global slowdown and the impact on the banking industry, technology
vendors have reported relatively strong results, writes Dan Jones.
Though fears remain over short-term profit sustainability,
longer-term prospects remain strong – particularly for Indian
outsourcing firms.
companies have so far emerged relatively unscathed from the
deepening global slowdown, according, at least, to half-year and
quarterly results.
UK-based Misys, for instance, posted
statutory operating income of £52.4 million ($97.8 million) in the
year to 31 May, a rise of 179 percent, with like-for-like operating
profit up by 37 percent to £81 million.
Chief executive David Lawrie remained
upbeat, noting “we are comfortable the performance turned in this
year [in banking] is sustainable”. Banking revenue rose by 5
percent on an annualised basis.
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Lawrie advised that a turnaround plan for
the business was proceeding ahead of schedule, and raised
performance targets for 2008. Analysts at Swiss bank UBS were more
cautious, however, cutting the firm from a ‘neutral’ to ‘sell’
rating on 14 August.
Wider concerns over the impact of the
credit crunch on banks’ IT expenditure is continuing to cloud the
outlook for fintech firms, particularly those exposed to the US
market. India’s largest IT services provider, Tata Consultancy
Services (TCS), for example, saw its quarterly net income fall for
the second consecutive quarter in the three months to 31 May,
despite posting a 4.79 percent rise in operating income over the
same period.
TCS remains “cautiously optimistic” about
the rest of the year, according to chief executive S Ramadorai.
Local Indian rival Infosys, meanwhile, sees “several opportunities
for growth” in spite of the acknowledged uncertainties in the
global economic environment.
According to a research note from US
consultancy Gartner, both TCS and Infosys will flourish in the long
term, growing to rival the likes of Accenture and IBM. By 2011,
each will become the world’s newest IT service ‘megavendors’,
concluded the research.
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By GlobalData“These vendors will increasingly be
considered for strategic service deals, and will augment or, in
some cases, replace today’s acknowledged megavendors in this
space,” the note forecast.
Operating income at the large US IT
vendors largely continued to hold up despite the ongoing US
economic slowdown. Second quarter earnings at three of the leading
fintech firms – Fidelity National Information Services (FIS),
Fiserv and NCR – beat analyst estimates, with Fiserv affirming its
earnings outlook and both Fidelity and NCR raising their own.
A report released by Swiss IT group
Temenos, which has reinforced its strong start to 2008 via a series
of acquisitions and alliances, suggests just 11 percent of industry
technical and financial officers expect their IT budgets to be cut
in 2008, with 40 percent expecting them to rise by 5 percent or
more.
Guidance from Unisys and SunGard, however,
was more cautious. Unisys saw operating profit rise to $50.6
million in the first half of 2008, versus a loss of $27.1 million a
year previous, but warned in its interim statement it would be
focusing on cost reductions “given the weak economic
environment”.
SunGard, which reported operating income
of $269 million for the first six months of 2008, said it was
experiencing “extended sales cycles and delays in discretionary
projects at some of our larger global accounts”. But revenues from
its financial systems division, nonetheless, rose by 23 percent
year-on-year.
“Pressure is creating opportunity as the
entire financial services industry is aggressively looking for ways
to increase efficiency,” Fiserv president and CEO Jeffery Yabuki
told analysts recently.
