Wipro net up 12 percent but IT revenue declines

Bangalore: India's third largest IT bellwether, Wipro, remained profitable in the first quarter this fiscal despite marginal revenue decline in its global IT services business sequentially and annually.
Even for the second quarter, revenue from its flagship IT services business is expected to remain flat in the $1.03-$1.05 billion range, as against the $1.03 billion garnered in the first quarter this fiscal, but still less than the $.1.11 billion earned in the corresponding quarter last fiscal.

According to the company's financial statement for the quarter under review, net profit grew 12 percent year-on-year to Rs.10.16 billion (Rs.1,016 crore), while consolidated revenue increased 5 percent to Rs.62.74 billion (Rs.6,274 crore) as per the Indian accounting standard.

Under the International Financial Reporting System (IFRS), net income grew 13 percent to $212 million, while total revenue jumped 5 percent to $1.31 billion.

"Revenue from our global IT services business at $1.03 billion in the first quarter is a decline of 1.3 percent sequentially and 3.3 percent year-on-year," said Wipro chief financial officer Suresh Senapaty Wednesday.

The projected guidance for the second quarter this fiscal, in the range of $1.03-$1.05 billion, will be a decline of 3.4-1.7 percent on constant currency basis and down 6.7-5.1 percent on reported currency.

The dollar depreciated from Rs.44.78 to Rs.48.23 during the last 12 months.

In constant currency, IT services revenue for the first quarter at $1.01 billion is a decline of three percent sequentially, but a growth of 2.1 percent year-on-year, Senapaty said.

The company's IT products business grew marginally by 2 percent to Rs.7.6 billion (Rs.760 crore) from Rs.7.5 billion (Rs.746 crore) a year ago.

"We are starting to see the first signs of stability in the business as ramp downs start to taper off and volumes start to stabilise. We expect revenues from our IT services to be in the range of $1,035-1,055 million in the second quarter," Wipro chairman Azim Premji said in a statement.

The company's consumer care and lighting revenue grew by 9 percent to Rs.5.46 billion (Rs.546 crore) from Rs.5.13 billion (Rs.513 crore) a year ago.

"We are adapting to the new reality with investments in value creation, go-to-market and driving significant operational productivity," Premji said.

Though the IT services business division added 26 new clients in the first quarter, the number of active clients declined to 830 from 863 sequentially and 928 in the same quarter a year ago.

"Even as the business environment remains challenging, we improved on several operating parameters to deliver margin expansion of 0.6 percent to 22.3 percent in the IT services segment," Senapaty pointed out.

On the hiring front, the company made a net addition of 711 employees. As a result, the total number of engineers for its IT services business division has gone up to 98,521 from 97,810 a quarter ago and 95,675 a year ago

Tech Mahindra Q1 net plunges 49 percent y-o-y

Silicon India
Bangalore: IT firm Tech Mahindra reported 49.08 per cent plunge in net profit at Rs.131.62 crore for the quarter ended June 30, 2009 owing to the interest costs on borrowings the company incurred after acquiring Satyam.

Tech Mahindra, which recently acquired 42.7 percent stake in Mahindra Satyam, had a net profit of Rs 258.52 crore in the June quarter of last fiscal. Total income of the company fell five percent to Rs.1,086.88 crore during third quarter, from Rs 1,142.50 crore in the year-ago period. On a quarter-on quarter basis, the company's net profit dropped 43 percent from Rs.230.40 crore in the March quarter of FY'09.

As of June 30, 2009, the company's debt stood at Rs 2,380.2 crore. Vineet Nayyar, Vice Chairman, Tech Mahindra said, "This has been a momentous quarter which has redefined Tech Mahindra's positioning in the market place. Not only has our leadership position in telecom been reinforced, but our presence has expanded across other industry verticals as well."

India to be among top three mobile-net nations: Google

Silicon India
Bangalore: According to the internet search giant Google, India is likely to be among the top three markets with highest number of mobile internet users in less than two years.

"Factors like affordable smartphones, cheaper telecom data plans and customized applications have doubled India's mobile internet users, reaching to two crore over the past year," informed Vinay Goel, Country Head, Products, Google India.


"When I came to India two years back, I thought none of the applications Google has invested in will work in the country. With the launch of 3G services enabling better bandwidth, India could be among the top three countries with maximum mobile Web users by end of next year, ahead of U.S. and Japan," said Goel.

Currently India is among the top 10 markets in the world behind countries like China, U.S., Japan, Germany, U.K. and France. The company is entering the spheres of web based applications like voice search, maps and social networking, as Google owned Orkut has a strong presence in India

Job security concerns rise in India

Silicon India
Bangalore: A survey conducted by a research firm reports that 52 percent of people, who were surveyed last month, say that there has been decrease in Job security. "In the June survey, approximately 52 percent of surveyed respondents observed (compared to 12 months ago) a decrease in job security compared to 48 percent in the May survey," according to Boston Analytics' monthly Consumer Confidence Survey, Press Trust of India (PTI) reported. The survey was conducted on 10,000 respondents across 15 Indian cities, including Delhi, Mumbai, Kolkata and Chennai.

The survey further claimed that the job market in India has been sending some mixed signals in the recent months. Sentiment related to job security on an observed basis has fallen again in the last month, reaching its lowest level since August 2008.

Sectors such as information technology, construction, aviation, financial services and real estate, which contributes to almost nine percent of the nation's GDP growth also faced severe cutbacks. While export oriented sectors like gems, jewelery, textiles and leather has also seen large scale layoffs due to global economic crisis.

However, many companies are optimistic that business condition and domestic demand to grow will improve soon. "On the expectations front, about 22 percent respondents (surveyed last month) feel unemployment will decrease in the next 12 months compared to 19 percent in the May survey," Boston Analytics said.

Sectors such as FMCG, food and beverages, banking, retail, energy, infrastructure, and pharmaceuticals have started hiring more people. About 24 percent respondents observed a decrease in unemployment in June compared to 21 percent in the previous month.

The most positive factor pointed out by survey is the growing optimism. "Positive sentiment about the nation's macro-economic outlook has translated into optimism about creating alternative means of employment," survey said. About 43 percent respondents felt it would be easy to create alternative means of employment in the event of a job loss

Siemens lays off 128 Indian employees

Silicon India
Bangalore: IT firm Siemens Information Systems (SISL), has laid off 128 employees from India, as part of its cost cutting measure. "As a part of our cost-cutting initiatives, we have released 128 employees from one of the business units," said a SISL spokesperson to Economic Times. He commented on the claim by The IT-ITES union UNITES India, who said that the number of employees laid off by the company is as high as 500. The union further claimed that Siemens is laying off its employees in Bangalore, violating the Industrial Dispute Act.

SISL is the Indian subsidiary of the giant German multinational Siemens AG. SISL has over 5000 employees in India, out of which 3000 are in Bangalore and the rest are spread across in Mumbai, Chennai, Delhi, Gurgaon, Kolkata, Pune and Secunderabad.

In an email to Deccan Herald, a SISL spokesperson said that due to unfavorable market conditions and the global economic slowdown, they were forced to take this action. "The System Development and Engineering (SDE) business unit of SISL, delivering software engineering services to external customers has been under cost pressure, necessitating it to realign and optimize its processes, as well as resources for attaining business sustainability. Consequently, the company has launched a series of initiatives to reduce its cost base, which included the release of over 100 employees from the SDE business unit," he added.

The laid off employees were in a state of shock. Many of them were recently recruited and were entry-level software engineers. "I don't know how to tell my parents and wife that I have lost my job. My dreams are shattered," said one of the laid off employee.

SISL says that they have compensated the employees affected higher than their contractual terms. While many employees claim that they have just been told verbally about compensation, but nothing has been paid so far.

"As the sole representative entity for workers in the IT and ITES establishments, we condemn Siemens for firing its employees and violating Section 25-F of the Industrial Disputes Act," said Karthik Shekar, General Secretary, UNITES. Shekhar further added that the figures provided by the company does not include the number of employees who were on contract. He claims that in the last one month, the company has laid off more than 128 employees.

In December last year, National Association of Software and Services Companies (Nasscom) had predicted that the IT industry will continue to be a net hirer in financial year 2009. But things are not looking very bright for the IT sector and software engineers' jobs might not remain safe in the short and medium terms.

90 percent Indians believe mobiles change work-life

Silicon India
Bangalore: At least nine out of ten Indians feel that the growth in mobile communications have enhanced productivity and transformed their work-life balance. More than 90 percent of Indian respondents say mobile communications technology such as smartphones and laptops have boosted personal productivity and, for many, transformed their work-life balance, as per a study.
The study Kelly Global Workforce Index maintains that 83 percent of Indians believe that their ability to work outside office and yet network and remain in touch is a positive development, although it meant working longer hours.

"Many employees now have the capacity to work from home or away from the office, at any hour of the day, and this is proving positive for productivity and work-life balance. Even though some are working longer hours, this is largely offset by the greater freedom and flexibility of the virtual workplace," said Dhiren Shantilal, Senior Vice President of Kelly Services, Asia Pacific.

A sound work-life balance is now a big priority, especially among the younger generation, in the age group of 18-29 years, the survey said. Gen X, between 30-47 years of age, is most attracted to telecommuting or working from home and working remotely. Baby boomers, who are between 48-65 years, are least happy.

But this does not mean that new technologies have not spread productivity benefits across all generations. 72 percent of the respondents said that productivity was much better.

"Employers who use technology to enhance working arrangements are also likely to reap productivity benefits and to be seen as employers of choice," said Shantilal. Around one lakh people from 34 countries were surveyed for the Kelly Global Workforce Index. Nearly 5000 were from India.

Budget upsets the market; Industry reacts strongly

Silicon India
Bangalore: After staying positive after opening on the budget day, the markets went into the red once Finance Minister Pranab Mukherjee presented the budget in the parliament. The market sentiment was
affected by the budget outcome and the Sensex ended the day at 14043.40 points plunging by 869.65 points.

The disappointment in the market is reflected in the reactions by some of the market players. "The market had huge expectations from the budget. Therefore post the 17 percent rise in one day post the election results, the markets are now correcting in line with the operating fundamentals," says Saurabh Nanavati, Chief Executive Officer, Religare Mutual Fund.

Financial expert Udayan Mukherjee said moneycontrol.com that markets were spooked mainly because of two reasons. One, the fact that fiscal deficit is seen at 6.8 percent versus 6.2 percent in the interim budget. And secondly, the hike in Minimum Alternate Tax (MAT) to 15 percent from 10 percent. There is nothing on fuel policy and there is nothing on FDI. These were things that the market was expecting some kind of announcement on and that has not come.

According to Mukherjee, there has been nothing on the banking sector, insurance, and even on housing finance sops. Stocks like HDFC, ICICI Bank, SBI are the ones which have taken a key knock post budget. Many of the sectors which had gone up like education, aviation, real estate hoping for sops have got knocked back, so stocks like NIIT and Unitech have sold off quite a bit post budget.

Ramesh Damani a member of Bombay Stock Exchange (BSE) says, "I think we were looking for the three Ds--disinvestment, decontrolling and deregulation and I was disappointed. There was no vision; there was no intellectual architecture from this budget." Vallabh Bhanshali of Enam Securities, told CNBC-TV18, it was a great stimulation budget. "I think it is a politically shrewd budget. I want to compliment the finance minister for the pragmatism that he has shown."

Though, Gaurav Dua, Head Research of Sharekhan is also disappointed with the budget, but he feels, specific measures to enhance investment in infrastructure and boost domestic consumption through lower tax burden is a good move. Overall, the focus continues to remain on stimulating economic growth in spite of further deterioration on fiscal front, adds Dua.

IT majors reduce billing rates by almost 40 percent

Silicon India
Bangalore: In move to reduce the burden on their clients due to recession, IT majors are cutting down on their billing rates by almost 35-40 percent. According to analysts, the billing rates have touched the lowest ever rates at $16 per hour and they predict that this will continue till first quarter of 2010

Avinash Vashisth, Chairman and CEO, Tholons, an offshore advisory firm says, "Last month has seen unprecedented cut in billing rates even for existing customers." According to Vashisth, large testing services, and of services of similar value, $16-20 is the prevalent rate. These rates are almost 30-35 percent lower than the rates being charged earlier this year and steeper than the 20 percent cut that British Telecom had demanded from Infosys and Tech Mahindra earlier this year on some old and new projects. Also higher-end projects like SAP have faced pricing cuts of around 25 percent, which is again more than what it was earlier this year.

According to The Economic Times, top IT firms are offering such rates in the form of introductory discounts for new clients, and for a year or two for existing clients. Another worrying factor for the IT firms is that despite the rate cuts, there has not been a corresponding rise in the volume of deal flow, in either highervalue or the lower end services.

Diptarup Chakraborti, Principal Analyst at Gartner, says that he does not see the situation improving before Q1 or Q2 next year. "Good old days are not coming this year for sure," Chakraborti said. A Gartner study says prices of IT services in outsourcing are anticipated to shrink well up to 2010 due to an uncertain economic climate, IT budget constraints and general market consciousness.

HCL CEO says American tech grads are 'unemployable'

Silicon India

Bangalore: HCL technologies' Chief Executive Vineet Nayar recently said that American tech graduates are basically 'unemployable', according to an InformationWeek report. He says that he views American tech grads as inferior to those from India, China and Brazil. American tech students only enter the field to get rich or to dream up the next big thing while students from India and China are willing to handle even the boring part of the industry, ITIL and Six Sigma.

Several months ago few western CEO had claimed that even though India produces second largest number of engineers in the world, more than half of them are unemployable. They also say that Indian graduates are smart, driven and they work for a pittance compared to their Western counterparts but lack critical thinking and creativity and function like robots.

Nayar has responded back to such claims as he feels that Americans are too costly to train as compared to Indian graduates who are highly trained in real life applications because they attend vocational courses and have hands on experience. HCL, however, has recently announced that it plans to open a delivery centre in North Carolina with an investment of $3.2 million and will hire over 500 employees over the next five years under a U.S. Job Development Investment Grant.

These remarks from Nayar have already created quite a few controversies. InformationWeek's Robert Preston wrote: "Imagine if the CEO of a U.S.-based tech company marched into Mumbai seeking a bigger share of the country's multibillion dollar market and declared the locals to be unemployable and un-trainable. A culture of innovation isn't inconsistent with one that values attention to detail." Few websites have taken this to extreme. A protectionist web site JobDestruction.com has sent email newsletter which says, "HCL hires Indians almost exclusively, so it's safe to assume that Nayar's disparaging comments don't just apply to our young college graduates. He thinks ALL Americans are unemployable."