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Infosys lifts outlook on improving outsourcing demand

Employees of Indian software company Infosys walk past Infosys logos at their campus in the Electronic City area in Bangalore September 4, 2
Employees of Indian software company Infosys walk past Infosys logos at their campus in the Electronic City area in Bangalore September 4, 2

By Soham Chatterjee

MYSORE, India (Reuters) - India's Infosys Ltd is chasing more big-ticket contracts from Europe and the United States this year and keeping a lid on costs as the outsourcing services giant powers ahead with a turnaround to regain market share.

India's second largest software services exporter raised on Friday its revenue growth outlook for the 2013/14 financial year to between 11.5 and 12 percent from a previously forecast 9-10 percent, citing higher demand for its services.

It reported its first decrease in its workforce in nearly five years, with overall attrition rates in the December quarter rising to 18.1 percent from 15.1 percent a year ago.

"While the organization is going through transformation, there may be some minor disruptions," Chief Executive SD Shibulal told an analysts' briefing after announcing the company's earnings.

"But as you can see over the last two or three quarters as the transformation has happened we have continued to focus on our clients, we have continued to focus on growth, and continued to focus on margins improvement."

The departure of 1,823 staff in the December quarter, and several senior executives over the last six months, comes amid a strategic shift led by founder N.R. Narayana Murthy, who was brought back last year after a string of disappointing results.

Infosys did not say whether the employees had been laid off or had left voluntarily.

"I am not too worried about it. With every restructuring there are some people who have to go," said Juergen Maiar, a Vienna-based fund manager with Raiffeisen Euroasien Aktien, which owns Infosys shares.

"We are looking at improvement in utilization with the reduction in staff numbers, which is good for investors."

Infosys shares rose as much as 3.6 percent after the company announced its quarterly earnings. The Mumbai stock market was trading 0.7 percent higher.

Infosys was once considered a bellwether of India's export-driven $108 billion IT outsourcing industry, but an inflexibility on prices, among other factors, resulted in it losing market share to rivals like Tata Consultancy Services Ltd, Wipro Ltd and Cognizant Technology Solutions Corp.

Infosys, which has been struggling to boost revenue from its own software platforms and high-margin consulting business, appeared to have some success in winning over large deals as the turnaround took hold.

It said the number of $100 million-plus revenue clients rose to 15 in the quarter up from 12 a year earlier.

Worldwide IT spending growth is expected to accelerate to more than 5 percent in 2014 after growing last year at its slowest pace since the financial crisis, according to the International Data Corporation.

Infosys, whose customers include Bank of America Corp and BT Group Plc, said net profit for the three months ended December 31 was 28.75 billion rupees ($463 million), compared with 23.69 billion rupees a year earlier.

That compares with the average estimate of 27.15 billion rupees by 21 analysts, according to Thomson Reuters I/B/E/S.

Revenue rose 25 percent 130.3 billion rupees in the quarter. The company added 54 new clients during the quarter, taking the tally to 888.

(Writing by Aradhana Aravindan and Sumeet Chatterjee; Editing by Miral Fahmy and Tony Munroe)

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