friends , i think every IT geek knows about INFOSYS. as heading tells you what had happen to Infosys read the article to know more.
No successful man or an institution can escape the most wretched curse of all – the mid-life crisis. Infosys Technologies is just living through it. Market capitalisation erosion of a fifth for a company that fired up the imagination of millions – be it investors or aspiring job seekers or entrepreneurs – is a reflection of the state of disillusionment with the firm.
Nothing seems to be going right for the firm that was once a darling of investors. And the management’s admission of its inabilities to turn the giant ship around is enough for the stock slump.
Its quarterly performance has long stopped rhyming with the management commentary. On Friday, it reported the worst ever margin performance and guided for a modest growth, a lot lesser than the forecast for the industry as a whole. That’s not what investors expect from a leader.
It reported its worst ever quarterly operating margin of 23.6% as direct selling cost and administrative expenses continued to increase even though revenues failed to budge from its previous quarter’s level. Even after adjusting for low margin business of Lodestone, a recently acquired Swiss company, operating margin was 24.8%, 90 basis points lower than the previous quarter. A basis point is 0.01 percentage point.
What may spook investors is the sharp and gradual fall in the profitability of the erstwhile IT bellwether that had always taken pride in demonstrating industry’s best margins. Its operating margin has fallen from 31% in the December 2011 quarter.
The margin has dropped for five consecutive quarters reflecting its eroding strength to command a premium which has been the hallmark of the Bangalore-based company founded by NR Narayana Murthy and Nandan Nilekani in 1981.
Competition catches up with everyone and Infosys is no exception. TCS and HCL Technologies, in better frame, are snapping at its heels. That could keep profitability under check in the next few quarters at least. Add to that the low margin business of Lodestone, which would take time to get the benefits of offshoring, underutilisation of the employees and a portion of the wage hike.
In addition, the FY14 guidance is anything but assuring. At the lower end of the 6-10% revenue guidance, the company expects the top line to grow at just over 1.5% on an average every quarter in the current fiscal.
This is dismal and hardly any improvement from last fiscal’s 5.8% in dollar terms. This also means the company is not expecting any major turnaround in its growth trajectory in the next few quarters, which may drag the valuation.