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Wipro profit tempered by staff costs, forex loss

Thu, 10/21/2010 - 9:05pm
ERIKA KINETZ - AP Business Writer - Associated Press

Wipro Ltd., India's third-largest software outsourcer, reported a 10 percent rise in quarterly profit Friday, short of expectations as salary hikes and foreign exchange losses hit margins, sending the stock down nearly 4 percent.

The rupee's appreciation against the dollar — which accounts for most revenue for India's software services exporters — and spiraling staff costs as companies fight to hold onto employees to meet rising demand have hit profit margins at Wipro and its competitors.

Net income for the July-September quarter was 12.9 billion rupees ($288 million), the company said Friday. Total revenue rose 12 percent from the same period last year to 77.3 billion rupees ($1.73 billion).

"We saw strong momentum in demand as customers tried to catch up with the under-investment in IT in the previous years," chairman Azim Premji said in a statement.

Despite that strong demand, operating margins at Wipro's mainstay IT services business slipped to 22.2 percent from 24.7 percent in the prior quarter.

Voluntary staff attrition for the quarter was 23.5 percent, up from 10.5 percent during the same period last year.

"The numbers were clearly below par," said IIFL Capital analyst Rajiv Mehta. "The problem has been the fact that the dollar revenue growth sequentially has not been as robust" as Wipro's competitors TCS and Infosys.

Wipro said IT services revenues for the December quarter would be 3.5 percent to 5.5 percent higher, at $1.32 billion to $1.34 billion.

Wipro shares were down 3.6 percent at 453 rupees in early Mumbai trading.

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