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Wipro's Azim Premji affirms faith in US tech market as company clocks Q3 growth

Wipro's Azim Premji affirms faith in US tech market as company clocks Q3 growth

Wipro cites uncertainty in the business climate but also assured that everything was not wrong in the world of IT.

Wipro on Friday cited uncertainty in the business climate but also assured that everything was not wrong in the world of IT. Azim Premji's company lagged most of its peers over the last two years in terms of growth but guided to fourth quarter revenues that were ahead of bigger rival Infosys's tepid outlook. While Infosys saw March quarter revenues being flat in dollar terms, Wipro guided to a three per cent sales growth.

Wipro also beat street expectations during the December quarter, although its volume growth of about 2 per cent lagged HCL Technologies, Tata Consultancy Services, and Infosys.


Management commentary, however, was replete with talk of "quality deal closures". The firm added a net of 5,000 employees during the quarter - one of the highest net additions in the industry this season.

Premji, who saw the 2009 downturn much ahead of his rivals, sounded confident: "There is uncertainty. Fortunately, it is not affecting the IT industry," he said, adding that the United States, Indian IT's bread and butter market, is surprisingly strong.

Enterprises in the US have good cash flows and are reaching capacity. They need to now invest in building new capacity to keep the growth going.

The critical banking and financial services (BFSI) industry, which generates anywhere between 27 per cent and 40 per cent of top tier IT revenues, is in no mood to cut back on spending just as yet - budgets here are being driven by the need to reduce operational costs, regulatory requirements, demand generation initiatives as well as new efforts around analytics.

Like HCL, Wipro's executives, too, touched on vendor consolidation in the market. The trend has caught on in the BFSI segment and smaller IT vendors are now running the risk "of being rationalized out".

While insurance and retail banking are healthy, Wipro CEO TK Kurien said that investment banking is stressed in Europe. Expect budget cuts and delays there, he added.

However, the company is seeing active interest in outsourcing from Germany and France, countries not so open to outsourcing thus far. The bottomline: Europe has potential for weakening going ahead, but not so much that it could upset the IT services applecart. 

Analysts appeared pleased with Wipro's numbers. Dipen Shah of Kotak Securities noted that the company's results were in line with his estimates. "The improvement in average realisations was a surprise, though it was led by better efficiency in fixed priced and not absolute increases. We maintain our positive view for the sector over the medium-to-long term," he said.

Management consulting firm Zinnov pointed out that Wipro's number of $100 million customers and revenue generated by the its top five clients have been steadily increasing - indicative of some success post a mammoth restructuring over the last one year.