Infy narrows gap with peers Revenue Up 1.7% Q-o-Q, Raises Full-Year Forecast To Near 12%

Mysore: Infosys has raised its dollar revenue growth guidance for this fiscal to 11.5-12%, up from the previous 9-10%, marking a return to near industry average growth and reflecting the success of its decision to focus more on large transformation projects. Nasscom has forecast that the IT industry will grow this year at 12-14%.      With only one quarter remaining, the latest guidance is unlikely to go terribly wrong. Infosys needs to grow by 1.4% sequentially in the last quarter to hit the upper end of its guidance. The guidance is a significant improvement over the dismal performance of last year, when Infosys grew 5.8% as against the industry growth of over 11%. Industry peers TCS, Cognizant and HCL have been growing well above average.      The forecast pushed the company share price up by nearly 3% on a day when the benchmark sensex was flat. Revenue for the December quarter, at $2.1 billion, grew 1.7% over the previous quarter and was largely in line with analysts' expectations. The December quarter tends to be a low-growth quarter because of year-end holidays in customer markets, mainly the US and Europe. Net profit, at $463 million, was up much more than expected at 20.9%, and operating margin was up nearly 3.2 percentage points at 25%, reflecting the success of the massive cost optimization initiative that began since the return of co-founder N R Narayana  Murthy as executive chairman in June.      CEO S D Shibulal said the external environment was getting better in most business segments. "Clients are focusing on cost optimization and are gaining confidence to invest in their strategic initiatives," he said. But followed it up with caveats: "Clients continue to be hesitant to take large investment decisions. IT budgets of clients in general would be flat in 2014, compared to 2013. And we face pricing pressure on large deals and commoditized services."      Partha Iyengar, country manager-research in Gartner India, said it was a good sign that Murthy's back-to-basics strategy was working. "But we need one more quarter of continuous outperformance to say that the company is out of the woods," he said.      Since Murthy's return, the company has taken a step back on its effort to focus more on IP (intellectual property)-led software development and platform services and on consulting, which were expected to substantially increase revenue per employee.