Wipro Posts Revenue, Profit Growth Despite Recession

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Indian outsourcer Wipro reported strong revenue and profit growth for the quarter ended December 31.

Wipro's revenue was 65.39 billion Indian rupees (US$1.3 billion at the exchange rate on the closing date of the quarter), up 25 percent over the same quarter in the previous year. Profits were 8.98 billion rupees, up by 9 percent over the same period last year.

Wipro's services business posted revenue of 50.64 billion rupees for the quarter, an increase of 30 percent over the same period last year. Besides the services business, which accounted for 77 percent of total revenue, Wipro has an IT products business and consumer businesses, such as making soap.

The IT products division reported revenue of 8.15 billion rupees for the quarter, up 26 percent over the same period last year.

Looking ahead, Wipro forecast that its services revenue for the first quarter, in dollar terms, will be about US$1.05 billion, down slightly from $1.1 billion during the fourth quarter.

Wipro and other Indian outsourcers are struggling as customers tighten IT budgets or defer decisions in an economic crisis. Wipro said it continues to win large deals and added 31 new customers during the fourth quarter.

The financial scandal at Satyam Computer Services, is likely to have an impact on other Indian outsourcers, including Wipro, according to analysts. Forrester predicted customers will scrutinize their Indian suppliers a lot more closely after the Satyam accounting scandal.

But the problems at Satyam could also be an opportunity for Indian outsourcers like Wipro, as Satyam's customers look for alternative suppliers, the research firm said.

Some key customers of Indian outsourcers are also in trouble. Nortel Networks, which uses IT services from Indian companies, filed for Chapter 11 in U.S. bankruptcy court. Wipro said earlier this month that business from Nortel accounted for less than 1.5 percent of its IT business revenue, and its assessment was that a substantial part of that business was expected to continue.

Wipro also announced earlier this month that the company was barred from direct contracts from the World Bank from 2007 to 2011, after family and friends of the bank's chief information officer and other senior executives purchased Wipro shares under a program set up by the company. The company said that the number of shares offered by the company were too few to amount to an inducement, and was "a goodwill gesture". Its business from the World Bank to date is insignificant, it added.

As part of the results announcement, Wipro also said it completed its$127 million acquisition of Citi Technology Services, the IT services subsidiary in India of Citigroup. Revenues from the business will be consolidated with those of Wipro starting from the first quarter. Under the terms of that deal, Wipro will receive IT services contracts worth at least $500 million over six years.

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