Thursday, 15 January 2009

TCS + Infosys = £1bn and more

(By Anthony Miller). You could pretty much map Infosys management comments from Tuesday on top of today’s TCS’ 3Q09 results in terms of tone and substance, though as usual the Mumbai-based giant of the Indian offshore services sector turned in the bigger numbers. Once again a combination of volatile currencies and differing accounting principles made reported results less meaningful, but at constant currency (ccy), TCS grew revenues 1% seq., much as did Infosys. However, growth in Europe (also ccy) was more even than with Infosys, at +4% seq. for both UK and Continental Europe.

TCS is not quite as transparent with exchange rates as Infosys, but on my estimates, TCS chalked up UK revenues of £188m (+28% yoy) for the quarter, bringing calendar 2008 total UK revenues to £664m (+23%), around 50% higher than Infosys. This performance could even see TCS in the UK IT services top ten when we publish our rankings in April. And as you may have calculated yourselves, these two top Indian players alone earned £1bn+ from the UK market last year.

Also like Infosys, TCS shares a number of customers with Satyam, and likewise, management nobly claimed not to be poaching their customers ... unless ‘invited’, of course, which they have been. Otherwise, much the same haziness on visibility, with some customer budgets yet to be finalised. Top growth sectors for TCS were Retail (!), Pharma/Life Sciences, and Media/Entertainment. The failure of telecoms equipment manufacturer, Nortel, won't make a big dent in TCS' business - it seems they contributed around $10m last quarter, less than 1% of TCS' almost $1.5bn 3Q09 revenues .

No question TCS will continue to win share in the UK market this year and, like Infosys, I’d be surprised if they didn’t strike low double-digit growth.

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