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Still, caution is the language at Infosys

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CIOL Bureau
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BANGALORE, INDIA: Infosys Technologies raised its forecast on a revival in outsourcing demand from its mainstay financial clients, but its shares fell as markets worried a weak European economy could curb orders.

India's No. 2 outsourcer reported a surprise 2.4 percent drop in April-June profit and its sales contribution from Europe fell to about 20 percent from nearly 25 percent a year ago and 23 percent in January-March.

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However, V Balakrishnan, chief financial officer, Infosys, is banking on the outsourcing demand from across the world. He said, "There are good times and bad times. Good times because there is a lot of spending happening from all customers. All the large economies are in distress; when the economies are in distress outsourcing increases. That is what we have seen in this quarter also. The bad thing is all the macro economic indicators are very bad so we have to closely watch them."

In what Balakrishnan has to say about European crisis, one could sense a cold threat to the ecosystem in which the company operates. He is not outright to deny any impact this will have on the company. Cautions is the language here: "We are not hearing anything from clients till now. We are not seeing any impact on the ground but that is something we have to watch out. If it becomes a larger issue then it could have an impact. Right now, it looks manageable."

Also read: We are cautiously optimistic: Infosys

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The chief operating officer SD Shibulal echoed this view when he said: "Overall, we are cautiously optimistic. We see caution all around but mostly in Europe. The U.S. clients have started spending. We are seeing traction in multiple segments."

According to Shibulal, Europe entered the recession late, so it will come out late.

“We believe that Europe will lag behind the U.S. for may be another quarter or two. However, Europe is very important for us. We expect that Europe will be eventually about one-third of business in the long run. At the same time, we expect some challenges in the medium term, he added."

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Also read: Infosys adds 38 new clients, raises outlook

Infosys is awaiting the stabilization of the economy to regain its say on pricing. "When the economy stabilises, when all the clouds go away probably we will have pricing power," Balakrishnan said.

However, Shibulal believes that their pricing is stable at this point. “We are seeing occasional renegotiations actually both upwards and downwards. It's part of our regular business. We are not seeing any unusual activity," he said.

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