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Infosys sees no quick revival in US demand

Nasdaq-listed Infosys Technologies Ltd, one of India's biggest software companies, does not expect a quick recovery in demand from the slow US economy.

The United States is India's top market for its fast-growing software services, accounting for more than 50 per cent of exports in this sector.

In an annual report filing to the Securities & Exchange Commission, Infosys said it would be difficult to increase billing rates and forecast an uncertain future in the near term.

"As self-preservation and prudence descend on the US industry, the near-term demand outlook for IT services is not as rosy as in the boom years," it said in the filing on May 4.

Bangalore-based Infosys, with an army of about 9,000 software engineers, caters to high-flying global clients, including Cisco Systems Inc and Nortel Networks Corp.

"We believe that increasing billing rates will be a challenge in the current environment and expect the majority of our 2001-2002 growth to come from increasing business volumes," it said.

Infosys' comments come after last month's warning that its revenue growth would slow to 30 per cent this year from an average of about 90 per cent in each of the past four years, due to the slowdown in the United States.

The company last month said it was not facing a cut in its billing rates.

With many US-based IT services players facing extinction and cost emerging as a key factor for firms, Infosys said the high quality of Indian software services could help consolidate its global share in this sector.

Share underperforms index

In early trade on Thursday, Infosys shares were down 1.87 per cent at Rs 3,785, while the Bombay Stock Exchange Sensex was down 0.51 per cent.

The share has underperformed the benchmark index, falling 46 per cent from its 2001 high of Rs 6,988 on January 22, while the index has lost about 16 per cent over the same period.

North America accounted for 73.5 per cent of Infosys' revenues the past financial year compared with 78 per cent the previous year. Infosys added 122 clients in the past year, boosting its total to more than 270.

Analysts had previously warned about the effect of a slowdown in spending by global telco firms, many of which are Infosys' clients and have fuelled its dizzy growth rates.

Nortel Networks (India) country head said in an interview last month that Nortel will hold expansion in software development by Indian vendors but will not cut back existing work.

Positive medium term outlook

Infosys expects the outlook for IT services to be positive in the medium-term.

"Despite the current venture funding environment, we believe that select high-quality ventures will continue to push the technology envelope and will need strong IT partnerships to achieve their vision," the company said.

It plans to spend $80 million on capital expenditure this financial year against $96.8 million a year ago. It said it will add between 1,500 to 2,000 employees in the current year.