This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Indian Outsourcers Living Large on Demand

Get Jim Cramer's picks for 2006.

This year's financial performance by India's top IT outsourcing firms will be tough to beat in the face of mounting competitive pressures, but an increasingly huge pool of global demand makes it a good bet they'll continue to outrun their larger rivals in 2006.

The current fiscal year, which ends in March, will mark a milestone for Indian offshore outsourcing firms Infosys (INFY - Get Report) and Wipro (WIT - Get Report), as their revenue crosses the $2 billion mark.

Those kinds of numbers are being fueled by the growing tendency of global businesses to seek ways to cut costs by farming out many of their basic -- and increasingly, not so basic -- operations.

And in fiscal 2007, the four largest offshore companies traded in the U.S. - Infosys, Wipro, Cognizant (CTSH - Get Report) and Satyam (SAY) -- are expected to average a 32% jump in sales, according to Baseline. That's on top of an average 43% climb in sales in the last 12 months.

Earnings, meanwhile, are expected to grow an average of 27% in fiscal 2007, on top of a nearly 45% jump in the past 12 months.

That kind of showing isn't lost on investors, who have rewarded Indian firms by sending their shares up an average 21% 2005. But the show isn't over yet.

Record Sales

"Next year is still going to be a good year for the outsourcers," says Rich Parower, portfolio manager of the (SHGTX) Seligman Global Technology Fund , which holds Infosys and Satyam shares. "I don't think this has run its course yet."

The streak will continue in part because Indian firms have just scratched the surface of potential demand. Goldman Sachs estimates suggest that the offshore model has penetrated less than 10% of Global 500 IT budgets for core application maintenance and development work, analyst Julio Quinteros recently wrote.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
ACN $94.18 0.84%
CTSH $59.67 -0.10%
EDS $1.64 0.00%
INFY $31.34 -1.50%
IBM $170.47 0.41%


DOW 18,127.29 +47.15 0.26%
S&P 500 2,122.07 +4.38 0.21%
NASDAQ 5,103.7760 +11.6910 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs