1. India Survey Shows Expectation for Rupee to fall to 58 INR/USD (6/4/12). A ING Vysya survey of 220 organization (440 respondents) has the majority expecting the currency to fall as low as 58 INR/USD. The INR (Rupee) has depreciated 5.7% on average this quarter to 53.6 from 50.7. A 1% move has a 40 bps impact on margins for our coverage universe on average.
2. President Obama Expands Optional Practical Training (OPT) visa program for Foreign Students (6/4/12). The number of fields of study were increased by 90 to 400. OPT allows foreign STEM (Science, Technical, Engineering & Math) grads to work in the U.S. for 29 months without a work visa. Critics view OPT as a backdoor H1-B visa.
3. Bottom Line Drivers in Place for Virtusa (6/4/12). Takeaways: 1) demand is healthy as VRTU scales up & competes on larger deals, 2) business at top clients (JPM & BT) stable, and 3) margin expansion expected at low end of guidance.
4. Margin Flexibility Key Component for Syntel (6/5/12). Takeaways: 1) 2012 margin guidance appears conservative; margin flexibility protects EPS during slowdowns, 2) focus remains on growing accounts 6 to 20, & 3) SYNT somewhat defensive due to high maintenance work (2/3) & low exposure to Europe.
5. Spending Time with the Consulting Practice of Infosys (6/4/12). Takeaways: 1) consulting is evolving @ INFY who prices lower than competition, but cost of delivery is lower, 2) No change in demand commentary, & 3) Margin profile may be more sustainable. Offshore wage increases were "delayed" not "canceled". Wage hikes could be put through if currency provides upside to margins or performance improves.
6. Infosys Clients Delaying Decisions on IT Projects (6/7/12). Infosys top executive said that there are delays in IT Spending, but the company hasn't seen cancellations. Co-Chairman S. Gopalakrishnan commented that uncertainty in the Euro Zone has caused companies to pull back on investing, even though they are doing well.
7. Nothing is Immune from Macro but BPO Makes Sense (6/8/12). Takeaways: 1) BPO demand remains healthy after recent channel checks, 2) BPO at positive inflection point "More At Bats" due to sales build out, etc & 3) BPO is defensive w/ little exposure to Europe & Other Areas of concern.
8. Just sitting here wondering: why the back half of the year would look better than the first half economically.
9. We have meetings set up with Infosys, Cognizant, & an industry consultant next week. Check with your Janney salesperson for details.
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Joseph D. Foresi