Infosys signals 5% revenue decline this year

(By Anthony Miller – Wednesday, 15th April 2009 9:00am). After a decade (perhaps more – my records only go back to 1999) of uninterrupted growth, Infosys has called its first annual revenue decline, 5%, in its current FY (to 31st March 2010). What’s more, Infosys expects EPS to fall 13%, another unfortunate ‘first’.

In fact, Infosys just missed its Q4 top line guidance this year, which left annual revenues a little shy of target, but nonetheless the 12% growth to $4.66bn is not exactly a bad result! With the help of a weak Rupee, Infosys boosted FY operating margins by 50bps to 29.5%. However, margins in Q4 fell 170bps to ‘only’ 29.4% as customers squeezed pricing another 3%.

There’s some interesting stuff in the results announcement which caught my eye. For example:

• the sale of its Finacle banking package to a UK financial services customer replacing incumbent systems


• a BPO shared service with ‘value-based pricing’ sold to a recruitment firm


• SaaS as a ‘new engagement model’


• ‘tightened’ performance management system (i.e. employees have to jump over a higher bar to keep their jobs)
  
• no salary increases this year.
  

As ever, I will be tuning in to today’s concalls to find out more.

As the bellwether for the Indian offshore services sector, Infosys sets the tone for the rest of the major players. TCS and Wipro report next week. Satyam – who knows, but Tech Mahindra (and indeed the global IT services sector) can’t be feeling too comfortable about Infosys’ view on the market.

We may be at or near the bottom (see "Industry at a new baseline?"), but even if so, there will be a considerable lag before that filters through to services market growth. In our MarketViews report (Feb. ’09), we forecast the UK SITS market will contract by 1% this year, but since then UK GDP estimates have got grimmer. No time for celebration just yet.