January 30, 2009 / 8:11 PM / 10 years ago

DAVOS-China's Neusoft sees profits up 20 pct in 2009

DAVOS, Switzerland, Jan 30 (Reuters) - China’s largest software outsourcing firm, Neusoft Corp, expects to see profit growth of at least 20 percent in 2009, its founder and chairman said on Friday.

Sales will be helped by Chinese manufacturers’ increasing imperative of shifting into more innovative products; multinationals’ need to cut costs; and opportunities created by the government’s 4 trillion yuan ($585 billion) stimulus package, Liu Jiren told Reuters.

“Even in the worst-case scenario, profit growth won’t be below 20 percent. It’ll probably be better than that,” Liu said in an interview on the sidelines of the annual meeting of the World Economic Forum in the Swiss ski resort of Davos.

The economic slowdown is putting more pressure on Chinese manufacturers to move away from just producing low-cost goods, which will create more business for firms like Neusoft as they seek to innovate, Liu said.

Multinationals such as International Business Machines and Microsoft Corp, which make up a big part of the Chinese software outsourcing industry’s business, are also likely to increase their demand for its services, he said.

“In the global market, our partners now face the challenge of cost,” Liu said. “They’re laying off some people, but they still need to do more research and development. So that’s a good opportunity for us.”

Analysts expect the Chinese outsourcing industry to expand by around 40 percent to 45 percent annually for the foreseeable future, though it is well behind India’s giants such as Tata and Infosys.

Liu said he had been shocked by recent revelations of overstated profits and fictitious assets at fourth-ranked Indian information technology outsourcer Satyam Computer Services, saying it cast a shadow over the entire sector, not just in India.

Neusoft had not approached any of Satyam’s clients, he said.

The company is still on the lookout to acquire companies or set up joint ventures in the United States, Europe and Japan to complement its China operations.

The aim would be to have roughly 500-600 engineers in each of the United States and Europe, and to increase its Japan operations from the current 500 to between 1,000 and 2,000, Liu said.

The company would have no problem to obtain the funds to carry out such acquisitions, because it has good cash flow of its own, easy access to bank credit and could also pay for any purchase partly in shares, he said.

For full coverage, blogs and TV from Davos, go to www.reuters.com/davos (Reporting by Jason Subler; Editing by Brian Moss)

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