UPDATE 3-India’s Wipro net beats forecasts; Europe concern rises

* Q1 net profit 13.19 bln rupees vs 12 bln mkt forecast

* Sees Q2 IT services revenue at $1.25 bln-$1.28 bln

* Adds 22 new clients, slowest pace in more than a year

* Deal pipeline good in the United States, Europe –
official

* Shares rise as much as 4 pct, then lose most gains
(Recasts; adds management comments & updates share price)

By Bharghavi Nagaraju

BANGALORE, July 23 (BestGrowthStock) – Strong demand for
outsourcing helped India’s Wipro Ltd (WIPR.BO: ) to handsomely
beat estimates in the June quarter, though a softening in
Europe’s revenue contribution raised concerns about profits
ahead.

India’s No.3 software services exporter’s Europe revenue
share fell mainly due to currency volatility, but it continued
to see a strong business pipeline from the region.

Europe is the second-biggest market for Wipro, which
develops software applications, integrates IT systems and
manages call centres, and the $60 billion Indian outsourcing
sector, after the United States.

An indicator of the troubles facing the region came when a
newspaper reported on Friday that several of Spain’s 18 savings
banks, including some that have been involved in recent
mergers, have failed tests to see how they would cope with
worsened economic conditions. [ID:nSGE66M07W]

“The demand for outsourcing services continues to be
healthy at this point of time but Europe is a concern in the
near term for these companies,” said K.K. Mital, head of
portfolio management services at Globe Capital. “Pricing may
continue to be an issue till there is some stabilisation in
Europe,” Mital said.

Wipro’s results mirrored the strong growth of sector leader
Tata Consultancy Services (TCS.BO: ), while it fared better than
No. 2 Infosys (INFY.BO: ), which posted a surprise fall in
quarterly profit last week. [ID:nSGE66D0ID] [ID:nSGE6680B5]

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For StarMine comparative data: http://r.reuters.com/dec29m

For graphic on Wipro earnings: http://r.reuters.com/fug29m

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“The situation in EU is uncertain, but we continue to see
good traction in terms of pipeline as well as deal closure,”
said K.R. Lakshminarayana, Wipro’s chief strategy officer for
IT business.

“At the customer level, decision making as well as deal
flow continues to be robust,” he told the Reuters Trading India
chatroom, responding to a query on business prospects in Europe
following the economic uncertainty.

Wipro Chief Financial Officer Suresh Senapaty told
reporters the company was seeing a good business pipeline in
the United States and the pricing environment for its services
was stable.

Wipro (WIT.N: ), majority-owned by billionaire Chairman Azim
Premji, who mostly travels economy class, forecast revenue from
its IT services business at $1.25 billion to $1.28 billion in
the September quarter, up 4.1-6.1 percent from April-June when
it grew 3.2 percent sequentially.

The company said Europe accounted for 25.4 percent of its
revenue in April-June, down from 26.3 percent in the March
quarter. The United States brought in more than half of its
revenue.

Wipro added 22 new clients in the June quarter, its slowest
pace of client addition in more than a year, reflecting the
cautious environment linked to the debt crisis in Europe.

Research firm Forrester said in a report this month that
Europe’s volatile economic situation and uncertainty about
corporate IT budgets would result in possible delays or
cancellations of some outsourcing projects.

COMPETITION INTENSIFYING

Shares in Wipro were trading up 0.2 percent at 416.40
rupees at 0830 GMT, having risen as much as 4.2 percent after
the earnings, while the main Mumbai market (.BSESN: ) was up 0.3
percent. Infosys was trading up 0.9 percent.

The trading volume on the Wipro counter, at nearly 800,000
shares, was four times its 30-day average volume.

Rising outsourcing demand has seen Indian IT firms boosting
hiring and raising staff salaries as they battle intensifying
competition from global rivals such as IBM (IBM.N: ) and
Accenture (ACN.N: ).

Wipro added 4,854 employees in the June quarter.

Wipro’s net profit for the June quarter rose to 13.19
billion rupees ($280 million) under international accounting
standards from 10.10 billion.

A Reuters poll of brokerages had forecast a net profit of
12 billion rupees for Wipro, which counts Citigroup (C.N: ),
Cisco (CSCO.O: ) and Credit Suisse (CSGN.VX: ) among its leading
clients.

Wipro shares, valued at about $22 billion, have risen about
2 percent so far this year, compared with a close to 4 percent
gain in the main index (.BSESN: ).
($1=47.1 rupees)

Stock Report

(Writing by Sumeet Chatterjee; Editing by Muralikumar
Anantharaman)

UPDATE 3-India’s Wipro net beats forecasts; Europe concern rises