Infosys in Emerging Markets - Analyst Blog

Infosys Technologies Ltd. (INFY) expanded its reach in the emerging markets through the introduction of a new Digital Smart Home Gateway at the recent Intel Developer Forum 2010 in San Francisco, California. The new solution is powered by E600 series of Intel Atom (TM) processor, which connects many home devices. The users can run the new Digital Smart Home Gateway from a Wi-Fi console, smart phone or distantly by the Web, enabling them to manage hordes of devices at home.

The new solution, built on Infosys' product engineering techniques and Intel Corporation's (INTC) state-of-the-art expertise, addresses Original Equipment Manufacturers (OEMs), utility, health care, telecom, entertainment and security service providers.

The Digital Smart Home Gateway will help the consumer to check the amount of energy consumed by an appliance, estimate cost per usage, provide subscription to a demand response program, and suggest savings prospective. For customers in the health care sector, the solution will assist in health monitoring and diagnosis, audio-video communication over Wi-Fi, entertainment subscriptions and security supervision.

As a pioneer of the Global Delivery Model and a proponent of a Flat World, the company is strengthening its presence in the emerging markets such as Mexico, Brazil, China and India. In addition to multiple services in Mexico, it is setting up its first development center in Brazil. Its China development center has grown to deliver BPO and IT services to clients in the US, Europe and Asia.

The company continues to focus on large transformational engagements, especially through its consulting and enterprise solution offerings. Clients have been impressed by its engineering services. Infosys' strategy through the downturn has been to build on its strengths rather than to limit itself to navigate the challenges. It has sharpened its focus on Research & Development, Intellectual Property-based solutions and New Engagement Models (NEMs).

However, the economic environment, pricing pressure and decreased utilization rates could negatively impact revenues and operating results. Revenues are highly dependent on clients primarily located in the United States and Europe, as well as on clients concentrated in certain industries. Economic recession or factors that affect the economic health of the United States, Europe or these industries may affect its business.

Further, intense competition in the market for technology services could affect its cost advantages, which would reduce its share of business from clients and decrease its revenues. Major competitors of Infosys are Tata Consultancy Services Limited and Wipro Technologies, a global IT services business division of Wipro Limited (WIT).

Founded in 1981, Infosys Technologies Ltd. is the second largest IT services company in terms of revenue in India, with a base of about 122,468 employees (as of September 30, 2010) around the globe. Headquartered in Bangalore, India, the company enables its clients to leverage its performance by utilizing its proprietary Global Delivery Model (GDM).

We currently have a Neutral recommendation on INFY, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.

 
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