Infosys Quarterly Earnings Slip

The US stock market proved to be itself to be as efficient as ever, in sending Infosys share prices falling 32% last Thursday.

Examing the movement of a stock price is always much easier and accurate when looking backwards then forwards. For instance, looking backwards, one could agree, that the ongoing war may have affected the results for this quarter. A case could also be made, that the outbreak of SARS in Asia may have led to some deals not being closed

Additionally, an examination of the financial numbers for the company shows that analysts have big expectations for the company. For instance, it was expected that Infosys would grow 18% and generate 58.6 million dollars of net income this quarter. Instead, growth was 12.4% and net income was 54 million dollars.

The war and SARS will eventually pass. However, two additional concerns were raised by internal staff. There is strong downward pressure on the billing rates and the strength of the Rupee is squeezing profits from work performed in India.

The pressure on rates will only continue. There are a number of very strong IT companies growing rapidly and each of them views the same prize, Fortune 500 companies in North America. As the services that companies like Infosys provide, come to be seen more and more as commodities, it will become even harder to differentiate one company from another. At this point, the key advantage that a company like Infosys has is it's size. Big companies will only rely on other big companies for certain services.