By Harichandan Arakali
BANGALORE, April 12 (Reuters) - Indian software services
firm Infosys Ltd's stepped-up sales push, including a
willingness to sacrifice margins, is helping it win business and
halt its loss of market share to industry leader Tata
Until January, Infosys had turned in a string of
disappointing results as a strategic revamp took longer to pay
off than it had hoped. A spate of order wins, especially in
Europe, has since brightened the outlook for India's No. 2
industry player, lifting its shares by more than 25 percent.
Upbeat comments from company executives have also led
analysts to predict that Infosys will set a revenue growth
target of as much as 12 percent for the fiscal year that started
this month, roughly in line with expectations for the broader
"We saw clients telling us that they're suddenly seeing
Infosys much more active, you know, much more calls, much more
executive visibility," said Sudin Apte, CEO of Offshore
Insights, an outsourcing advisory firm.
For about two years, Infosys, a bellwether of India's $108
billion IT services sector, had been losing market share to more
aggressive rivals such as industry leader Tata Consultancy
Services Ltd (TCS) and No. 4 HCL Technologies Ltd
The rough patch was caused in part by the challenge of
implementing its "Infosys 3.0" push for revenue through the
development of its own software platforms, to differentiate its
services from those of its competitors, amid sluggish demand
from clients in its core western markets.
Infosys is expected to report flat March-quarter profit
later on Friday.
Critics also complained that Infosys was obsessed with
preserving margins and needed to focus more on selling.
Infosys's margins, long the best in the industry, tumbled to
25.7 percent in the December quarter from 31.2 percent a year
earlier and lagging those at TCS. Its renewed focus on sales is
reflected in a 14 percent surge in sales and support staff over
the nine months through December. Over the same period, Infosys
grew the ranks of its software professionals by just 3 percent.
Infosys beat expectations with its earnings report in early
January, and since then its shares are up 25.5 percent, topping
the industry index's rise of 18.6 percent.
On Friday morning the company is expected to report March
quarter net profit of 23 billion rupees ($421 million), little
changed from a year earlier, while revenue is expected to have
risen 21 percent to 107 billion rupees, according to the average
of 18 analyst estimates on Thomson Reuters I/B/E/S.
In dollar terms, Infosys has estimated a 6.52 percent rise
in consolidated revenue for the fiscal year just ended to at
least $7.45 billion, lagging 10.2 percent growth seen for the
Industry lobby National Association of Software and Services
Companies in February forecast 12 to 14 percent growth for the
Indian IT sector in the fiscal year that started this month, and
several analysts expect Infosys's revenue in dollar terms to be
roughly in line with that.
During the March quarter, Infosys inked a five-year order
from BMW AG to revamp and manage a large part of the
German carmaker's software applications, computer storage
networks and systems.
Ambit Capital analyst Ankur Rudra said the BMW deal and
another from motorcycle maker Harley-Davidson Inc
include a significant amount of rebadging, or bringing a
client's staff onto the Infosys payroll.
"Deals with rebadging tend to come at lower margins. We also
note that management is comfortable with rebadging and there
could be several unnamed deals of this nature," he said.
(Editing by Tony Munroe and Chris Gallagher)