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Business News/ Companies / Impact of spending slump will be widespread, says Infosys
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Impact of spending slump will be widespread, says Infosys

Impact of spending slump will be widespread, says Infosys

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Bangalore: India’s largest computer service provider by market value, Infosys Technologies Ltd, said a slump in orders from financial clients will probably spread to retail and manufacturing customers.

“The impact is going to be widespread," chief executive officer S. Gopalakrishnan, 53, said in an interview on Thursday at the firm’s headquarters in Bangalore. “The most difficult part is we don’t know when stability will come."

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b5e4f7f4-9c61-11dd-b687-000b5dabf613.flvMicrosoft Corp. chief executive officer Steve Ballmer had said last month that the global credit crunch will discourage corporations from investing in computers and related services.

Gartner Inc. said this month technology spending growth may slow to 2.3% next year, less than half the research firm’s previous projection.

“Right now, what they are dealing with is the shock of contraction," Phani Sekhar, a Mumbai-based fund manager at Angel Broking Ltd, overseeing Rs65 crore in Indian stock investments, said in a telephone interview on Friday. “When corporate planners begin to integrate cost-cutting into their business models, that is when the turnaround will happen."

Infosys, which counts Citigroup Inc. and Bank of America Corp. as customers, generated one-third of its revenue from financial companies last quarter.

Manufacturing and retail customers include Daimler AG, Cummins Inc. and Sears Holdings Corp.

Infosys, which cut its earnings forecast last week, is repeating a client spending plan survey because the deterioration in the financial markets in the past month has rendered the company’s previous one irrelevant, added Gopalakrishnan.

Financial companies are reeling from a global financial crisis that led to the downfall of firms, including Lehman Brothers Holdings Inc., Merrill Lynch and Co. and Bear Stearns Companies Inc. Wall Street may lose as many as 35,000 jobs in two years as the impact of the credit freeze spreads, New York city comptroller William Thompson’s office said this week.

The proportion of Infosys’ revenue contributed by banking and financial services clients declined to 33.4% during the quarter ended 30 September, compared with 36.5% a year earlier.

Clients in the industry say “we don’t know what is happening, what is the situation, what is our situation and so we are not ready to discuss", Gopalakrishnan said.

Infosys has fallen 23% in the past three months, the fourth largest contributor to the benchmark Sensex’s 23% drop during the period.

Tata Consultancy Services Ltd, Infosys’ only bigger Indian rival by revenue, has declined 41%.

Infosys share lost 5.06% on Friday to close at Rs1,202.55 on the Bombay Stock Exchange, against a 5.73% fall in the Sensex.

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Published: 18 Oct 2008, 12:55 AM IST
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