Playing the Passage to India

Losing high-tech jobs to Asia may make American blood boil. But if you're an adventurous investor, the leading Indian outsourcing companies are worth a look.

Consider Wipro(WIT Quote), a one-time producer of cooking oil that now sports a market cap of $11.7 billion, and, according to published reports, counts among its roster of clients high-tech giants including Microsoft(MSFT Quote), Sony(SNE Quote) and Nokia(NOK Quote)

In its most recent quarter, the Bangalore-based company earned $58 million on sales of $343 million, representing yearly increases of 22% and 44%, respectively. When its fiscal year ends in March, Wall Street expects Wipro to report sales of $1.2 billion, an increase of 46%. Investors have noticed: Over the last year, the company's stock has appreciated by 59%, nearly doubling the performance of the S&P 500.

While that's a big run-up, it isn't out of line with the companies' historical growth -- and that growth shows no sign of waning. Wipro, as well as rivals Infosys(INFY Quote) and Satyam(SAY Quote), are riding the crest of an outsourcing wave that has seen U.S. companies shift everything from call centers to X-ray interpretation to India.

Collectively, the three companies -- plus Cognizant (CTSH Quote) and Syntel (SYNT Quote), two U.S.-owned competitors that do much of their outsourcing work in India -- will likely report more than $3.1 billion in revenue when 2003 sales are totaled, according to Brean Murray analyst Ashish Thadani. By 2005, that total should soar to $5.4 billion.

Revenue for the outsourcers represents significant savings for their U.S. clients. But U.S. workers will pay a price.

In July alone, 25,000 to 30,000 new jobs were created in India as a direct consequence of work outsourced from the U.S., according to a report by researchers Ashok Deo Bardhan and Cynthia Kroll of the University of California's Fisher Center for Real Estate and Urban Economics. It's not clear if there is a one-to-one correlation with job losses in the July figures, a month in which more than 226,000 Americans were laid off, but some of the gain for Indian workers was at the expense of the U.S. workforce.

Cashing In on the Offshore Wave

*US owned, with heavy outsourcing presence in India **Predominantly Indian owned Source: Brean Murray