April 30, 2011 / 1:54 PM / in 7 years

UPDATE 2-India's Infosys names new CEO, chairman

* COO Shibulal to become CEO, Kamath named chairman

* Current CEO Gopalakrishnan to become exec co-chairman

* Changes linked to retirement of chairman Murthy in August

* All appointments effective Aug. 21

* Co to change name to Infosys Ltd

(Adds quotes, more details)

By Bharghavi Nagaraju

BANGALORE, April 30 (Reuters) - Infosys Technologies Ltd (INFY.NS) announced top management changes linked to the retirement of its billionaire chairman and stuck to its practice of giving its founders a shot at running the firm.

Infosys, India’s No. 2 software services exporter, which is also listed on the Nasdaq INFY.O, is struggling to meet growth expectations and its shares have fallen over 15 percent in 2011.

The board named S.D. Shibulal, a founder of the company and currently its chief operating officer, as chief executive in place of S. Gopalakrishnan, who will be the company’s executive co-chairman, current chairman N.R. Narayana Murthy said at a press conference.

K.V. Kamath, 63, an independent director of the company, will take over as non-executive chairman of Infosys, a visibly emotional Murthy said at the company’s headquarters in the south Indian city of Bangalore.

Murthy, who retires as chairman in August, will serve as chairman emeritus of the company he set up in 1981 with six other engineers.

“This was what was expected. There are no surprises here. The market should not be too shocked or surprised by this,” said Tejas Doshi, vice president of research at brokerage Sushil Finance.

Infosys, which is seen as a trend-setter for India’s near-$60 billion outsourcing sector, is battling aggressive competition from larger rival Tata Consultancy Services Ltd (TCS.NS) and Cognizant Technology (CTSH.O), which are steadily chipping away at its market share.

Global rivals IBM (IBM.N) and Accenture (ACN.N) also compete directly with Indian firms such as Infosys.


Analysts have said the management announcements will put an end to uncertainty that has surrounded the company since talk of the change began last year and will allow the firm to focus on boosting growth.

“As we look ahead, we will ensure that this leadership transition is smooth as all other transitions have been in the past. We are also making other organizational changes to strengthen our market position and ability to serve our clients better,” said Shibulal.

Shibulal’s appointment as chief executive is in line with Infosys’ practice of giving a member of its founding group a shot at running the company, which Murthy and his six fellow engineers set up with $250 they scraped together.

    Shibulal, aged 56, takes over from Gopalakrishnan, who in turn replaced Nandan Nilekani in 2007. Nilekani was made chief executive after Murthy stepped aside to become chairman alone.

    Infosys will appoint three internal executives to its board by June, incoming Chairman Kamath, who is also the non-excutive chairman of India’s second-largest lender ICICI Bank (ICBK.NS), told reporters at the press conference.

    Infosys will also seek shareholder approval to change the name of the company to Infosys Ltd to reflect its broad range of services -- from consulting to back office processing -- Gopalakrishnan said, after the Infosys board approved the prposed name change.

    Infosys has missed analysts’ profit estimates for three of the last four quarters and in April forecast a lower-than-expected annual sales outlook on slower client spending for the year ending March 2012.

    It also expects a near 300-basis point decline in operating margins for the year, hurt by wage hikes and currency moves.

    All appointments will become effective Aug. 21, said the company which has seen a couple of recent exits by directors from its board.

    Infosys’ human resources chief T.V. Mohandas Pai, seen as the one executive outside the founding group with a chance of becoming chief executive, announced his decision to quit the company earlier this month.

    On the same day, K. Dinesh, one of the six engineers who founded Infosys along with Murthy, said he would retire.

    The Infosys changes come on the heels of a surprise moves earlier this year by third-ranked rival Wipro Ltd (WIPR.NS) to replace its joint CEOs with company veteran T.K. Kurien and reorganise its key IT outsourcing business to rev up growth.

    Infosys shares, which the market values at about $38 billion, have fallen 15.6 percent this year, worse than the over 6 percent fall in the wider market .NSEI. (Additional reporting by Devidutta Tripathy in New Delhi; Editing by Catherine Evans)

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