IT cos. Q2 results, satisfactory or a warning?

February has been an eventful month as far as the offshore IT services providing companies. The troika of the BIG 3 offshore companies TCS, Wipro, Infosys have all come out with their results and the results have been good. Also their smaller cousins HCL-T and Sathyam have also come out with results and on paper they also seem good. For obvious reasons I am not including the results of HCL’s group companies results HCL-Infosys (which incidentally had a great quarter) and NIIT while comparing HCL with other IT companies. The following link gives the overview of the results, and it does look rosy http://www.amrresearch.com/Content/View.asp?pmillid=17963
When I went through HCL-T’s result I came across this strange sounding ratio EBITA very often and wondered what it meant, googled it and what did I find? Earning Before Interest Taxes and Amortization. It turns out this is more commonly used to value a company which is subjected to take over. Then why is it that HCL is using this, than say net profit? That ordinary souls like me can understand is a question to be posed to the financial honchos sitting up there in HCL Sunnyvale, USA. But I just hope that its got nothing to do with the Rs 100 cr tax bill slapped by the IT department in India. Any way it was interesting comparing the results of the 3 leading companies.
Coming down to results.*
HCL-T TCS Infosys
Revenues
Amt 801.38 2691 1875.61
QoQ 2.5% n/a 7.22%
YoY 29.4% n/a 49.21%
Net Profit
Amt 121.91 713.31 497.31
QoQ -20.2% n/a 51.31%
YoY 46.7% n/a 11.37%
Profit/
100 Rs 15.21 26.5 26.51
Of revenue
*In Rs crores
Since TCS became a public company only last year YoY figures are not avilable. QoQ figures were also not available but I dint search to hard for it.
Dint have time to go through Wipro and Sathyam’s results but I guess it would be similar, Wipro more in the league of TCS and Infy and Sathyam more like HCL may be slightly better. I guess it points towards consolidation at the top where the big are getting bigger and the smaller cos. are stagnating.
HCL’s QoQ profits declining must be seen in the light that HCL-T has cash reserves are a mammoth $450 million and they receive a lot of income through investments and there have been some changes in that aspect i.e. other income. Also figurers in $ terms look better but don’t ask me why? Got to do some thing with exchange rates I guess.
So the trends seem to be mixed, Indeed and going forward I guess the tectonic plates under the IT cos. are moving and moving fast where will it lead us? Will the smaller cos. be elbowed out eventually? Only time will tell.
PS: 1. Going through the official results of the 3 cos. I found Infosys as the most transparent and open about the results, followed by HCL-T and then by TCS. Kudos to Infosys, probably its got to do with the time these companys have been publicly traded. My respect for Infosys has only increased because of this.
2. While HCL-T may look small compared to these companies HCL corporations consolidated revenue is 2 billion dollars or 9000 cr. Rs or around 2250 cr. Rs per quarter. Bigger than both Wipro and Infosys.