India’s outsourcing sector is bracing itself for a sharper than expected slowdown after the industry’s second-largest operator, Infosys Technologies, slashed its full-year forecast for revenue growth by nearly 30 per cent.
In a further bearish signal, Infosys also backed away from its bid for the UK’s Axon, saying it would not match a rival offer for the company from Indian competitor HCL.
EDITOR’S CHOICE
Path cleared for HCL to buy Axon - Oct-10Infosys nervous after Tata factory dispute - Sep-09Infosys ‘cautious’ despite profits jump - Jul-11Infosys develops new pricing models - Jan-11India’s IT outsourcers face increasing costs - Dec-27Indian IT gears up for US backlash - Dec-18“When we looked at the future and given what other things are happening, we felt it would be prudent to reduce our guidance,” S Gopalakrishnan, Infosys chief executive, told the FT.
The outsourcing sector has become one of the pillars of India’s economy by providing third-party services such as software and hardware management to overseas clients.
But the crisis afflicting one of the industry’s main sources of business, the US financial sector, is increasing uncertainty over the outlook for the sector.
Infosys reported strong results for its second quarter, the three months to September 30, but sounded a cautious note on the remainder of the fiscal year to March 2009.
Infosys said revenue grew 19 per cent against a year earlier in the September quarter to $1.22bn, while net profit was up 17.3 per cent to $318m.
But it forecast that full-year revenue would grow between 13.1 per cent and 15.2 per cent against a year earlier to up to $4.81bn compared with an earlier forecast of growth of between 19 and 20 per cent.
It also predicted that revenue in the third quarter ending December would be flat compared with the second quarter, at $1.22bn.
Sandeep Muthangi, analyst with India Infoline in Mumbai, said the change in guidance was a surprise to the market.
At least 3 percentage points was due to the sharp depreciation of the rupee against the US dollar, with the currency losing nearly 20 per cent this year to approach levels close to Rs50.
“What they have done is put in a significant amount of buffer for either meeting or outperforming expectations for the next quarter,” Mr Muthangi said.
Mr Gopalakrishnan also said the group believed its 600p per share bid for Axon, a specialist in applying SAP business software, was fully valued and it was not prepared to match HCL’s 650p price.
10/13/2008
Markets surge on £1,430bn European bank bail-out
Germany, France and other European countries have unveiled bail-out plans to recapitalise their banks and reopen credit markets, following the British announcement of measures to nationalise parts of the UK banking system.
The world’s stock markets soared as details emerged of the co-ordinated European campaign to spend more than £1,430bn (€1,812bn, $2,420bn) on bailing out the continent’s troubled banks.
EDITOR’S CHOICE
Turmoil brings out best in Europe - Oct-13Lex: Brownian Motion in Europe - Oct-13Treasury outlines Tarp details - Oct-13In depth: Global financial crisis - Oct-13French brawn and UK brains lead way - Oct-13Europe acts to rescue banks - Oct-13London’s FTSE 100 closed up 8.3 per cent, its second biggest one-day gain on record, after the British government announced its plans to inject £37bn into three of the country’s biggest banks.
Other European stock markets followed suit as Germany, France and the Netherlands announced their plans, Italy’s cabinet passed a new decree offering more support to the financial sector, and the Spanish government approved a guarantee for issues of new bank debt. Frankfurt’s Xetra Dax closed up 11.4 per cent, while the CAC 40 in Paris rose 11.2 per cent.
Europe’s central banks promised unlimited dollar funding in co-ordinated action with the US Federal Reserve. The European Central Bank, Bank of England and Swiss National Bank said they were ready to inject as much as needed into the markets for dollar funding covering periods of seven days, a month and 84 days.
Confidence in the money markets showed signs of returning as the interbank cost of borrowing in sterling, euros and dollars fell. Three-month euro Libor posted its biggest decline this year and three-month dollar Libor had its steepest fall since March.
US stocks rallied when Wall Street opened, as details began to emerge of the plan to recapitalise US banks and other financial institutions. Neel Kashkari, the Treasury assistant secretary appointed by Hank Paulson, Treasury secretary, to run the US government’s $700bn bail-out fund, said the scheme would be “voluntary” in his first public statements since his appointment.
“The equity purchase programme will be voluntary and designed with attractive terms to encourage participation from healthy institutions.”
Mr Kashkari said Ben Bernanke, Federal Reserve chairman, would lead the oversight board for the troubled asset relief programme. That panel, which met for the first time last week, also includes Mr Paulson and the heads of the Securities and Exchange Commission, the Federal Housing Finance Agency and the Department of Housing and Urban Development.
In other moves, Australia and New Zealand announced guarantees for all bank deposits, as did the United Arab Emirates, while Saudi Arabia cut its interest rates.
The Swedish government said on Monday it would unveil steps to safeguard their financial sector in the next few days, but did not plan to inject capital into the Nordic country’s banks. Norway announced at the weekend it would offer its commercial banks up to $55.4bn in government bonds in exchange for mortgage debt and Portugal said it would make as much as €20bn available in guarantees for its banks’ financing.
Gordon Brown, the UK prime minister, defended his government’s “unprecedented but essential” £37bn injection that could leave it owning a majority stake in Royal Bank of Scotland, one of the world’s biggest banks, and more than 40 per cent of the combined Lloyds TSB and HBOS, which is set to be the country’s largest mortgage lender.
The German government endorsed measures closely modelled on the British rescue plan unveiled last week, will initially empower the finance ministry provide as much as €500bn in loan guarantees and capital to bolster the banking system.
The French government pledged €360bn to the country’s banks, including €320bn of loan guarantees and €40bn to buy stakes in French banks. The guarantees will run through to the end of 2009.
Dutch banks will be able to draw on €200bn of government guarantees for their loans to each other.
The world’s stock markets soared as details emerged of the co-ordinated European campaign to spend more than £1,430bn (€1,812bn, $2,420bn) on bailing out the continent’s troubled banks.
EDITOR’S CHOICE
Turmoil brings out best in Europe - Oct-13Lex: Brownian Motion in Europe - Oct-13Treasury outlines Tarp details - Oct-13In depth: Global financial crisis - Oct-13French brawn and UK brains lead way - Oct-13Europe acts to rescue banks - Oct-13London’s FTSE 100 closed up 8.3 per cent, its second biggest one-day gain on record, after the British government announced its plans to inject £37bn into three of the country’s biggest banks.
Other European stock markets followed suit as Germany, France and the Netherlands announced their plans, Italy’s cabinet passed a new decree offering more support to the financial sector, and the Spanish government approved a guarantee for issues of new bank debt. Frankfurt’s Xetra Dax closed up 11.4 per cent, while the CAC 40 in Paris rose 11.2 per cent.
Europe’s central banks promised unlimited dollar funding in co-ordinated action with the US Federal Reserve. The European Central Bank, Bank of England and Swiss National Bank said they were ready to inject as much as needed into the markets for dollar funding covering periods of seven days, a month and 84 days.
Confidence in the money markets showed signs of returning as the interbank cost of borrowing in sterling, euros and dollars fell. Three-month euro Libor posted its biggest decline this year and three-month dollar Libor had its steepest fall since March.
US stocks rallied when Wall Street opened, as details began to emerge of the plan to recapitalise US banks and other financial institutions. Neel Kashkari, the Treasury assistant secretary appointed by Hank Paulson, Treasury secretary, to run the US government’s $700bn bail-out fund, said the scheme would be “voluntary” in his first public statements since his appointment.
“The equity purchase programme will be voluntary and designed with attractive terms to encourage participation from healthy institutions.”
Mr Kashkari said Ben Bernanke, Federal Reserve chairman, would lead the oversight board for the troubled asset relief programme. That panel, which met for the first time last week, also includes Mr Paulson and the heads of the Securities and Exchange Commission, the Federal Housing Finance Agency and the Department of Housing and Urban Development.
In other moves, Australia and New Zealand announced guarantees for all bank deposits, as did the United Arab Emirates, while Saudi Arabia cut its interest rates.
The Swedish government said on Monday it would unveil steps to safeguard their financial sector in the next few days, but did not plan to inject capital into the Nordic country’s banks. Norway announced at the weekend it would offer its commercial banks up to $55.4bn in government bonds in exchange for mortgage debt and Portugal said it would make as much as €20bn available in guarantees for its banks’ financing.
Gordon Brown, the UK prime minister, defended his government’s “unprecedented but essential” £37bn injection that could leave it owning a majority stake in Royal Bank of Scotland, one of the world’s biggest banks, and more than 40 per cent of the combined Lloyds TSB and HBOS, which is set to be the country’s largest mortgage lender.
The German government endorsed measures closely modelled on the British rescue plan unveiled last week, will initially empower the finance ministry provide as much as €500bn in loan guarantees and capital to bolster the banking system.
The French government pledged €360bn to the country’s banks, including €320bn of loan guarantees and €40bn to buy stakes in French banks. The guarantees will run through to the end of 2009.
Dutch banks will be able to draw on €200bn of government guarantees for their loans to each other.
10/06/2008
What is going on with the markets? What should you do about it?
On September 27th, investors thought the $700 bailout package was on the verge of passing the House. Hank Paulson and George W. Bush pushed that bill as the way to avoid financial calamity -- and "heaven help us" if it failed to pass. Last Monday, the bill was voted down -- and the Dow fell a record 778 points. Last Friday, an $810 billion version of the bill passed -- with added sweeteners.
So, did the clouds in the heavens part to reveal sunshine and rainbows? Not exactly. Since the market closed on the 27th -- the day before the bailout to save the world was expected to pass -- the Dow has lost 1,188 points, wiping out $2 trillion in stock market value. I wonder whether anyone actually believed the government when it said the bailout bill would fix things.
I didn't, because I did not expect the bailout to work. The good news is that with the market regularly tanking so much every day, our leaders are getting ever more desperate to try something that will work. This increases the odds that they will try what I think is a better plan. And if it would kindly supply a $25 billion guarantee to the $1.7 trillion Commercial Paper (CP) market. This would help companies finance payroll and buy inventory. (How hard would that be to do this after the government has already set aside $50 billion to guarantee the $3.4 trillion money market industry?)
Serious Money: Up stocks on bad day -- AAPL, EWBC, IRBT & MET
Investors shuddered in horror as the market was dropping; with the Dow down 800 points in midday trading and finally closing at a better but still dismal 9,955.50, off -369.88 or -3.58%.
So, on this terrible day what if anything made a good showing of itself? Four stocks among the ones that I follow popped up.
Apple Inc (NASDAQ: AAPL) closed at $98.14, up 1.07, or 1.10%. Apple needs no introduction to most readers of BloggingStocks or anyone breathing almost anywhere on the planet. Although the stock appears to be a fallen star for the time being and is down 51% for the year it managed to outshine almost everything else today. Apple has not traded at a P/E below it's projected growth rate in years so the bargain hunters were obviously interested.
East West Bancorp (NASDAQ: EWBC) closed at $15.69, up 0.61, or 4.05%. Some banking stocks are recovering nicely and this small California bank with business in the Asian community here and in China as well seems to be getting out from under the taint of the sector. It is one of the stocks I included in Chasing Value: Financial devastation? Still up but less. If I had to 'bank' on whether this stock is higher or lower in a years time I would say higher.
IRobot Corp (NYSE: IRBT) closed at $13.50 up 0.36 or 2.74%. the maker of small robotic home vacuum cleaners and military reconnaissance vehicles has been hovering between in a tight range for months. On this day when other companies were suffering it managed to eek out a gain.
Metropolitan Life (NYSE: MET) closed at $44.32, up 2.19, or 5.20%. which is nothing short of remarkable today. Now that AIG has tanked, I think it is the largest of the international life insurance companie and is no doubt chasing and getting some of American International Group's (NYSE: AIG) business. AIG was up a penny today too. Investors Seek Safety with MetLife.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of IRBT.
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