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Infosys fails to realize USD 5bn revenue dream

Published on Wed, Apr 15, 2009 at 21:23 | Source : CNBC-TV18

Updated at Thu, Apr 16, 2009 at 10:33

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In its annual guidance a year ago, Infosys said revenues would cross USD 5 billion. But much to the disappointment of investors, the company has only managed USD 4.7 billion. And with Infosys warning that business may shrink in the coming fiscal, the USD 5 billion dream looks even more elusive. CNBC-TV18's Raja Rajeshwari and Shruti Rajkumar report.

"Our guidance is a statement of fact as we see it today," said SD Shibulal, COO and Board Member, Infosys, during the results boardroom on Wednesday. The global meltdown has put paid to Infosys's USD 5 billion revenue dream. It is now fighting to maintain its current run-rate, and for the first time in its history, has warned that in FY10, revenues may come in lower between USD 4.35 and USD 4.52 billion.

Also read: Infy disappoints; Q1FY10 guidance turns negative

S Gopalakrishnan, CEO & MD, Infosys, said, "Most of our clients have a challenging environment, impacting their own revenues and currency market seems to be very volatile and when we did our survey of customers, they said IT budgets are going to be down so based on that and visibility we have, we gave a guidance which in constant currency terms is flat to -2% to -2.5%.

Pricing, which was stable in early FY09, is also under threat. What was earlier expected to be a 5% decline is now a 6-6.5% fall. V Balakrishnan, CFO, Infosys, said, "Pricing in Q4, we take it as a constant for the next full year, which means average drop in pricing for FY09-10 will be 6-6.5%. We believe environment has stabilised to some extent, if catastrophe happens it could become challenging, what pricing we get today, we expect it to continue over the next one year."

Volumes, however, will be the biggest wild card. With companies not committing to more than a quarterly or monthly budget, Infosys has tough times ahead.

Shibulal said, "Recently we did a survey of our clients through our managers, and 61% have closed their budgets, 89% said [they see a] downturn in IT budgets. If you look at our top-135 clients, budgets have closed about 60-70%."

Till these client budgets open up, Infosys will be under pressure to meet its sales targets. And the litmus test will come at the end of June, when the first quarter numbers will be announced.