Bangalore: Wipro Ltd missed estimates with a 1.2 per cent rise in quarterly net profit on Wednesday, joining its rivals in giving a muted forecast due to deteriorating global economic conditions.
The company forecast its IT services revenue this quarter would rise to $1.12 billion, barely ahead of its July-September revenue of $1.11 billion.
"The global economic environment has deteriorated significantly over the past couple of months and our outlook is cautious in the near term, given the strain on the global economy," its Chairman, Azim Premji, said in a statement.
"However, we are confident of the resilience of our business model to tide over these challenging times."
Shares in the company opened lower on the BSE after the news, but slipped nearly 4 per cent lower to Rs 283.
Wipro's earnings follow results of Infosys Technologies and Satyam Computer Services, with both companies cutting their revenue forecasts for the year to March due to the growing economic uncertainty.
Tata Consultancy Services may post a 10 per cent rise in quarterly profit to Rs 1,374 crore later in the day.
Top companies Wipro and Infosys make more than half their sales in the US, where the financial services industry has been hard hit by the credit crunch.
Wipro, which offers IT solutions such as system integration, software application development and back-office services, said net profit rose to Rs 822 crore ($168 million) in its fiscal second quarter ended September 30, from Rs 812 crore a year ago under US accounting rules.
The Chief Financial Officer, Suresh Senapaty, said although the company has not seen outsourcing project cancellations so far, decision making by clients is getting delayed.
"It has moved from the Wall Street to the main street," he said of the global financial turmoil. "The overall economic situation does not look good. I think it will take more time for it to stabilise."
A Reuters poll had forecast a mean net profit of Rs 854 crore for Bangalore-based Wipro, which counts telecoms gear makers Cisco, Credit Suisse, Nortel and Nokia Siemens Networks among its clients.
Revenue rose 36 per cent to Rs 6,410 crore, as its IT services business added 28 clients during the quarter. It got 69.4 per cent of the revenue from the US market in the quarter.
Analysts say the global economic downturn and spreading financial crisis will curb outsourcing demand from overseas clients and put more pressure on prices.
"Demand environment is challenging and the numbers of these companies reflect that," said Dipesh Mehta, sector analyst with Khandwala Securities. "I don't expect it to turnaround very quickly."
Suresh Vaswani, Wipro's co-chief executive, said although the overall pricing environment was stable, the Bangalore-based company was seeing pricing pressure from some of its customers.
Last week, research firm Gartner said information technology spending could rise only 2.3 per cent in 2009, hitting $3.5 trillion with businesses cutting back budgets as the economic crisis spreads.
It had previously forecast corporate spending on hardware, software, telecommunications goods and technology services would grow 5.8 per cent next year.
Shares of Wipro, which also has interests in computer hardware, consumer products and lighting, fell 22.4 per cent in the quarter, in line with a drop in the sector index.