Wipro Q3 profit expected to have nearly doubled

Anshuman Daga

BANGALORE: Indian tech giant Wipro Ltd. is expected to report a near doubling

of its profit for the October-December quarter, boosted by soaring earnings from

its software services business.

The diversified information technology outfit, India's largest company by

market value, is forecast to report a 96 per cent surge in net profit to Rs 1.64

billion ($35 million), according to a Reuters poll of brokerages.

"This quarter will again be the story of Wipro being able to improve its

operating margins," said Chetan Shah, software analyst at DBS Securities.

He said Wipro continued to increase billing rates at its software unit in the

October-December quarter.

Wipro, which listed on the New York Stock Exchange in October, also makes

computer hardware, soaps, vegetable oils and electric bulbs. Yet, over 90 per

cent of its profit comes from its software services business.

The company will announce its third-quarter results on Friday.

At the Bombay Stock Exchange, Wipro shares on Wednesday fell Rs 8.75 or 0.3

per cent to Rs 2,518.60. The stock is down 74.24 per cent from a high of Rs

9,800 reached last February but has gained 71.23 per cent from a subsequent low

of Rs 1,474 touched in May.

In the past six months, Wipro's shares have fallen nearly 11 per cent.

Its American Depositary Receipts (ADR) have on the other hand gained 16 per

cent to $57 - on Wednesday from its closing price on October 19 when it listed

at a small premium on the NYSE.

Shift in focus



Wipro's software clients include Nortel Networks Corp., the world's top supplier
of fiber-optic network equipment, networking giant Cisco Systems Inc, Japanese

electronics giant NEC Corp and UK travel operator Thomas Cook.

A Reuters poll released earlier this month forecast Wipro's sales to increase

by 34 per cent to Rs 7.65 billion in the third quarter from Rs 5.70 billion a

year ago.

"Wipro has in the last few quarters been focusing more on its technology

business than (software) applications," said Sandeep Dhingra, analyst at J

P Morgan Chase.

"The proportion of their global R&D (research and development)

business is increasing and that's a trend which we will continue to see."

Analysts also said that they did not expect Wipro to be hit by any cut in

infotech spending in the United States.

Wipro Chairman Azim Premji last month told an industry conference that a

slowdown of the global economy meant profit pressure and global companies would

look for ways to economize.

"India offers the most economic services in the world today. So, in

overall terms, it is actually positive and not negative for India," Premji

said.

He said Europe and the Asia Pacific region, especially Japan, offered good

opportunities for growth for Wipro.

Europe contributes about 28 per cent to Wipro's revenues while about 65 per

cent is accounted by the US.

(C) Reuters Limited 2001.