In this blog, we have looked at Infosys and we will take a look again to see how the company is doing.
Infosys is an Indian company that trades on Nasdaq. The businesses the company is into is noted below from its web site.
Infosys Technologies Ltd. (NASDAQ: INFY) provides consulting and IT services to clients globally - as partners to conceptualize and realize technology driven business transformation initiatives. With over 72,000 employees worldwide, we use a low-risk Global Delivery Model (GDM) to accelerate schedules with a high degree of time and cost predictability.
As one of the pioneers in strategic offshore outsourcing of software services, Infosys has leveraged the global trend of offshore outsourcing. Even as many software outsourcing companies were blamed for diverting global jobs to cheaper offshore outsourcing destinations like India and China, Infosys was recently applauded by Wired magazine for its unique offshore outsourcing strategy — it singled out Infosys for turning the outsourcing myth around and bringing jobs back to the US.
Infosys provides end-to-end business solutions that leverage technology. We provide solutions for a dynamic environment where business and technology strategies converge. Our approach focuses on new ways of business combining IT innovation and adoption while also leveraging an organization's current IT assets. We work with large global corporations and new generation technology companies - to build new products or services and to implement prudent business and technology strategies in today's dynamic digital environment.
First, let us look at the financials. For FY07, revenues increased by 44% and profits increased by 53%. For FY08, the company expects revenues to grow by about 30% compared to FY07. Profits will probably grow at a faster pace of about 40%.
The main concern with the outlook is the increased cost of hiring and retaining employees. Infosys pays about $7000 per entry level employee in India and this price is expected to go up by about 15% on the average in the next two years. The company is also increasing the salary of overseas employees by about 5-6% this year compared to about 3% last year. In addition to this, the company is also getting squeezed by the sudden appreciation in the Indian currency of about 10% in the last month and half. Hopefully the company has hedging operations - otherwise this is a double whammy of higher salaries causing 25% increase in costs.
In the conference call, the company talked about some of these challenges. Previously, the company only recruited engineering graduates - now it recruits 10% of its work force from non science and engineering fields. One can see this percentage going up as there is more demand for skilled labor.
Infosys is a well run Indian company - probably the best of the outsourcing companies by far. The management is well known for adding share holder value and for ethical behavior. While the stock is not cheap - given its growth rate, this is a good buy during market dips. It is already the top Indian company in all the emerging market funds that have exposure to India.