UPDATE 3-Wipro Q2 disappoints; currency, economy cloud outlook

* Q2 net profit 12.85 bln rupees vs 13.42 bln consensus view

* Sees Q3 IT services rev at $1.32-$1.34 bln, up 3.5-5.5
pct

* Says economic environment continues to remain uncertain

* Adds 29 clients in Sept qtr, biggest addition in four
qtrs

* Shares down over 5 pct; rival TCS jumps to record
(Adds more company comments, updates share price)

By Bharghavi Nagaraju

BANGALORE, Oct 22 (BestGrowthStock) – India’s No.3 outsourcing firm
Wipro (WIPR.BO: ) missed quarterly profit estimates as higher
wages cut margins, underperforming rivals and sending its
shares down more than 5 percent.

Like bigger competitors, Tata Consultancy (TCS.BO: ) and
Infosys Technologies (INFY.BO: ), Wipro (WIT.N: ) flagged concerns
about a strong rupee and an uncertain economic outlook
affecting India’s $60 billion sector, which gets more than half
its revenue from exports and faces costs in rupees.

“At a time when the clients are coming back for discussing
contracts, macro-economic concerns are building up again,” said
K.K. Mital, head of portfolio management services at Globe
Capital, which holds Wipro shares for its clients.

“This may result in postponement of long-term deals,” Mital
said. “Economic uncertainty and currency volatility remain two
biggest challenges for the IT companies in the near-term.”

Indian outsourcing firms, which manage computer networks
and maintain IT operations for many Fortune 500 companies, are
facing stiff competition from bigger global rivals, including
IBM (IBM.N: ), Accenture (ACN.N: ) and Hewlett-Packard (HPQ.N: ).
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ StarMine comparative data: http://r.reuters.com/pax69p Graphics on Wipro earnings: http://link.reuters.com/cyp69p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

STOCK HIT

Wipro shares fell as much as 5.3 percent after the earnings
in a slightly weaker Mumbai market (.BSESN: ), while rival Tata
Consultancy rose as much as 5.8 percent to a record high after
its forecast-beating profits on Thursday. [ID:nSGE69K0I1]

Infosys also posted forecast-beating profit last week.

Wipro gave its staff an 8 percent annual wage hike in the
quarter that shaved off 130 basis points from its profit
margins.

“Tata Consultancy is seeing much better growth than peers
at this time due to better efficiency and geographical focus,”
Mital said. “Tata’s mainstay financial services sector is also
seeing decent growth.”

Trading volume in Wipro shares was more than double the
average volume over the last 30 days.

Research firm Forrester said last week it had trimmed its
2010 growth forecast for global IT purchases to 7 percent, down
from its July guidance of 8 percent.

“U.S. economic growth is falling short of our already
modest expectations and will expand at a snail’s pace,”
Forrester analysts wrote in the report. The U.S. accounts for
more than half of Wipro’s revenue.

The rupee’s (INR=IN: ) 6 percent rise since the start of
September is also a concern for the country’s showpiece
outsourcing sector.

IT REVENUE GROWTH SEEN

Wipro, which develops software applications, integrates IT
systems and manages call centres, forecast IT services revenue
of $1.32 billion to $1.34 billion for the third quarter ending
in December, up 3.5 to 5.5 percent from the second quarter.

On average, analysts had expected the firm to forecast a
4-5 percent increase in IT services revenue.

More than 75 percent of the company’s revenue comes from IT
services, but it also makes computer hardware, soaps and
electric bulbs.

“While the macro-economic environment continues to remain
uncertain, there is a higher degree of confidence at the micro
level,” said Wipro’s Chairman Azim Premji, ranked by Forbes as
India’s third-richest man with a wealth of $17.6 billion.

In the mid-1960s, Premji quit Stanford University, his
degree in engineering unfinished, and rushed to the aid of his
family to run the vegetable oil business after his father’s
death. He later turned that business into a an IT services
firm.

Bangalore-based Wipro, majority-owned by Premji, said
second-quarter net profit rose 10 percent to 12.85 billion
rupees ($290 million) under international accounting standards
from 11.71 billion a year ago.

Analysts had forecast net profit of 13.42 billion rupees.

Wipro, whose customers include Citigroup (C.N: ), Cisco
(CSCO.O: ) and Credit Suisse (CSGN.VX: ), said it added 29 clients
in July-September — its biggest pace of addition in four
quarters.

Wipro shares, valued at $26 billion, have risen about 11
percent this year versus a 19 percent jump in the sector index
(.BSEIT: ) and a 16 percent rise in the broader Mumbai market.
($1=44.3 rupees)
(Writing by Sumeet Chatterjee; Editing by Jui Chakravorty and
Lincoln Feast)

UPDATE 3-Wipro Q2 disappoints; currency, economy cloud outlook