UPDATE 3-Infosys beats Q1 fcast, flags tough environment

* Raises lower end of full-year forecast in dollar terms

* Employee numbers fall in Q1, first drop in any quarter

* Expects technology spending to recover in mid 2010

* Shares on course for best daily gain in nearly 2 months

* Infosys boosts tech shares, broader market down over 1 pct (Updates stock price, employee numbers, details)

By Sumeet Chatterjee

BANGALORE, July 10 (Reuters) - Infosys Technologies Ltd (INFY.BO) marginally raised its full year forecasts after beating estimates with a 17 percent rise in quarterly profit, helped by currency gains but warned of a challenging global environment.

India's second-biggest software services exporter, said staff strength fell in the last quarter for the first time and it expects contract prices to drop further due to pressure from battered clients.

Its rivals Tata Consultancy Services (TCS.BO) and Wipro (WIPR.BO) also face competition from big players such as IBM (IBM.N), Accenture (ACN.N) and Hewlett-Packard (HPQ.N) who have raided their home-turf and are winning contracts.

"The broad numbers are better than estimates," said Apurva Shah, head of research at broking firm Prabhudas Lilladher in Mumbai. "The guidance is more a signalling tool indicating the degree of pessimism or gloom has come down. But it is not yet back to normal to lift the overall forecast."

The business environment was turbulent and punctuated by long decision making cycles and a recovery in technology spending was likely only by mid-2010, Infosys' Chief Operating Officer S.D. Shibulal said. He expects prices to fall by 5 percent in the year ending March 2010.

Kicking off the sector's results, Infosys forecast consolidated revenue to fall 3.1-4.6 percent to $4.45-$4.52 billion in the full year.

The company, which counts Goldman Sachs (GS.N), Philips Electronics (PHG.AS), BT Group Plc (BT.L) among its clients, expects earnings per share to decline 11.1-12.4 percent in dollar terms. That compares with its April forecast of earnings to fall 11.1-15.1 percent and revenue to decline 3.1-6.7 percent.

Nasdaq-listed Infosys (INFY.O), which started in 1981 with $250 borrowed from spouses of its seven founders, said its staff strength fell by 945 in the last quarter to 103,905.

It was the first drop for the company that had been hiring employees by the thousands each quarter to keep pace with rising contracts from clients keen to cut costs.

"I think it is a blip," said Ashok Reddy, managing director of staffing firm TeamLease. "There has been employee rationalisation to combat the slowdown in the IT sector. But in the last month and a half recruitment demand has revived."