PREVIEW-India IT firms Q1 net seen up, growth prospects cloudy

* What: Fiscal Q1 results from India's top software
exporters

* When: From Friday, July 10

* Tata Consultancy, Infosys, Wipro net seen up 2-12 pct

* Focus on outsourcing business outlook, pricing trends

By Sumeet Chatterjee

BANGALORE, July 8 (Reuters) - India's top software services
companies are likely to report a rise in quarterly profits, but
worries persist about the near-term outlook for the
export-driven sector as technology spending falls and clients
seek fee cuts.

Analysts said a reduced pace of deal cancellations and
signs of stability in the financial sector, a key customer
base, was positive for India's $60 billion outsourcing sector,
but a pick-up in growth was unlikely due to fragile global
economy.

"The IT sector is not out of the woods yet. Pressure on the
financials will continue for some time as demand outlook is not
great," R.K. Gupta, managing director at Taurus Asset
Management, said. "Margins will remain under pressure."

Infosys Technologies (INFY.BO)(INFY.O), India's No. 2 IT
services firm which is seen as a trend setter for the sector,
will be first to off the blocks with its fiscal first-quarter
results on Friday, followed by leader Tata Consultancy Services
(TCS.BO) and third-ranked Wipro (WIPR.BO)(WIT.N).

Investors will be watching management comments on any
change in demand, the pricing environment and staff levels,
after hopes of growth revival later this fiscal year sent
outsourcers' stocks soaring up to 44 percent in the June
quarter.

Powered by an army of low-cost, English-speaking workers,
the outsourcing sector provide services ranging from managing
complex computer networks and call centres to software coding
and maintaining technology operations of global corporations.

The sector's scorching pace of growth has halted as many
top customers are struggling to stay afloat, have gone
bankrupt, or are tackling severe cost cuts, leaving little room
to boost technology spending.

Research firm Gartner expects global IT spending to fall 6
percent in 2009, sharper than an earlier forecast of 3.8
percent, due to the economic downturn. [ID:nBOM14518]
"Visibility for fiscal year 2010, as of now, remains hazy and
any global economic improvements are likely to take time to
reflect in fundamentals," Harit Shah, a sector analyst with
Angel Broking, wrote in a report.

"We expect pricing to witness a downward trend, as has been
the case over the past several quarters now."

In June, Tata Consultancy said a slowdown in global demand
for outsourcing had halted, but clients were still demanding
lower prices and were cautious in their technology spending.
[ID:nDEL57467]
Infosys, which stunned the markets in April when it forecast
its first decline in annual revenue, may project a smaller drop
in dollar revenues due to favourable exchange rate movements,
brokerages said.
Emkay Global said Infosys could forecast a fall of between 1
and 4 percent in annual dollar revenue in 2009/10, smaller than
its April forecast of a drop of 3.1 to 6.7 percent, after the
dollar fell against the euro and the British pound in the June
quarter.

But the sector's rupee profits would be hit by the Indian
currency's rise of nearly 6 percent against the dollar in the
June quarter, brokerages said.

COMPETITION

Tata Consultancy, Infosys and Wipro are looking to expand
in markets such as Europe, Latin America and Asia Pacific to
cut their dependence on the United States, which accounts for
more than half the sector's revenue.
Indian IT services firms, which count Citigroup (C.N), General
Electric (GE.N), BT Group Plc (BT.L), General Motors
GMGMQ.PK, and Boeing (BA.N) among their clients, face
competition from big players such as IBM (IBM.N) and Accenture
(ACN.N).

The competition is expected to intensify after smaller
local rival Tech Mahindra (TEML.BO) acquired Satyam Computer
Services (SATY.BO), renamed as Mahindra Satyam, in an auction
in April.

Shares in Infosys, valued in the market at about $21
billion, rose 34 percent in April-June and Tata Consultancy
gained 44 percent, compared to a 44 percent advance in the
sector index .BSEIT and 49 percent in the main index
.BSESN.

NET PROFIT (millions of rupees)
COMPANY MEAN % CHANGE RANGE DATE

Year Qtr
Tata Consultancy 12,730 2.4 -3.1 12,202-13,199 NA
Infosys 13,969 7.3 -13.4 13,522-15,077 July
10
Wipro 9,142 12.3 0.8 8,369-9,642 NA

NET SALES (million rupees)
Tata Consultancy 68,972 7.6 -3.8 67,295-70,810
Infosys 53,520 10.3 -5.0 52,072-54,900
Wipro 64,155 7.6 -2.0 61,989-65,222

NOTE: Estimates for TCS and Wipro are in U.S. GAAP.
Forecasts for Infosys is in Indian GAAP.

Poll contributors - Citigroup, Sharekhan, Emkay Global
Financial, Motilal Oswal, Religare, Angel Broking, Morgan
Stanley, Reliance Equities, K.R. Choksey, JP Morgan, JM
Financial, and India Infoline.
($1=48.8 rupees)
(Editing by John Mair and Valerie Lee)