IGate posts strong Q4 earnings, warns of softness ahead

IGate posts strong Q4 earnings, warns of softness ahead

Bangalore: Software company iGate reported a forecast-beating quarter on strong margins, but warned of a soft first quarter, echoing similar worries voiced by India’s No.2 software exporter Infosys Technologies a week earlier.

“The first quarter will be a much, much softer quarter than last year’s first quarter," iGate chief executive Phaneesh Murthy, a former sales head at Infosys, told Reuters.

He said IT budgets could come under pressure as businesses adopt a wait-and-watch attitude but added that the softness may help check attrition rates, a major concern for Indian IT companies.

IGate’s attrition rate fell 1%, sequentially, to 19% in the October-December quarter.

The company’s results follow a mixed bag of earnings from India’s $60 billion outsourcing sector. While Infosys reported a weak profit, top exporter Tata Consultancy Services beat forecasts with a 30% rise in profit.

Fremont, California-based IGate, which recently sealed a $1.2 billion deal to buy a majority stake in India’s Patni Computer Systems in a bid to take on bigger rivals in India’s export-driven IT services industry, expects the deal to close in the first half of 2011.

IGate, which competes with Cognizant Technologies and Genpact Ltd, expects the acquisition to add to its adjusted earnings by 2012 and take the combined company close to $1 billion in revenue.

An integrated company with a Nasdaq listing is the most preferred option, Murthy said.

For the fourth quarter, iGate earned 34 cents a share, beating estimates of 26 cents a share, according to Thomson Reuters I/B/E/S..

Sales jumped 55% to $81 million, with gross margin rising to 42.7% from 40.6% last year.

IGate shares, which have shed about a fifth of their value over the last one month, closed at $16.26 on Tuesday on Nasdaq.