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Outsourcing Companies Check-In With Results

|Includes: Accenture plc (ACN), G, INFY, PTI-OLD, WIT, XRX

By Audrey B.

Numerous outsourcing companies released results following the end of the quarter, with Accenture (NYSE:ACN) leading the pack.  It was currency volatility, problems in Europe, and attrition which were some of the major issues that were raised with the release of results.  The general flavor in the outsourcing space has been that business in outsourcing is steadily on the rise with business process outsourcing and IT outsourcing coming into major play, with the big winners being Indian companies, Tata Consultancy Services Ltd (NSE:TCS), and HCL Technologies (NSE:HCLTECH), as well as company Xerox Inc (NYSE:XRX).

Management consulting, technology and outsourcing company, Accenture, was the first of its peers to release results on the 24th of June.  The company reported 3Q Fiscal 2010 Results period ending May 31, 2010.  Accenture did not disappoint analysts after reporting higher than expected quarterly results, rising 8% in revenue compared to the previous year, above analysts’ expectations.

As the first of its Indian outsourcing peers, expectation was high for Infosys (NASDAQ:INFY); unfortunately the company failed to deliver, and released disappointing results for the quarter on the 13th of July.  The company posted a 2.6% drop in profit to $318 million.  The company’s CEO, S. Gopalakrishnan however, was quoted saying that, “while the global economic environment remains uncertain, we continue to see greater demand for services from our clients.” A number of economic and operational difficulties however, have affected the company’s performance, bringing its results down to less than stellar.

So soon after Infosys released its results on the 15th of July, Tata Consultancy Services came out with its own results, inviting comparisons between the two companies. It didn’t help that TCS reported better than expected results, reporting a 21.3% rise in net profit to $394 million, and a 6.4% sequential growth in dollar-term revenue.  A day later on the 16th of July, TCS officially became Asia’s most valuable software company.

IBM (NYSE:IBM)meanwhile disappointed markets posting on the 19th of July only a 2% increase in revenue as compared to a year ago, although the company did report a 9% increase in income.  IBM also reported a 19% fall in the value of outsourcing contracts and a 12% fall in the value of servicing contracts.

India’s third biggest software services and outsourcing provider, Wipro Technologies (NYSE:WIT), released results for its first fiscal quarter ended June 30, 2010 on the 22nd of July alongside Xerox, Inc.  Wipro posted quarterly profits ahead of analysts’ estimates, reporting growth of 30.5% in net profit over the corresponding quarter a year ago.  Meanwhile, Xerox managed to beat street estimates upon the release of the company’s higher than expected second quarter results.  The company attributed the results to increase in demand for printing as well as outsourcing services.  Net income of the company rose $227 million from $140 million from a year ago.

Both Genpact Limited (NYSE:G)and Patni Computer Systems (NYSE:PTI) released results on the 28th of July.  Genpact saw its net income dip to 6% or $27.8 million, when the company released its Q2 results.  The company cited higher operational costs and the effect of transitional deals which impacted the company’s income.  Also coming into play is the impact of currency volatility, which was at about $3.5 million for the quarter.  Patni in the meantime also released weak results for its second quarter.  The company reported a 7.3% increase in its net profit, thanks in part to a foreign exchange gain, but the company’s revenues missed analyst expectations, posting revenues of $167.6 million down its estimate of $172 million.

Last on the list is Indian company, HCL Technologies, who released better than expected results on the 29th of July.  The company announced that its global revenues increased by 24.1% to $2.7 billion for the full year, with a 9.3% sequential growth in business volumes within the IT segment, higher than reports of its peers, TCS, Infosys and Wipro.

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