Wipro's outlook trails expectations, IT services revenue drops

BANGALORE, INDIA: Wipro posted a 2.2 percent rise in the net profit in its fourth quarter ended March 31, 2015. The consolidated net profit stands at around Rs. 2,270 crore with a sequential rise of 3.6 percent. Total consolidated revenues in the Q4 was at Rs. 12,140 crore.

Although the IT Services segment revenues saw an increase of 6 percent YoY at Rs. 11,240 crore, but dollar revenues of its IT services business during the March quarter saw a sequential decrease of 1.2 per cent, and rupee revenues fell 0.9 percent sequentially.

The outlook for the June quarter is also below the Street's estimates as Wipro stated that it expects revenues from its IT Services business to be in the range of $1,765 million to $1,793 million for the quarter ending June 30, 2015. This translates to a negative 0.5 per cent to 1 per cent growth as compared to its March quarter numbers.

Wipro has added 21 new customers during the quarter with one in 100 Million dollar + clients segment and two additions in 20 Million dollar + clients segment.

India & Middle East business grew by 10.1 percent, while Americas, Europe, APAC & Other Emerging Markets were impacted by negative growth.

Vertical growth led by Finance Solutions at 2 percent, Retail, Consumer Goods & Transportation at 1.4 percent respectively.

The growth was driven by Product Engineering at 6.1 percent, R&D Business at 3.1 percent, Business Application Services at 2.6 percent, Advanced Technologies & Solutions at 1.6 percent respectively.

The confidence of the IT majors is perhaps shaken due to the external factors such as adverse cross currency movements and slackness in European revenue said Thomas George, head of CyberMedia Research(CMR). But all the tier-1 IT services companies who are operating in global scale are affected by these factors and Wipro is witnessing the same set of challenges too.

"The dampness in the crucial verticals like Energy & Natural Resources, Media & Telecom, Manufacturing & Hitech, as well as Healthcare & Life Sciences, etc. is an area of rising concerns for Wipro. Plus, they have also not been able to capitalize on the highly commoditized services such as Application Development & Maintenance(ADM) and Business Process Services, which also dims the outlook for the coming quarter," added he.

Wipro saw a massive dip in the ADM business in Q4 with a 13.2 percent QoQ decline. This is also the fifth consecutive quarter of decline in its ADM business.

T K Kurien, Member of the Board & Chief Executive Officer of Wipro, said, “We are well-positioned to take advantage of the opportunities in the market, while tackling headwinds in certain areas. We see Digital, Open Source and Artificial Intelligence as key levers for driving business change and reshaping the delivery model for the future.”

But, does it help Wipro to deliver strong results in coming quarters? "Although Mr. Kurien has underlined the future growth directions, but they are all long term opportunities and hence are unlikely to have an impact on the revenues of the next two or three quarters," said George.