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Infosys signals recovery in outsourcing market

The company posts significant revenue growth, but profits stay flat

Infosys Technologies, India's second largest outsourcer, reported on Tuesday revenue of US$1.2 billion for the quarter ended Dec. 31, up 5.2 percent over the same quarter in the previous year.

Despite the rise in revenue, the company's profits for the quarter were basically flat, rising 0.6 percent to $334 million.

The rise in the value of the Indian rupee against the U.S. dollar meant the company's revenue in rupees dropped by 0.8 percent during the quarter, in comparison to the same quarter in the previous year. Profits in rupees declined by 3.6 percent.

Analysts have forecasted a recovery in the market for offshore outsourcing, but cautioned that the industry will take some time to reach growth levels matching those before the recession.

Infosys revised upwards its forecast for its fiscal year ending March 31. The company's annual revenue is now expected to be in the range of $4.75 billion and $4.76 billion, a year-on-year increase of 1.8 percent to 2.0 percent.

Infosys said that offshore outsourcing is likely to benefit from the recovery, even though IT budgets will be flat this year.

The recovery, which started in a small way in the third quarter of last year, is expected to continue strongly in the current quarter, said Diptarup Chakraborti, principal research analyst at Gartner.

Most of the IT services business is still expenditure considered necessary by user organizations, which was postponed because of the recession, Chakraborti said. Discretionary expenditure on IT services is still to pick up, he added.

Indian outsourcing companies have started adding staff in anticipation of a recovery. Infosys added 4,429 employees in the quarter, taking the total number of staff to 109,882 as of Dec. 31. The company added 1,548 staff in the previous quarter.

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