Ciba Gator

Infosys' Weak Outlook: Appreciating Rupee, Rising Wages To Blame

The rupee hasn't appreciated 10% a year for a consistent period of time. To suggest that overstates reality. Wages in the US are climbing, on a nominal basis, faster than India. So rather than say that Indian engineers get 10-15% more expensive each year, do the dollar comparison--US engineers get 5%=3-4k more expensive each year versus 15% in India = 1-2k). To a buyer, who pays in dollars not in percentages, the US engineer is getting comparably more expensive each year. In any case, there just aren't enough skilled workers in the West to do these jobs and unless US kids suddenly decide they want to spend four years studying for a job that may end up in India by the time they graduate, supply in the West will never meet demand. Meanwhile India is doing a lot to improve the quality of its vast labor force--within the next few years it more likely that hundreds more thousands of people in India will be employable and wage pressure should abate. Now mix in China (where Indian companies are some of the biggest employers of cheap IT labor) and it's highly unlikely that your long-term wage theory is going to hold water.

I think your analysis is short-sighted, focusing on a handful of current data points without looking at the whole picture. Any industry or business has a collection of challenges, but there may be ways to offset those risks. Anyway, where else will you find this growth, margin, and multiple combination in the markets?

By the way, Infosys reported 13.7% attrition. Accenture, a high quality global company, recently reported 18% attrition. Hard to say that Infosys has employee retention issues--if anything they have an advantage in this area.

Infosys' Weak Outlook: Appreciating Rupee, Rising Wages To Blame

Care to do the math and show us how long it will take before your 10% wage/10% currency scenario creates any sense of parity between labor costs in the US and in India?

Also care to quantify the employee retention problem with some numbers? Say, compare INFY's employee attrition rate with other industry players such as Accenture or BearingPoint or IBM Global Services?

The headlines say that wage hikes and retention are bad, but looking beyond the headlines at the actual numbers might produce some different conclusions....

Which IT Outsourcing Company Gives Maximum Return on Covered Calls?

The next higher strike price for Satyam is $25 if the stock is at $24.50. Am I missing something?

Which IT Outsourcing Company Gives Maximum Return on Covered Calls?

Sorry, not sure why the original post was truncated. Here's another try:

Dan, dude, what the heck are you talking about?!?! You can't ignore time value of money "assuming" that one will hold a stock for the next six months and that capital losses in that time will be erased!!!! The central idea with options is that there IS a time value to ownership and capital. Jeez, man, quit it with the inane ramblings, you're just embarrassing yourself.

Of course Satyam looks great in your "analysis". You used a high strike price and ignored all the other variables!! Here's another look at your "analysis"--

Stock price on June-25 $24.50
Call premium for $25 for Jan-08 = $2.60
If one buys 200 shares one would invest $4,900
Max return is ($2.60 * 200) + (($25 - $24.50) * 200) = $620 = 12.7%
Min return is $2.60*200 = $520 = 10.6%

THE ACTUAL MIN RETURN IS:
-4,900 + ($2.60 * 200) = -$4,380 IF THE STOCK GOES TO $0.00

Dan, you can't IGNORE the value of the underlying stock. You can't ignore time value of money--of course if you pick a $30 strike price you will make "more money" at the "max". If you had run the analysis with a strike price of $50, you would have calculated an even greater "max" return.

This is beyond sloppy, it's just ignorant. Please try to understand what you are saying befor you say it.

Which IT Outsourcing Company Gives Maximum Return on Covered Calls?

Dan, dude, what the heck are you talking about?!?! You can't ignore time value of money "assuming" that one will hold a stock for the next six months and that capital losses in that time will be erased!!!! The central idea with options is that there IS a time value to ownership and capital. Jeez, man, quit it with the inane ramblings, you're just embarrassing yourself.

Of course Satyam looks great in your "analysis". You used a high strike price and ignored all the other variables!! Here's another look at your "analysis"--

Stock price on June-25 $24.50
Call premium for $25 for Jan-08 = $2.60

Why is Accenture's Market Cap Less Than Infosys'?

Dude, you've got your picture on the top of this posting and your name attached to each article. It's your reputation, not mine. If you're trying to say that your advice and insights are worthless because seekingalpha is free, then I guess that we shouldn't waste our time reading what you write. I only posted because you seem to put up a lot of information about this sector and I thought that you actually cared about informing and educating.

Garbage In Garbage Out. I'm disappointed.

Increasing Taxes Should Keep India’s IT Biggies at Bay (INFY, WIT)

LOL, taking the battle to another forum, eh?!

No argument here. Your original article quoted an analyst who suggested that the tax rates would shoot up, but did not cite the timeframe. Since later in the article his growth commentary is based on quarter-to-quarter growth (I assume this--once again it is not mentioned in the article), one might believe that the tax rate is going to jump up this quarter as well.

As you rightfully point out, the tax rates do not change until fiscal 2010.

Yes I believe in FACTS and I do my homework. I simply found your original post to be misleading and I posted a question to obtain a public clarification. Well done!

Why is Accenture's Market Cap Less Than Infosys'?

Dan,
I cannot speak for Accenture IR. Unfortunately there are many, many data services out there (Thomson, Reuters, Yahoo, Google, Excite, AOL, CapitalIQ, Bloomberg, First Call, The Markets.com, etc.) and on any number of companies there will be material errors in their databases, especially since those databases are increasingly being populated automatically or by (otherwise intelligent) people who are not experts in the subject matter. If I look at 100 companies, I will probably be able to find 100 errors, some perhaps minor, in their data on the various data services. I can't speak for Accenture's IR, but I suspect that they don't have the time or desire to hunt down and correct every error. But perhaps they would care. Perhaps in the course of your conversation with them, when they are helping you understand their share count, you can point Yahoo's error out.

By the way, Yahoo Finance is free. You get what you pay for.

Why is Accenture's Market Cap Less Than Infosys'?

I'm staring at Reuters numbers right now and there are two share counts:
Total Shares Outstanding: 778.2
Diluted Shares Outstanding: 867.3

Mike, I am in AGREEMENT with you that Accenture's market cap is greater than Infosys, contrary to this article. That was my original argument, which the original writer has been vehemently denying. I'm also saying that your calculation is incorrect and that the correct Market Cap is closer to $36 billion based on 867 million shares.

Like I said, you did NOT check your numbers with Accenture investor relations as you claimed. Here's the number: 917-452-5106.

No Fiction, just the FACTS.

Why is Accenture's Market Cap Less Than Infosys'?

Mike, I call shenanigans on you. Name (initials to protect their privacy if you wish) the IR person you spoke with. I don't think you got 778 million from anyone in Accenture IR. That is something Reuters created and any service that uses Reuters data repeats. I've spoken with IR within the past three months (S.K.) and the 778 million is -- FACT -- incorrect.

Why is Accenture's Market Cap Less Than Infosys'?

Mike, I appreciate the attempt but this is in error also.

The 778 million is the sum of Class A and Class X, but Class X shares, despite being listed on the cover of the filings for regulatory purposes, do not count as tradable shares. They do not have voting rights or economic rights. Only the SCA Class-1 shares are convertable 1-for-1 in to Class A shares, which are the ones that freely trade. The SCA shares have full voting and economic rights.

Here's a clue for you all. Look at the income statement. At the bottom there is a line called Income before Minority Interest. That is how much money the company is making. The "Minority interest" that is then subtracted to arrive at net income represents earnings attributable to the 263 million shares that are represented by SCA and Accenture Canada shares. This minority interest is what has you guys confused. It is nothing but the collection of thousands of Accenture investors (mostly employees/retured employees) who own SCA or Canada shares. They are shareholders like anyone else except that there are certain distribution restrictions on their shares (that lift gradually over time). Accenture cannot control those shares. They can buy them back like any other share if they can convince the owners to sell.

Class X is nothing. It was used as a stub in the past for certain tax issues. Accenture has been aggressively redeeming them for $0.0000225 each to get them off the books (41 million retired in the February quarter alone).

Why is Accenture's Market Cap Less Than Infosys'?

Dan,
For accounting purposes the SCA Class-1 shares are considered minority interest (even though, as a class, they are not controlled by a single entity). This is what is tripping you up.

Answer this: If a private equity firm wished to acquire 100% of Accenture, how much would they have to pay (ignoring acquisition premium, etc.)? If you beleive that $24 billion is the right number, then you should start assembling a group of investor IMMEDIATELY! This would be the bargain of the century.

Dan, I will stay subscribed to this thread in case you have anything else to say, but until you check your facts by calling investor relations (they are there to help investors and analysts--even the sensible ones) or by speaking to an investment professional who knows Accenture's stock, I cannot keep banging my head against your wall of ignorance. I gave you the number above--they are quite friendly.

Why is Accenture's Market Cap Less Than Infosys'?

THE LAST LINE CLEARLY STATES THAT THE CLASS X SHARES DO NOT CARRY ANY ECONOMIC RIGHTS.

Look, Dan Menashi, you are showing a great deal of ignorance on this subject and I am embarrassed for you. Please do your homework. Call Investor Relations and ask for some help on this subject: 917 452 5106.

Why is Accenture's Market Cap Less Than Infosys'?

Yes, if Company A gives out 1 million more shares then the fully diluted number of shares outstanding will increase, thereby reducing the value of the stock.

Accenture does not OWN the SCA Class-1 shares. Those are already owned by third parties. They are ALREADY in the share count. Accenture cannot decide tomorrow to make those shares public -- they have no control over them.

I do agree that the share price could go down if all of the SCA shares were to suddenly go on the market tomorrow--that assumes that the owners (not Accenture) would want to sell all their shares tomorrow. But this assumption needs to be made about Infosys' shareholders too, in that case. Infosys management owns over 10% of their shares, Fidelity owns around 2%, etc. Should we be excluding all these shares since they are not "trading"?

Why is Accenture's Market Cap Less Than Infosys'?

Let's just deal with facts.
1) The number of shares outstanding are 867 million. This has NOTHING to do with Class X. Please refer to my post above regarding SCA Class I and Accenture Canada shares. These shares have voting rights and share equally in the economics of the company (including participating in dividends).

2) There is no "opinion" required in calculating "Market cap". This is a well defined investing term that is simply the stock price times the total number of diluted shares outstanding. The number of shares publicly traded is referred to as the "float" and it has absolutely no bearing on the quantitative value of a company.