Techs nosedive

There was no consolation for tech stocks on Thursday as concerns over earnings and more disappointments plagued the sector.

Thursday's big disappointment Wipro headed the way down, diving 9.74% to Rs 870.10. The three Sensex tech components - Infosys Technologies (down 6.29% to Rs 2,835), Satyam Computer (down 6.36% to Rs 147.35) and HCL Technologies (down 3.49% to Rs 139.80) - also made significant losses dragging the BSE Sensex along with them (to 2,988.60, down 43.72 points).

The selling manifests in initial response to Wipro's disappointing results. The results clearly indicate that, going forward, margins will continue to remain under pressure for the company and tech companies in general. This is prompting a realignment of tech stocks in terms of valuation.

As two major IT companies have turned out disappointing results and outlooks, players have been prompted to sell in techs. There's concern that bottom lines in the tech sector in general could take a beating in future due to sustained pricing pressure. However analysts feel top line growth will continue.

Early this morning, Wipro unveiled its Q4 as well as FY 2002-03 results. According to US GAAP, Wipro has experienced a 0.94% decline in Q4 ended 31 March 2003 net profit to Rs 209.5 crore (Rs 2.09 billion), below market expectations. In the corresponding period of the previous year, net profit was Rs 211.5 crore (Rs 2.11 billion). Revenues increased from Rs 904.6 crore (Rs 9.04 billion) in MQ 2002 to Rs 1,227.6 crore (Rs 12.27 billion) in MQ 2003.

A capitalmarket.com poll of five software analysts had estimated net profit at Rs 241 to Rs 263 crore (Rs 2.41-2.63 billion) for the quarter. Sales were projected at between Rs 1,191 crore (Rs 11.91 billion) and Rs 1,227 crore (Rs 12.27 billion).

Even so, Wipro has met its revenue guidance for the global IT services business as well as for Spectramind (the IT-enabled services business). For the quarter ended 31 March 2003, Wipro had projected revenues from global IT services at approximately $162 million, which it surpassed by posting $167 million. Wipro Spectramind was projected to have revenues of $12 million. The company turned out $14 million.

For the full year ended 31 March 2003, Wipro recorded a 2.8% fall in net profit to Rs 809.9 crore (Rs 8.09 billion) on a 28% rise in top line to Rs 4,285 crore (Rs 42.85 billion).

The disappointment from Wipro precipitated falls in other important tech sector scrips including Polaris (down 5.89% to Rs 115.80), NIIT (down 4.19% to Rs 96), Digital GlobalSoft (down 3.39% to Rs 512), Hexaware Technologies (down 4.55% to Rs 97.60), Silverline (down 5% to Rs 5.70), Mastek (down 3.13% to Rs 298.60) and VisualSoft Technologies (down 3.78% to Rs 124.80).