{"id":17116,"date":"2012-07-12T12:42:17","date_gmt":"2012-07-12T17:42:17","guid":{"rendered":"http:\/\/www.drishtikone.com\/?p=17116"},"modified":"2012-07-12T12:42:17","modified_gmt":"2012-07-12T17:42:17","slug":"infosys-financial-results-and-its-future-contradictions","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/drishtikone\/2012\/07\/infosys-financial-results-and-its-future-contradictions\/","title":{"rendered":"Infosys Financial Results and its Future Contradictions"},"content":{"rendered":"<!DOCTYPE html PUBLIC \"-\/\/W3C\/\/DTD HTML 4.0 Transitional\/\/EN\" \"http:\/\/www.w3.org\/TR\/REC-html40\/loose.dtd\">\n<html><head><meta http-equiv=\"content-type\" content=\"text\/html; charset=utf-8\"><meta http-equiv=\"content-type\" content=\"text\/html; charset=utf-8\"><\/head><body><p>One is trying to understand Infosys and where it is going. \u00a0Honestly, I cannot make out the logic behind some of what is happening in there. \u00a0Read the following and contemplate:<\/p>\n<ul>\n<li><strong>Lost a major transmission client<\/strong> in Europe (portfolio worth $15 mn)<\/li>\n<li><strong>Pricing and Currency Fluctuations<\/strong>: Lost $13 mn on currency fluctuations (bad investment?). \u00a0While its rooting for the Indian Rupee to stay at INR 55 \/ $, the fall in Rupee is being offset by lower pricing. \u00a0So, clients are smart \u2013 they are factoring the fall in Rupee in their pricing.<\/li>\n<li>Infosys is acknowledging that its <strong>Margins have declined due to Visa and Employee costs<\/strong><\/li>\n<li>The company is now looking for <strong>Inorganic growth<\/strong><\/li>\n<li><strong>Client confidence is fairly low<\/strong> in the current market, which is why they are postponing their investment decisions.<\/li>\n<li>Total number of people promoted in the company this year (July 1, 2012) now total 20,000 \u2013 or <strong>13% of the entire company has been promoted<\/strong>. \u00a0 But these promotions have coming largely with salary freezes.<\/li>\n<\/ul>\n<p>A few observations about Infosys\u2019 situation going forward.<\/p>\n<p><strong>Margins and Foreign Policy:<\/strong> \u00a0If your company\u2019s Operating Margins are hostage to some foreign country\u2019s Foreign policy, then your Corporate Strategy is all screwed up! \u00a0You have NO control! \u00a0This outsourcing business and the life of Infosys (and other Indian IT companies) has been there for over 2 decades now. \u00a0It is time they had a change in strategy. \u00a0If in 2012 their margins take a hit because of Visa cost in US, then they are a ship waiting to sink, sooner or later.<\/p>\n<p><strong>Pricing Fluctuations:<\/strong> \u00a0If you are a Global company, you cannot rejoice at the falling Rupee and increasing Export revenues anymore. \u00a0The correct measure is DOLLAR REVENUES for a company listed on US Exchanges \u2013 with an ADR \u2013 as Infosys is. \u00a0I find it nauseating and immature of the analysts in India to play up the currency fluctuation for exports so much. \u00a0It is nonsensical. \u00a0More so, because they are betting against India and themselves! \u00a0The lower the INR, the higher the inflation -&gt; higher the employee and other operational costs. \u00a0And you can see that happening in Infosys\u2019 P&amp;L as listed above.<\/p>\n<p><strong>Inorganic Growth:<\/strong> With fallen stock price and lower cash reserves, NOW, after so many years, Infosys wakes up to inorganic growth. \u00a0And even now it is not talking of a large acquisition in consulting or services, which is a must for its long terms survival. \u00a0The rates being charged to clients for Indian Developers have come down from $45 in 2009 to roughly $15-20 now. \u00a0For any Account manager, the Nirvana in such a downward spiral for outsourcing cost is in \u201cBlended Rate\u201d, where the high end consulting with Onsite resources cover up. \u00a0But how do you do more of that, if you are a minority compared to say an Accenture or IBM? \u00a0The imperative for all these years should have been to buy a LARGE consulting firm, while the stock price and the cash reserves were high. \u00a0With a largely outsourcing work, the margins will be hit even more in the coming days.<\/p>\n<p>\u00a0<\/p>\n<p><strong>Reference Articles:<\/strong><\/p>\n<p><a href=\"http:\/\/www.firstpost.com\/business\/key-takeways-from-infy-results-are-375344.html\" target=\"_blank\" class=\" decorated-link\" rel=\"nofollow\">Key Takeaways from Infy results<\/a><\/p>\n<p><a href=\"http:\/\/timesofindia.indiatimes.com\/tech\/careers\/job-trends\/Infosys-promotes-20000-people-utilization-retention-high-at-TCS\/articleshow\/14852147.cms\" target=\"_blank\" class=\" decorated-link\" rel=\"nofollow\">Infosys promotes 20,000 people<\/a><\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"<p>One is trying to understand Infosys and where it is going. \u00a0Honestly, I cannot make out the logic behind some of what is happening in there. \u00a0Read the following and contemplate: Lost a major transmission client in Europe (portfolio worth $15 mn) Pricing and Currency Fluctuations: Lost $13 mn on currency fluctuations (bad investment?). \u00a0While [&hellip;]<\/p>\n","protected":false},"author":1517,"featured_media":17117,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,33,79],"tags":[169,1612,1696,1699,2391,3401],"class_list":["post-17116","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-india","category-us","tag-accenture","tag-ibm","tag-infosys","tag-infy","tag-narayana-murthy","tag-tcs"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Infosys Financial Results and its Future Contradictions<\/title>\n<meta name=\"description\" content=\"One is trying to 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