Infosys may trim forecast again as U.S. clients cut back

Mon Dec 17, 2012 2:44am EST
 

By Harichandan Arakali

BANGALORE (Reuters) - Infosys, India's No. 2 software services provider, may cut its revenue forecast next month as U.S. business clients defer spending and balk at signing big deals.

The outsourcing icon, which has missed its own revenue guidance in three of the past four quarters, has struggled as its big customers cut costs, and analysts have criticized management for sticking with a rigid pricing policy when competitors have offered more flexible plans.

Infosys executives have sounded downbeat in recent interviews and in meetings with analysts, citing client troubles ranging from Hurricane Sandy-related shutdowns to worries about the U.S. "fiscal cliff" of tax hikes and spending cuts.

"From what they've been saying in various conversations, it's not unlikely that they will cut guidance," said Ambit Capital analyst Ankur Rudra, who has maintained a "sell" rating on Infosys shares since January 2011.

An Infosys spokeswoman declined to comment, noting that the company is in a mandatory quiet period ahead of its earnings results due in January.

With about 60 percent of its business in the United States, Infosys is particularly vulnerable to swings in U.S. corporate sentiment and has been hit hard by spending deferrals.

Diviya Nagarajan, an analyst at UBS, wrote in a December 6 note to clients that the company's growth forecast for the fiscal year ending in March could be under threat because of cutbacks on large projects and delays in closing deals.

UBS organized an investor meeting on December 6, featuring Infosys Chief Executive Officer S.D. Shibulal.   Continued...

 
Employees of Indian software company Infosys walk past Infosys logos at their campus in the Electronic City area in Bangalore September 4, 2012. REUTERS/Vivek Prakash