

As anticipated, Information Management revenues were flat for the year and down slightly in the fourth quarter. License and professional services revenue grew for the year in the quarter largely offsetting the data processing decline. This was driven by Information Management success addressing the demand for convergent solutions around the globe, reflected in the continuing strength of our international business.

As expected Employee Care revenues were up substantially for the full year and for the fourth quarter. As a result, we significantly reduced the Employee Care operating loss in 2006...

• Excerpted from the full Convergys conference call transcript.

AsiaInfo CEO Steve Zhang

I am pleased to report that in the fourth quarter, we exceeded our net revenue guidance for the second quarter running and steady growth in our telecom business. Our security products and service business unit also performed well, with net revenue growing 28% over the previous quarter.

During the fourth quarter, we continued to focus on delivering telecom software solutions to China’s telecom carriers, making progress on a number of fronts.

The demand of AsiaInfo’s leading operational assistance and CRM solutions is continuing to rise, as carriers seek to differentiate their services, win customers and improve profitability in an increasingly competitive market.

For example, during the quarter we constructed new business support systems for Hubei and Shanxi Unicom. We also upgraded Beijing Mobile’s operational CRM -- customer relationship management system, to improve their sales and marketing processes.

We are also seeing exciting opportunities to develop billing systems that support new applications and the new business models.

With the expansion of China’s mobile user base and the advent of 3G, we expect operators to roll out new data service offerings in areas such as music download, entertainment, WAP, and the mobile media, and AsiaInfo is in a unique position to benefit from this strength. In fact, during the fourth quarter, we signed an agreement to build a content billing system at China Mobile’s headquarters that will provide higher flexibility in handling data on the value-added services.

In late 2006, we also formed an innovative revenue sharing agreement with China Unicom to launch a range of interactive voice response services. We believe that this has the potential to generate meaningful recurring revenue in the future and we will look to replicate this model with other telecom carriers going forward.

We also signed a new customer in the fourth quarter, signing a break-through contract with Shanxi Netcom to develop their business intelligence system, and we expanded business relations with two China Mobile subsidiaries, Vietnam Mobile and Tibet Mobile. We are now working with 27 of China Mobile’s 31 subsidiaries.

As I mentioned earlier, our security products on the services business continue to build on the growth that we have been seeing in recent quarters. The market for IT security remains a promising proposition for us, and we are confident that with our strong brand recognition and highly qualified management team, this business will continue to expand in the course of 2007.

• Excerpted from the full AsiaInfo conference call transcript.

Wipro Chairman Azim Premji

We have had another satisfying quarter. Wipro Limited recorded revenue growth of 43% year-on-year and profit growth of 40% year-on-year. Revenues from our Global IT Services at $641 million for the quarter we are well ahead of our guidance of about $633. This was driven by strong growth in our Energy and Utilities Vertical, Technology Infrastructure Services and Enterprise Application Services. Continuing the good momentum, our Financial Services and Retail Businesses delivered 50% year-on-year growth. Manufacturing Vertical and Europe geography posted sequential growth rates ahead of the company average.

We saw some mercury wins in our BPO business. We added 37 new clients, of which 8 were Global 500 or Fortune 1000 clients.

On the operations front, we saw lowering of our rate of attrition in both the IT and the BPO business. That coupled with improvement in other operational metrics helped us largely offset the profitability pressures from wage increase and rupee appreciation. As a result, we were able to maintain and deliver an operating margin within our narrow range in our Global IT business.

Continuing the strong momentum our India, Middle East and Asia-Pac IT business recorded strong YoY revenue growth of 74% and profit before interest and tax growth of 39%. Wipro Consumer Care and Lighting business also grew well with 32% year-on-year revenue growth and 26% year-on-year profit growth.

On the global delivery front, we continue to pursue our approach of focus expansions of our geographical footprint. Our Romania center is now operational and we are creating a third center in China and we will be expanding our Brazil center that came though our Enabler acquisition.

• Excerpted from the full Wipro conference call transcript.