Infosys Q3 solid as CEO Sikka revs software focused revamp

In Dr. Vishal Sikka's first full quarter as CEO of Infosys, the outsourcing company delivered solid financial results as it starts an overhaul---culturally and technically---to focus more on software and innovation.

Infosys reported fiscal third quarter earnings of $522 million, or 46 cents a share, on revenue of $2.22 billion for the three months ended Dec. 31. Infosys' sales were up 5.6 percent in the third quarter compared to a year ago.

More importantly, Infosys maintained its outlook for 7 percent to 9 percent growth in U.S. dollars. That outlook was in question given currency fluctuations around the world. Infosys ended the quarter with cash and equivalents of $5.53 billion.

For Sikka, who took over Infosys Aug. 1 after being a member of SAP's executive board, delivering solid results is critical as the company aims to create a new culture. Sikka has initiated classes in design thinking for 9,000 employees, honed the company's software strategy and worked to keep top performers in the fold via bonuses. Infosys ended the quarter with 169,638 employees and had gross additions of 13,154. The company also added 59 clients.

Sikka's challenge is to renew existing Infosys' existing business, which is characterized by high dollar low margin services deals, and new efforts in key categories such as cloud, big data, artificial intelligence, omnichannel retailing and next-gen payment systems.

Previously:Infosys' Sikka promotes 5,000 but will that stop the churn? | Vishal Sikka, father of SAP's HANA, to look after Infosys | SAP's Sikka steps down, company reshuffles executive board

In the meantime, Infosys saw mixed growth in financial services and retail, consumer product goods and life sciences were challenging industries. The energy industry has begun focusing on cost savings due to falling oil prices. Spending on analytics, multichannel commerce, digital marketing and ERP was solid. Deals are taking longer to compete.

Key points from Sikka on the Infosys conference call included:

• The company saw volume growth of 4.2 percent in the third quarter. That tally was the best in the last three years, but revenue per billed employee fell. Sikka said Infosys is looking to improve productivity.
• "We have expanded our innovation fund from the current $100 million to $500 million to support the creation of a global ecosystem of strategic partners. This capital will be used to invest into young companies, innovating in areas such as artificial intelligence, automation, the Internet of Things and sensors, collaboration and design," said Sikka.
• 70 percent of front-end consultants have been trained in design thinking. "We currently have a pipeline of workshops for more than 25 clients planned in design thinking," said Sikka. "We believe this will enable a fundamental shift in the way that we approach client problems and solving our own challenges through innovation by being proactive about finding problems, in addition to being excellent at solving them. We're also working with the Stanford Graduate School of Business to design and deliver a customized strategic leadership development program for our company's executives.
• Infosys lost 8,900 employees in the third quarter down from the 10,000 range in each of the previous two quarters. "We announced a 100% bonus payout in Q2, and in addition a special holiday bonus to high performing employees. For Q3, we have announced a 100% average bonus payout across the employee base. We want Infosys to be a place where each one of us can pursue a dream career," said Sikka.