Bangalore: Cognizant Technology Solutions Corp., a US-based information technology company that carries out bulk of its operations from India, has forecast its revenue to grow more than a third in 2008, allaying fears of a possible impact on software services vendors due to a likely cut in technology spendings by US firms.
Cognizant expects 2008 revenues to grow 38% to $2.95 billion (Rs11,682 crore) compared with $2.13 billion it grossed in 2007. Last year’s revenues were 50% more than the $1.42 billion it reported in 2006. Net profit for 2007 grew 50% at $350 million from $232.8 million a year ago. Nasdaq-listed Cognizant follows a January-December fiscal year.
Net profit for the December quarter grew 38% to $96.3 million against $69.5 million a year ago, while revenues were up 41% at $600 million. Sequentially, revenues grew 7% and included $5 million from marketRx, an analytics firm it acquired during the quarter for $135 million.
Reacting to Cognizant outlook, Indian software stocks rebounded on Friday on the Bombay Stock Exchange (BSE).
The BSE IT Index rose 4%, while the benchmark Sensex was down 0.35%. Tata Consultancy Services Ltd (TCS) gained 2% to end at Rs 899.95, while Infosys Technologies Ltd rose 5% to 1551.35 and Wipro Ltd gained 3% to close at Rs422.45. The three are India’s top software exporters. Among other IT stocks, Satyam Computer Services Ltd and HCL Technologies Ltd gained 5% each to close at Rs410 and Rs257.75, respectively.
“In the short term, the IT stocks will outperform till April, when companies such as Infosys forecast their projections for FY09,” said Harit Shah, equity analyst at Mumbai-based Angel Broking Ltd.
Shah said the results allayed the apprehensions on the outlook for the IT sector for an year at least and has set expectations that revenue forecast from companies such as Infosys for fiscal 2009 will be good.
Despite declaring better-than-expected results, IT exporters such as TCS, Infosys and Wipro said outlook for the fiscal year ahead will be clear only after clients firm up budgets, that were delayed due to recessionary trends induced by the credit crisis in the US, the largest IT market.
In January, the world’s largest IT services firm, International Business Machines Corp., said revenues will grow 15-16% for 2008, putting to rest fears that the cut in technology spends due to a weakening US economy would curb the sector’s growth. Accenture Ltd said in December that its revenue will grow 9-12%.
“Strong growth across business segments, service offerings and investments in regions such as Europe and Asia Pacific are paying off,” said R. Chandrasekaran, president and managing director, Cognizant.
Revenues from Europe almost doubled, accounting for 18% of the total revenues.
Cognizant expects IT budgets of clients to stay flat or grow marginally in 2008. “The interest in offshore adoption is on the rise and we expect our clients to offshore more work,” Chandrasekaran said.