Wipro net profit below expectation

BANGALORE: Software services giant Wipro Ltd has posted a Rs 1.63 billion

($33.4 million) consolidated net profit for April-June, below expectations, on

greater-than-expected revenue growth. Revenue totaled Rs 9.3 billion. During the

previous quarter, the company had posted a net profit of Rs 2.3 billion on a

revenue of Rs 9.4 billion.

Net profit was forecast at Rs 2.17 billion and revenue at Rs 8.85 billion in

a Reuters poll of 10 brokerages released last week. Wipro said it took a charge

of Rs 389 million in the quarter for its discontinued Internet Services Provider

business.

"The net profit is far lower than expected though sales have surpassed

our estimates. The initial reaction looks negative," said Pratish Krishnan,

a technology analyst with Cholamandalam Securities. Dipankar Choudhury, an IT

analyst at ICICI Securities and Finance, said, "The pricing pressure was

more than we expected. The margins have fallen which is the reason why profits

are less than expected. Volume growth however is very good in the presence of

strong pricing pressure."

Wipro, India's largest software firm by market value at roughly $6 billion,

has been hit by the loss of business from battered telecom equipment makers like

Nortel and Alcatel. Results of the New York Stock Exchange-listed Wipro were

announced before the start of trading in Indian markets on Friday. When trading

began the shares fell as much as 3.5 percent to Rs 1,258.20.

At Thursday's close, Wipro's shares were down nearly 19 percent in calendar

2002 compared to a 15 percent drop in Bombay's information technology index.

To buy further 66% of Spectramind

Wipro said it is buying a further 66 percent stake in IT-enabled services

provider Spectramind for $83 million. That will take its total holding in the

call services and back-office services provider to 90 percent. Wipro also said

it had recently signed a $20 million, five-year contract with a U.K.-based

utility.

"Overall the numbers are good, the volumes forecast is good for next

quarter and they are also buying additional stake in Spectramind which will

strengthen their position in the IT-enabled services business," said IT

analyst Pramod Gupta of Enam Securities. India's No. 3 software services

exporter said it added 919 employees in the first quarter, taking its total

staff strength to 10,545.

The company expects $135 million in revenue from global IT services this

quarter. "The forecast is pretty good," Gupta said. "They are

talking of huge volume growth because pricing is still under pressure."

Rates for software services provided from India fell 4.5 percent last quarter,

while fees for services provided at client sites overseas dropped 5.6 percent,

vice chairman Vivek Paul said on CNBC television.

"There is a 100 basis points fall in IT services operations but that

could be because of the decline in prices. But Wipro also added quite a few

people to its workforce in the first quarter, so despite pressure on margins, it

is not much of an issue," Gupta said.

($1 = Rs 48.77 Indian)

(C) Reuters Ltd.