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Wise move, Infosys cuts revenue outlook and says not interested in Axon

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 10, 2008

Infosys Technologies Ltd., India’s second-largest software-services provider, on Friday said it would not raise the bid price of 600 pence a share for UK-based Axon, a move which rules it out from the race to acquire the SAP firm.

“After careful consideration, the board of Infosys has concluded that it will not increase the price of its original offer dated August 25, 2008,” Infosys said in a filing to the Bombay Stock Exchange.

Last month, HCL Technologies had increased the bid to 650 pence per share for Axon valuing the company at 441.1 million pounds. Infosys also reported improved operating profitability during the September quarter. Operating margin expanded by 264 basis points sequentially (QoQ) and 184 bps year-on-year to 33.1 per cent. Net margin showed a marginal drop of over 40 bps to 26.4 per cent sequentially and annually.

As hinted by a report in ET today, Infosys recorded a decline in its new client additions. These reduced to 40 in the September quarter from 49 a quarter ago and 48 a year ago.

Though Infosys has given robust number for the latest ended quarter, it has cut its dollar guidance for FY’09 by over 5 per cent citing the global macroeconomic turmoil. For FY’09, it expects EPS to be $2.24, down from $2.32 earlier. Revenue is expected to be $4.72-4.81 billion, down from earlier estimation of $4.97-5.05 billion.

Last week, Axon Group had decided to go ahead with the 441-million pound acquisition offer from HCL Technologies, noting that the price is at a premium of 8.3 per cent to Infosys’ bid, worth 407.1 million pounds. Revenue growth in rupees was however higher at 32% in the quarter because of the appreciating U.S. dollar. Profit growth was 30% in rupees for the quarter.

The company’s results for the quarter are in accordance with International Financial Reporting Standards (IFRS). It previously reported according to U.S. GAAP ( Generally Accepted Accounting Principles).

The National Association of Software and Service Companies (Nasscom) has said that the crisis in the financial services sector in the U.S. will have an impact on Indian outsourcers in the short term. With no third suitor in sight and its competitor Infosys Technologies today announcing not raising the bid price from 600 pence a share, HCL Technologies is likely to go ahead with the acquisition of UK-based SAP consultancy firm Axon plc.

Bangalore-based Infosys today said it would not raise the bid price of 600 pence a share for UK-based Axon which had already decided to go ahead with a 441-million-pound acquisition offer from rival company, withdrawing its support to lower its bid of 407.1 million pounds.

HCL had offered to pay 650 pence per share, 8.3 per cent higher than rival Infosys. A company release on the development is expected later in the evening.

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