October 17, 2008 / 8:26 AM / 11 years ago

UPDATE 1-India Satyam cuts revenue forecast on global crisis

(Adds details, quotes, analyst comments)

By Sumeet Chatterjee

BANGALORE, Oct 17 (Reuters) - Satyam Computer Services SATY.BO on Friday cut its revenue guidance as technology spending is hit by the global financial turmoil, one week after bigger rival Infosys Technologies (INFY.BO) lowered its forecast.

Satyam, India’s fourth-largest software services exporter, said revenue in the year ending March 2009 would grow between 19 percent and 21 percent in dollar terms, slower than 24 to 26 percent growth seen in July.

Last Friday, second-ranked outsourcer Infosys cuts its dollar revenue growth forecast to 13.1-15.2 percent from 19-21 percent. See [ID:nBOM352371]

“The near-term environment remains challenging because of the global slowdown and continued instability, notably in the U.S. banking and financial services sector,” Satyam Chairman B. Ramalinga Raju said in a statement.

India’s export-driven software service firms, used to a scorching pace of growth, have been badly hit by the market and economic troubles in the United States, which contributes more than half their revenues, and its global spread. “The next few quarters will be very challenging for these firms,” said Dipen Shah, a sector analyst with Kotak Securities. “Overall, the sector will remain under pressure unless there is a significant improvement in the economic situation.”

Satyam, which specialises in business software and offers back-office outsourcing services, said consolidated net profit for the quarter ended Sept. 30 was 5.81 billion rupees ($120 million), up 42 percent from 4.09 billion a year ago.

A Reuters poll had forecast a net profit of 5.36 billion rupees for Satyam, whose customers include General Electric (GE.N), Nestle NESN.VX, Qantas Airways (QAN.AX), Emirates Bank International EBIL.DU and Fujitsu Services (6702.T).

Shares in Satyam, based in the southern city of Hyderabad, were up 2.6 percent at 280.20 rupees at 0718 GMT in the main Mumbai market .BSESN that was down 0.5 percent. Traders said they had factored in the revenue guidance revision.

The outsourcer cut its hiring plans to 8,000 to 10,000 staff in the year to March, down from an earlier forecast of 15,000.

PROJECT DELAYS, NO CANCELLATIONS

Outsourcers such as Infosys and Satyam are expanding in Europe, Asia-Pacific and the Middle East to cut their dependence on the United States.

Satyam earned about 21 percent of its revenue in the September quarter from banking and financial services firms.

It said there were delays in closing outsourcing deals as firms considered on their technology spending, but it had not seen any cancellations.

“Given the uncertainty, I would say that in some of the cases we are seeing that people are not able to take decisions and waiting for how things are going to look in the next few weeks,” chief executive B. Rama Raju told reporters.

He expected profit margins to increase by 100 to 150 basis points in 2008/09 due to a weaker rupee, up from 50 basis points forecast in July. The rupee has fallen more than 19 percent against the U.S. dollar in 2008, hitting a record low last week.

The company expects pricing to remain stable this fiscal year. Analysts have said outsourcers were under pressure to reduce prices to win deals. Satyam added 33 clients in the quarter to September, taking its tally to 649 ($1=48.6 rupees) (Editing by John Mair)

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