* Third-quarter adjusted earnings $0.46/share vs est $0.37
* Third-quarter revenue $271.1 mln vs est $277.2 mln
* Contract renewal delays clouding outlook
* Shares jump premarket on result, but retreat after warning
By Sruthi Ramakrishnan
Oct 12 (Reuters) - Outsourcing company iGate Corp
posted a higher-than-expected quarterly profit as margins
increased, but warned clients were delaying contract renewals
and it had dropped a "relatively large" client in the third
IGate shares jumped 9 percent premarket after the company
said its third-quarter profit had doubled, but fell back sharply
after it updated its outlook on a conference call. They are flat
at $17.75 in morning trade on Friday on the Nasdaq.
The company was growing but lagged peers, especially
considering its acquisition last year of a large Indian
outsourcing firm, Patni Computer Systems, Noble Financial
Capital Markets analyst Vincent Colicchio said.
The company's third-quarter revenue rose 2 percent to $271.1
million, but lagged analysts' expectations of $277.2 million.
"They beat earnings on good cost management, but I think the
rationale of the acquisition was to improve revenue growth
momentum. (We) have not really seen that yet," he said.
Business outsourcing, especially in retail, finance,
manufacturing and healthcare, has been growing as companies seek
to cut costs.
IGate, which has most of its operations in India, said net
income doubled to $28.3 million, or 27 cents per share, in the
third quarter from $14.3 million, or 10 cents per share, a year
Excluding items, iGate earned 46 cents per share, beating
analyst expectations of 37 cents per share, according to Thomson
IGate said economic weakness was behind the delays in
contract renewals that were a cause of concern.
"Decision making cycles are a little longer than what we had
anticipated but more importantly, contracting cycles are taking
a lot longer than what we had anticipated, even if the decisions
are made," Chief Executive Phaneesh Murthy said on a conference
IGate said it won two $100 million-plus deals in the third
"If you look at the size of deals we are winning, we do
anticipate that next year will be a better year. How much of a
better year, is really very difficult to call now," Murthy said.
The company said revenue in the current quarter will be hit
by the loss of a mortgage services client that had been spending
about $4.5 million per quarter, although it added that the
business had "zero margin."
The Fremont, California-based company, which also develops
software, said volatile currency rates remain a cause for
India-based rival Infosys Ltd reported a 24
percent rise in profit for the quarter ended September on
Friday, but cut its full-year earnings forecast, citing concerns
about currency market volatility.