Wipro’s IT Services Revenue Up on Improved Demand

Wipro on Friday reported growth in U.S. dollar terms in its IT services revenue for the quarter ended June 30, citing strong demand for its services. Inside IT Outsourcing

The company’s margins in the IT services business also improved.

Wipro’s competitors, Infosys Technologies and Tata Consultancy Services, have also reported an uptick in revenue for the quarter, but this is still far lower than the revenue growth rates before the recession, according to analysts.

The global outsourcing market is not yet bouncing back as economic uncertainty continues to weigh on corporations around the world, outsourcing consultancy firm Technology Partners International (TPI) said earlier this week.

Wipro, which is India’s third largest outsourcer, said that its IT services revenue in U.S. dollar terms was $1.2 billion, up by 16.6 percent from the same quarter last year. Revenue growth in rupee terms was slightly lower at 14 percent, reflecting currency fluctuations, including a declining Euro.

The company’s operating margin rose to 24.5 percent for the quarter, up from 22.2 percent in the same quarter last year, while its gross margin barely changed to 32.35 percent this year compared with 32.29 percent last year. Wipro has a diversified business that also includes consumer care, and it does not break out its profits by business segment.

The company has forecast that revenue from its IT Services business will be close to $1.3 billion for the quarter ending September 30, 2010. This would compare to a little over $1 billion during the same quarter a year ago.

The company’s results for the quarter are in accordance with International Financial Reporting Standards (IFRS).

The TPI Index, which measures commercial outsourcing contracts worldwide valued at $25 million or more, recorded total contract value (TCV) of $18.1 billion in the second quarter of 2010, down about 13 percent both sequentially and year-on-year.

Indian companies are showing revenue growth because they have been expanding business from existing customers, and most of their new deals are smaller than $25 million, said Siddharth Pai, a partner at TPI, on Friday.

Wipro added 4,854 staff in its IT services business in the quarter ended June 30, taking the total number of employees working on IT services to 112,925 employees as of June 30, 2010. It added 22 new clients in the quarter.

During the quarter, Wipro took over the ownership and management of Citibank’s data center in Meerbusch, a suburb of Dusseldorf. As part of the deal, Citibank will lease back office and data center space from Wipro for at least 30 months, while Wipro will provide Citibank with facilities management and physical infrastructure management services during the period.

Wipro plans to offer similar infrastructure management solutions from this center to other clients in Europe and other parts of the world. Europe accounted for 25.4 percent of its revenue in the quarter, second to the U.S. which contributed 57.3 percent.