Wipro Limited (WIT) More Cautious on 2013 Than Tata Consultancy Services Limited (TCS) and Infosys Ltd (INFY)

Page 1 of 2

Bangalore based company Wipro Limited (NYSE:WIT) , one of the leading firms in India’s powerful IT sector has posted mixed results for its previous quarter. Although quarterly earnings beat analysts’ estimates, the outlook is weak as sales from its outsourcing services division for the current quarter ending March 2013 will most likely remain flat, or in the best case scenario, increase by 3% from the previous quarter.  Following the announcement, the company’s shares on the Bombay Stock Exchange slid by 6% in early hours of trading.

Wipro’s quarterly net income increased by 17.9% to $317 million (Rs 17.16 billion), about $15 million more than analysts’ estimates, while sales increased by 10% from last year’s $2.05 billion (Rs 109.89 billion).  Out of the total revenues, $1.58 billion have come from its outsourcing services unit, which forms the backbone of the company. For its final fiscal quarter of FY 2013 ending in March, Wipro expects these revenues to increase to the range of $1.585-$1.625 billion. Operating margins at this unit have increased slightly from 20.7% in Q2 ending September 2012 to 20.8% in Q3 ending December 2012.

Wipro’s main competitors; the market leader Tata Consultancy Services Limited (NSE:TCS), which has significant representation in Technology GEMS ETF (NYSEMKT:QGEM), and the second biggest Indian IT firm Infosys Ltd (NYSE:INFY) have also posted strong results for their respective quarters, beating analysts’ estimates; but unlike Wipro, the other two are more optimistic about the future. Overall growth in the outsourcing services market remains modest at best. TCS has the competitive advantage due to its flexible pricing policies while Infosys’s earnings got a boost from its acquisition of the Zürich based management consultancy firm Lodestone for $349 million in September 2012. I have discussed Infosys and its current growth strategy in more detail in this previous article.

Infosys Ltd ADR (NYSE:INFY)However, TCS and Infosys have not convinced Azim Premji, Wipro’s Chairman who believes that “the overall mood on economic growth continues to be muted.” Then again, Wipro relies heavily on the telecom, technology and manufacturing sectors and has already witnessed an extremely challenging period of growth following the global financial crisis. In the two years since the beginning of 2010 till the end of 2011, Wipro’s stock at India’s National Stock Exchange (NSE) fell by 1.4%. In the same period, TCS’s shares rose by 58.5%.

Wipro’s outsourcing division is not struggling anymore and is posting increasing sales. This is a big positive that has come after Wipro restructured its core operations in 2011. Growth for India’s outsourcing companies in the last couple of years has remained challenging due to an economic slowdown in the U.S and Europe. The two markets contribute about 75% of total sales to India’s $100 billion IT outsourcing sector.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!