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News >> Technology >>
IT companies falter in June
By agencies
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Thursday, 11 August 2005, 19:30 IST
MUMBAI: The IT sectorÂ’s performance in the quarter ended June Â’05 was a mixed bag, though a preliminary analysis shows a decline in performance. ThatÂ’s because profits of most IT companies declined during the quarter, compared to the March Â’05 quarter.
Foreign currency fluctuations and salary increases were the main reasons for this. However, a positive element was that billing rates remained stable, and new clients were added at slightly higher rates. Also, leading companies have seen sales grow quarter-on-quarter and IT companies are succeeding in reducing their dependence on the US. Europe continued to drive growth for most companies during this period.
The decline in profits was mainly due to higher salary costs and adverse foreign currency fluctuations. InfosysÂ’ net profit declined by 5 percent, partly due to an increase in offshore salaries of its employees by 13-15 percent and overseas salaries by 2-3 percent. Visa expenses to the tune of $5 million added to costs. The fall in the pound and euro led to a negative impact of 0.5 percent on the topline of company.
With regard to attrition, the IT sector has been losing employees at the senior management level. Infosys, Wipro and Satyam are some of the companies, which have lost such employees.
On the positive side, Europe continues to drive the growth of IT companies. For Infosys, the contribution from the Europe business has gone up to 23.9 percent for the quarter ended June ‘05 from 23.3 percent the previous quarter. Wipro, MphasiS and i-flex are some of the companies that have witnessed strong growth in the European business during the quarter.