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By | Joe Fay 21st April 2008 12:54

US crunch hits India

Satyam lowers guidance

The US slowdown rolled into India this week with outsourcer Satyam forecasting that revenue growth in 2009 will be well down on the 40 per cent plus rates it has become accustomed to.

The company today forecast full year 2009 revenues of $2.65bn to $2.69bn, a rise of 24 to 26 per cent on the previous year.

After seeing annual growth rates of 40 per cent or more, Satyam at the beginning of the year had set its 2009 revenue forecast at a more temperate around 30 per cent growth.

But as the financial clouds over the US have grown darker, the Hyderbad-based company has been going back to its customers and asking how they would react to "given situations", said chairman Ramalinga Ragu. Those talks clearly prompted it to lower the bar again.

As well as an increasingly nervous US market, the company, like other Indian players, has been hurt by the depreciation of the dollar, and the rising strength of the rupee.

Satyam's revenues for the fourth quarter came in at $613m, up 49.1 per cent on the year. Net income, at $112m, was up 30.1 per cent giving earnings per share of $0.34. Full year revenues were up 46.3 per cent to $2.138bn, slightly ahead of January's upwards revision, while net income was up 39.7 per cent, to $417m. This gave full year earnings per share of $1.25.

Full year earnings per share for fiscal 2009 should be $1.44 to £1.47. Q1 revenues should be $631.7m to $634.8m, up three per cent to 3.5 per cent, with eps of $0.38.

Unsurprisingly Ragu put a gloss on the slowdown, saying that as customers felt the pain they would look to drive down costs, which would play into Satyam's hands and "continue to throw up opportunities for our company".

At the same time, the firm is ramping up its business in continental Europe, Latin America and Asia Pacific. This, apparently, was already well underway before Wall St realised it had mislaid a few trillion dollars of shareholders' cash, but now it looks like an imperative if the company is to keep growing at anything like the rates the Indian sector – and its investors – have become used to.

The slowdown will dent the ambitions of India's tech workforce. CFO Srinivas Vadlamani said the firm expected to take on 14,000 to 15,000 new entrants from college this year, but said this could be adjusted as the situation dictates. At the same time, after years of wage hikes in the upper teens, the firm said workers can expect their pay packets to increase by 12 to 14 per cent this year. This would still be in line with the industry average, said Vadlamani.

The company also announced a brace of acquisitions, pulling in Caterpillar Inc's Market Research and Customer Analytics operation for $60m. Under the deal, Satyam will launch a research and analytics business unit servicing Caterpillar. The company also put $35.5m on the table for S&V Management Consultants, a Belgian-based supply chain management specialist. The deal brings 60 consultants to Satyam, and includes S&V's Equazion supply chain management suite.

Satyam also announced it is buying CA's half share in C&S, a smart card and e-learning joint venture the firms launched in 2001. ®

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