Infosys needs to up overseas acquisitions, co-innovation

Indian outsourcing giant's stock price dropped by over 20 percent after its earnings announcement on Friday, which reveals investor apprehension over a low growth guidance lagged behind the industry.
Written by Mahesh Sharma, Correspondent on

The slide in Infosys's stock price indicates investor disappointment with the low growth guidance, which lags the Indian outsourcing industry.
Infosys is under even more pressure after its forecast.

Last Friday, Indian outsourcer posted its Q4 2013 earnings where profit dropped 4.1 percent to US$444 million. Income grew by 9.4 percent to US$1.9 billion. This saw its share price dip by over 20 percent, to the 2,300 rupee (US$43.10) mark.

Infosys CEO S.D. Shibulal had projected revenues to grow by 6 to 10 percent over the coming year. This lags the industry growth forecast of 11 to 14 percent, which was formulated by India's peak IT body Nasscom.
Amit Goel, CEO of Bangalore-based consulting firm Knowledgefaber, said the low guidance spooked analysts and industry.
Fresh in their minds was the company's performance last year, when it missed full-year guidance for the first time in almost two decades. "This indicates slower growth for Infosys as compared to industry and competitors," Goel said.
Also given that Infosys has missed guidances in the past it is not good news and so the stock tumbled, he added.
Infosys has struggled to compete with the discounts offered by competitors, according the Goel. "A lot of contracts are won and lost on pricing... Infosys has been known to give smaller discounts, but even this has pressured its margins."
Manish Bahl, vice president and country manager for Forrester India, said Infosys cannot compete on price alone.
"In order to sustain its premium pricing model, Infosys needs to adopt an aggressive strategy around overseas acquisitions and co-innovation with clients and partners especially around disruptive technologies," Bahl said. 
Editorial standards