The Wall Street Journal-20080122-Wipro Posts 11- Rise in Profit- Expects Pressure on Margins
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Wipro Posts 11% Rise in Profit, Expects Pressure on Margins
BANGALORE, India -- Wipro Ltd. said that fiscal third-quarter net profit rose 11% on strong outsourcing orders, but it expects pressure on its operating margin this quarter.
India's third-largest software exporter by sales said its business is strong in the U.S., its main market, though Chief Financial Officer Suresh Senapaty said some clients are facing pressure to cut costs.
Larger rivals Tata Consultancy Services Ltd. and Infosys Technologies Ltd. both posted profit increases and forecast strong growth earlier this month.
Under U.S. accounting standards, Wipro's net income in the quarter ended Dec. 31 rose to 8.26 billion rupees ($210.6 million) from 7.45 billion rupees a year earlier. Revenue grew 32% to 52.36 billion rupees, helped by the addition of 39 clients to the company's information-technology services business. Of those new clients, 25 are in the U.S., Mr. Senapaty said.
Girish S. Paranjpe, president of finance solutions, said though the company hasn't seen any impact of the perceived U.S. slowdown, there may be "the possibility of some large deals, which were to have started this year or next, getting deferred." He said the picture of an impact will get clearer by the end of this quarter.
Aside from its core IT-services business, Wipro also makes items such as soap and precision tools.
Operating margins in the company's global IT services and products narrowed to 21.4% from 22.4% in Wipro's second quarter.
"The rising rupee and some salary increases added to the negative impact on operating margins in the quarter, but we managed to offset most of it by getting pricing increases and controlling costs," Mr. Senapaty said. He said he expects salary increases to hurt operating margins in the current quarter and currency translations and effects from Wipro's acquisition of Infocrossing Inc. in August to weigh on margins.
