Infosys Shares Fall On Strong Rupee Concerns

Shares of India's second largest IT service provider, Infosys Technologies, were down 5.4% in pre-market trading (as of 8:15 a.m. ET), on fairly strong volume of 44,000 shares, despite hitting all its earnings targets, due to fears an appreciating rupee would cut into its future profits. Shares fell by as much as 6.9% in Indian trading. Infosys reported quarterly net income of 11 billion rupees ($279.2 million) on revenue of 41.06 billion rupees ($1.04 billion), up 18% and 19% respectively from a year ago. The weak dollar forced the company to revise downwards its earnings guidance from previously expected growth of 34% to 30.7% to 31.3% growth. In addition, the company's employee attrition rate rose to 14.2% from 13.7% in the quarter. According to Mumbai-based money manager, Arun Kejriwal, shares fell as a result of Infosys' full year forecasts, which were "a disappointing set of numbers that have broken the trend of Infosys always delivering more than promised." The rupee has appreciated 12% versus the dollar so far in 2007. A U.S. dollar bought Infosys just 40.19 rupees on average during its recent quarter, versus 46.29 rupees on average a year ago, hurting the value of the company's repatriated earnings. 63% of its revenue came from North American clients during the latest quarter. The report also hurt other Indian outsourcers with Tata Consultancy Services Ltd.'s stock down 4%, Wipro Ltd. lower by 4.3% and Satyam Computer Services Ltd. dropping 6.6%, all in Indian trading.

Sources: Press Release, Bloomberg, Forbes, MarketWatch
Commentary: Indian IT Outsourcing Companies: Up to the Challenge • Which IT Outsourcing Stock is the Best? • Infosys CEO Kris Gopalakrishnan Describes Exciting Times
Stocks/ETFs to watch: INFY. Competitors: SAY, WIT. ETFs: INP
Earnings call transcript: Infosys Technologies F1Q08 (Qtr End 6/30/07)

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