Infosys Ltd (INFY) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to the Infosys Technologies third quarter fiscal year 2002-2003 conference call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session. This call is being recorded as a request the Infosys Technologies. Participants who have any objections to such a recording may disconnect at this time. I would now like to turn the call over to Mr. P. R. Ganapathy, Investor Relations Officer. Mr. Ganapathy, you may begin.

Hello, everyone and thank you for joining us today to discuss the result for the quarter ended December 31, 2002, which is the third quarter of our fiscal 2002-2003. I am P.R. Ganapathy, also know as “Guns” and I handle Investor Relations, North America based in Freemont, CA. Joining me from the conference room in Bangalore India from Bangalore India is Nandan Nilekani and member of his inner management team.

We'll start with a brief statement on the performance of the company in the quarter and the outlook for the future. After which we'll open up the discussion for questions and answers. Before I hand over to Mr. Nilekani I have a small but important task to perform in reminding you that anything we say that refers to our outlook to the future is a forward-looking statements and may be read with the conjunction with the risks the company faces. A full statement of these risks is included in our filings with the SEC which may be found on www.SEC.gov. Without further ado I'd like to hand it over to Nilekani President and CEO of Infosys Technologies.

Thank you, Guns and thank you for the introduction. I think we have had a comfortable quarter. Consolidated revenue for the quarter has been $200 million, and we also have guidance for the next quarter of between 204 and $207 million and for the year we have given guidance of between 14 million & [ Inaudible ] this quarter has been at 40 cents and we are given guidance for the next quarter of between 40 and 41 cents. Which leads to the year being between a $1.49-$1.50.

Apart from this we have been in successful adding new plans during the quarter including companies like Bristol Meyers who have [ Inaudible ] and AT&T wireless in the Mobil service [ Inaudible ] and Europe. & Compass has come back in the US. [ Inaudible ] including (inaudible) [Poor audio quality].. So we have had robust revenue growth. We have had added new clients the number of million dollar customers has gone up from 92 to 99. So on all [ Inaudible ] there has been growth (inaudible) we believe it is an important business model and we think this model is becoming more [ Inaudible ] and customers across the world are value for their I. T. dollars, we think that our business model is the right model, and we also believe that as companies continue to work with partners in India, our robust financial strong world class [ Inaudible ] brand the quality that we have makes us the first choice for these customers. With this I'd like to open the floor for questions. [Audibility difficulty throughout paragraph]

Thank you. We will now begin the question and answer session. If you have a question, you will need to press the 1 on your touch-tone phone. You will here an announcement you have been placed in queue. If your question has been answered and you wish to be removed from the queue, please press the pound sign. If you're using a speaker phone, please pick the up the hand set before pressing the numbers. If you have a question, please press the 1 on your touch-tone phone. One moment, please. We have Rahul Dhruv from Salomon Smith Barney with a question. Please state your question.

Hi, good evening. I had a couple of questions on the training cycle and that accruement pattern. We've seen around 70% of that accrued being [ Inaudible ] are you expecting any change in this going forward?

)) Hi. This is [ Inaudible ] multiple quadrants 12 month improvement cycle. The people they recruited last year joined last quarter that the 1800 number was included in Q2. In the current cycle we have recruited 900 or so people, 270 or so people (inaudible). And that will continue. Today we do a lot of things (inaudible) improvement that will model the revenue for the next couple of quarters [ Inaudible ] improvement (inaudible) thank you.

Our next question comes from Amit Karana (ph) from Bearla Fund Life (ph) that. Please state your question.

Hi. Thank you for taking my call this morning. What is the management's view in terms of the shift we're looking at on the selling and marketing expenses? If you could give us a sense that the increases that we're experiencing quarter to quarter now, are these representing a long-term shift in the business model for the company, or do you think it's a trend which would probably get over in a couple of quarters down the line?

Yes, the company moves along good. There is a shift in focus in terms of the positioning, the perception; for example today our largest customer is about $14 million. Now, that's out of revenue predicted at about $740 million ( audibility problems) for the year. So if you look back 2 years ] the revenue was about 5, $10 million. dollars The management and the way customers perceive us is very different. We have also become larger as far as our I.T. spending. Again, the customer sees us differently. So the positioning of the company has to be different. We will now manage the programs from that. We will manage multiple relationships not necessarily inclusive with other vendors also.under that, programs under that and projects under that. with not from sourcing but [ Inaudible ] So based on the positioning we want to do and the system we want to build and changes we want to make we may have to review spending. [ Inaudible ] Global Company and sort of I. T. services company, we see that we have to position the company globally to take advantage of this trend and of this opportunities. ( Severe Audibility problems)

Okay. If I may just follow-up related to the assignment we are still currently lower than what looking forward spending percentage of revenue on selling and marketing, so is there a concerted attempt to build the gap farther and also try and boost it farther? Are you trying to look at it, have we now gone into the stage of 35, 36% range of margins of the operating level and the possibility of that moving up is much more or less than what it was a couple of quarters back?

I think in the circumstances when you see the accomplishment, you see growth, you see the market becoming price sensitive, the increasing the margins to a (inaudible) level would be a good performance. But you must remember, being in that range is increasing on-site and becoming substantially investment [ Inaudible ] in marketing. It’s not just the investment in marketing (inaudible) you've got to continue on the same path. It has come to a new level which we think is required for the state of our business. So let me ask you to not go off on the (inaudible) same degree and end up with 10, 12% sometimes on the line. That's not our intention. It's to make sure that the particular margins that cause the value to change become more concentrative and increase to have a deeper penetration and ensure growth.

Okay. Just my last question is related to the on-site [ Inaudible ] to be very high. Now, when we fined these declines in the last three or four quarters I presume there must have been a fair amount of visibility as to what kind of (inaudible) would happen from on-site to offshore. Is there a sense that it might take longer or is there a change in the plans at the client level which is getting more on-site for us?

(Inaudible) We are still seeing very healthy positive start [ Inaudible] This quarter (inaudible). Last quarter, 200+ (ph) (inaudible) so we are seeing [ Inaudible ] a lot of new projects. So while we are seeing the shift of the projects, we are adding a lot of new projects we also have a few new customers, and on top of that, the kind of business initiatives, (inaudible) the revenue this quarter you can see that particular revenue has gone up from 9.7 to 11 % and [ Inaudible ] more on-site. It is keep these factors in mind, strong (inaudible) start basically new customers, revenue going up in and a couple of the reasons and on-site [ Inaudible ].

All right. Thanks a lot.

Our next question comes from Amash Zigler (ph) from JPMorgan.

Yeah,.hi. A couple of questions. One is on the sales pipeline. If you look at the current pipeline of prospects that you have, how would you compare those with your other pipeline quality which was six months back or one year back?

I'd say about 9 months back, if I compare it with the pipeline 9 months back, it must have been, [ Inaudible ] I don't think there's been that much change between last quarter and this quarter [ Inaudible ]. Currently our pipe line is [ Inaudible ] we have a wide range of companies in that pipeline who represent top ranking companies [ Inaudible ] in their industry. (Inaudible text) And we are much more confident about the sales cycles (inaudible) as taken in time as planned.

Just a question on the margins following up obviously you know, obviously we've seen a lot of impact in margins this time around. If you look, you know, four, five [ Inaudible ] let's say let's look at a steady state for the business and let's say offshore [ Inaudible ] normal age as you would expect. Where do you think –we are?- Do you think your steady state margins will be around these levels, or do you think we could go back up a little bit?

I think it's on-site offshore [ Inaudible ] 32 or 30.

Could you kindly speak up, if possible?

Yeah, it's on-site mix comes down to 32 or 30, it could be some increments it always depends on what mixes is on-site [ Inaudible ] [large block of inaudible text]I think once it's normalized, margins will go up.

And just one last thing on the on-site, you mentioned you will continue the 70 to 70% odd (inaudible) ratio. Also on the morning call you mentioned there were about 1,000 (inaudible) offers that you made at campus’s this year, that is effectively the people who well join next year. Would it be possible to share what the offers are out there [ Inaudible ] for the next 12 months or is that your only number?

Usually with me, when we recruit people, we recruit almost 18 months in advance at the campus’s. then we (inaudible). So we have not gone to the campus, it will be about $1000 in the pipeline. It will be just me [ Inaudible ] ].

Okay. Thank you.

Our next question is from David Grossman from Thomas Weisel partners. Please state your question.

Oh, hi, it's Alice Mizle from Thomas Weisel. I was wondering if you could talk about some of the changes in the competitive landscape with some of the other large U.S. players entering the market and setting up their globalized market capabilities.

Would you mind repeating that because we were not able to get the question.

Yeah, I was just wondering if you could talk about any changes you've seen in the competitive landscape with the other large U.S. players. Kind of building out their, global delivery capabilities.

Yes, I think it is particularly a change in the landscape. We believe that customers pretty much (inaudible) the application outlook [ Inaudible ] development, we pretty much the work of companies that have global delivery. Now, [Inaudible ] they're asking that then if we're going to work with you guys, we want to work with you only in the global delivery approach. But I think a fair amount of that kind of activity, as a consequence [ Inaudible ] it creates a major encumbrance wrapping up of possibilities, but we believe that the [ Inaudible ] in Bangalore, the business models change, integrations and provide solutions [ Inaudible ] and also I think going offshore will likely impact the revenue and up line growth at this point. (large blocks of inaudibility)

Great. And can you give us a quick update on how the BPO business is going and what you're seeing there in terms of opportunity and how much traction you're getting?

I will let someone else give that update.

Hi. The business in the quarter revenues were $1.7 billion and negative net income of $300,000 [ Inaudible ] we have four customers [ Inaudible ] December 31 we had 4 [ Inaudible ] on board (inaudible) thank you.

Great. Thank you.

Our next question comes from Andrew Yew from Oak Tree Capital. Go ahead, sir.

Hi. I'd like to reiterate, it's very difficult to hear the responses from Bangalore, if you could address that, that would be great. On the gross margin side, I was wondering if you could quantify the decline in the current quarter, you know, I understand some of it's from software costs and maybe you could give us a little more on how much of the cost of goods sold is employee cost-related and other software costs. And also I guess the relationship as we're seeing fixed price contracts as a percent of total revenue increase, how that's affecting gross margins now and with expectations going forward. Thanks.

You look at employee costs, employee costs are around 51.9%, as employee costs the last quarter of 32.1%. They have remained flat. The decline in the margins are from 3 reasons. [ Inaudible ] software has gone up from 1.2% to 2.2% the current quarter because of [ Inaudible ] that's a 1% point.. Two, use up the [ Inaudible ] costs I think we have 2.1% of revenue from 1.5%, (inaudible) used those efforts to [ Inaudible ] which we do not have and [ Inaudible ] the third point is that travel costs were up from 2.2% to 3.6% and last part of (inaudible).4% was due to higher costs. We cut costs significantly in the quarter and we also applied for a number of [ Inaudible ] if you take the software by 1%, you would take the costs of charges (inaudible) items going up by .6% and balance charges going up by 7.4%, that is an impact of 2 percentage points on the margin.

Okay. Great. Okay. That helps. And then on the fixed price contracts, I guess do you see -- I know it's been gradually increasing at 37.6% of total. Is that going to continue to increase, and does that have an affect on margins going forward?

As far as the margins, I think the margins are different size and time. The cross margins [ Inaudible ] fixed price,, fixed price contracts. (Inaudible, cannot distinguish syllables)

Customers want [ Inaudible ] they'll have a sale. At the same time, we also have an interest in contracts with the largest to delivery [ Inaudible ] and also, so in that sense, both sides are precise. At the same time, I don't have a number that comes to my mind for the next quarter.

Okay. Thanks. Again, I'm sorry, it's just very difficult to hear from this side but I think I got most of that. I guess one other question, just if you can give us an idea of your CAPEX expectations for next quarter and maybe next fiscal and if there's any update on the potential ADR? Thank you.

Yeah. We would be looking at spending $45 million on CAPEX for the year. We have spent about $26.7 million in CAPEX for the nine months, and for the balance for this quarter we estimate a CAPEX expenditure between what we have budgeted. For the next year, we would be talking about guidance sometime at the 10th-11th of April which time we'll also talk about our CAPEX plans for next year.

Our next question comes from Garish Pai from SSPI Securities. Please state your question.

Yeah, hi. Just a housekeeping question before I move on to others later.. Can you give me the volume numbers on-site offshore bench training support and subcontractor numbers for the last quarter? Hello?

Let me give you those numbers. On-site was 9,600 plus some months, offshore was about 18,700 plus some months. Bench plus training was about 8,900 plus months, and the support was about 3,400 a month.

And subcontract billing included on-site or offshore or separately?

Depending on where it was.

Okay. On it's part of the volume number? Okay. Okay. My second question is with regard to, you know, the closure of the big (inaudible) center involved, the budgets for 2003 by most corporations are being chalked out. I was wondering whether (inaudible) these large projects would happen in the March quarter because we've seen orders happening in December in U.S. with some of the large I. T. services companies out there. So are you going to see -- are you seeing any visibility on closure of some of the contracts that you are currently working towards in the March quarter?

I think that from the budget's perspective, the way the budgeting process at that time helped us more in terms of estimating how much work we will do with existing plans. That's really [ Inaudible ] what helps us more than -- [ Inaudible ] we then add it, not necessarily [ Inaudible ] so the budgeting process has really helped us better to understand what we can expect from the existing plan and the news in general is good. The plans are for more [ Inaudible ]. [Large portions of response completely inaudible]

Garish Pai In terms of closure of some of these large deals, do you think they could possibly accelerate in March quarter, compared to what you have seen over the last few quarters?

Again, [ Inaudible ].

Hello, the audio is -- audio quality is pretty bad. Could you please speak up, please?

Yeah, what I was saying is maybe if you could define what you mean by that.

Okay. You had mentioned in the last quarter's results call that you were working towards some 50 to $100 million type of contracts. That's what I mean by the large contracts.

Okay. Local outsourcing bill which we really have not seen anything on yet. It's hard to put a trend on it, so you're asking whether we're getting [ Inaudible ] whenever that happens.

I didn't get the last bit.

What I was saying was that when you are talking about a large global outsourcing which involves transition of sources and assets as well, we have not yet got the sources of elevation but we do think that climate continues to favor outsourcing, so we will see more of this nature.

Okay. Just one last question. This is regarding the subcontract as it was brought on board. Is there any policy regarding that and what type of work skills sets are you looking for that they bring to the table and where do you think the subcontracted number will be going forward? Is that a particular thing you're going to see in Infosys?

We generally work with the contractors [ Inaudible ] very specific, and that's -- they generally will not have those skills. [ Inaudible ] at the same time it's a rumor that [ Inaudible ] we are ramping up these process and customers.

Okay. I'll come back for further questions later. Bye.

Our next question comes from Madally Gash from Merrill Lynch. Please state your question.

Yeah, hi. I was wanting to check on the services mix where I notice that revenues have, you know, come down as a percentage of revenues two quarters in a row. And my understanding was that Infosys is probably one of the areas where off shoring is, you know, most convenient. So is there any trend in this, and does it have also margin implications?

If you look at the [ Inaudible ] really coming down I don't think you can be [ Inaudible ] at this point we don't see any independent [ Inaudible ].

So you would not even expect this to really move up? You'd expect the mix to stay at?

On a quarter to quarter basis [ Inaudible ] revenue of 28.5% as of December 31 and [ Inaudible ]

Okay. Okay. Thanks. And the second question is on the competition profile. Have you seen that changing, you know, over the last three months or last six months in terms of possibly getting more aggressive and possibly taking some of that work at lower prices on-site itself, if you could just throw a little bit of light on what the competition environment on that has been like.

Let me, in the last two months, our global comparisons have been more aggressive. They have been aggressive on their on-site pricing as well as aggressive in offering their new found outsourcing.

Okay. So that percentage (inaudible) has been picking up?

Can you repeat that?

No, I said so in terms of percentage sort of global Windows, you would say that has possibly been going up?

Yeah, percentage where we compete against global vendors.

Okay. Okay. Thank you.

Our next question comes from Fajeed Fezwell from UBS.

Hi, this is Fajeed Fezwell. Okay. Focusing on the margin issue, I noted in the morning call basically you're saying that a lot of dependent (inaudible( on the on-site mix. Now, my analysis shows that out of the 193 basis point decline, the mix decline has caused margin drop-off maybe 12 or 15 basis points only. That's a very small part of the margin drop. Why are we then focusing so much on this in terms of what will dry margins up again?

We are focusing on that with (inaudible) the fact that if you look at it on a year over year basis, the increase in the on-site, in the on-site ratio [ Inaudible ] and we have said in the first quarter and the second quarter there was a margin impact [ Inaudible ] on-site number comes down. We have been going pretty fast. (Inaudible)

Sequentially of 14 basis points, on-site is only causing a 15 basis point in margins, so I was wondering why --

It's also depends on what caused the on-site increase. (Inaudible) Example of our (inaudible) on-site [ Inaudible ] 17% as net of margins and look at the figures on the basis, you'll see the on-site growth at 33% from 30%.

Right.

It's been increased in on-site. For this quarter it's 150 basis points.

Okay.

: So the impact is there. And if you look at the price realization of on-site, (inaudible) the price then the realization went up in the second quarter.

Yeah.

That it didn’t stop in the third quarter realization in the fourth quarter.

Okay. My second question is regarding this, again, money spent on software for their own use. Now, the thing I don’t understand is it routine spending just because you added a thousand more people you have to update those PCs or is (inaudible) it tools going up? This question is for Kris actually.

Yeah. It is substantially one-time. This is on, you know, [ Inaudible ] services so that we can [ Inaudible ] so that we can use it to do some projects. [ Inaudible ] Internally we use safety (inaudible) additional licenses we can (inaudible) we'll increase the number of licenses on some of the larger, higher priced tools like (inaudible). It's substantially one-time.

Okay. Okay.

Our figures are particular in nature [ Inaudible ] it is then done one-time and goes on for one year, two year.

Okay. Thanks. My last question was on this likely to be coming down from September of this year from 195 to about 65. That's quite a bit of drop there. If you notice, most of the growth last of the few quarters has been on-site centric.. Did that have to with how you are preparing for this? You mentioned something different, can you expand on that a bit?

K. Gopalakrishnan I think the number of [ Inaudible ] will have an overall macro impact. We have sold about 5000 [ Inaudible ] but I think there are a number of things, a couple of things.. One is that we will be complementing the people that we send from here with local hires. Some of these local hires will be people, you know, an example for example on the consulting side to come from the other side is so other local technology people are doing the work. So I think given that desire to become much more multi-cultural and global, I think we don't have the technology that we need on-site, but we need a lot of local hires. The second thing is that we will -- we are trying to look at how to increase our offshore content. While I think this is an overall macro issue, at this point we are not clearly -- at this point it is very material, but we will deal with it as the policy develops on the retail front.

Our next question comes from Radash Restiva (ph) from Salomon Smith Barney. Please state your question.

Hi. I just want to understand the mechanics and the time frame for the ADR offering to come through. And in terms of acquisition strategy. Are we any nearer to -- or any further away -- from you complementing your service offerings with [ Inaudible ] in the U.S.?

We are trying to make any product statement and what we have done [ Inaudible ]. We are in a quiet period. I hope you'll forgive us for this.

This is Kris. Constantly, we look for companies where there is a very big spread. [ Inaudible ]. We are in typically [ Inaudible ] but unless and until we are able to prove that in terms of agreeing on what facilities are going to be [ Inaudible] how a combined entity will progress, there really aren’t (inaudible) there's no [ Inaudible] goods in the company (inaudible).

Okay. That ends my question.

Our next question comes from Garish Pai from SSPI Securities . Please state your question.

Yeah, hi. Regarding local hires, you are saying that you may be going for a more number of local hires going forward. I was wondering if the cost for local hires for the same skill compared to somebody coming from India is the same, or is it a premium?

You know, I think everyone who will go from India is a compatible hire[ Inaudible ]. Is based on the policies there, so if it's a local hire, it doesn't make any cost difference..

Okay. Now just regarding the thousand first that you mentioned in the morning call that you said were outstanding campus offers, I was wondering if the offers are made in the December quarter, or was it made before that?

It was in the July-August quarter.

Okay.

(Inaudible). It will -- next July or so next July-August.

Okay. Okay. And in terms of work days, were the number of work days in the December quarter, lower than the September quarter, and by what amount would that be, if it were to be so?

We had about [ Inaudible ] 2-3 days lower than the previous quarter and I think next quarter would be around the same rate..

You mean the same as this quarter?

Yeah, it could be one day from -- you know, one day more than this quarter.

Okay. So one question on the disaster recovery plans, I think you set up something in (inaudible). Could you elaborate a bit more on that? I was wondering if you would have development center out there? Would it be more redundant [ Inaudible ] where you won't be placing people, what's your plan on that?

Yeah, this is Kris, yeah.. Our plan is to set up a center we can accommodate about 1500 people. The place required we have not yet obtained the site as we have here in our development centers in India. You know, possibly we will use that and increase it more if needed so we can increase the [ Inaudible ], basically going to be unused, so it will be unused space. We will also set up a development center with may be 100-300 people to start with so that you know, there is always somebody doing work in that center for customers. Any way, we have the center. So those are the plans we have, you know, besides the location and [ Inaudible ] setting up as we speak.

Yeah, okay. Just one last question, this is Regarding the answer, you know, on the pipeline how it's looking and you mentioned that you're more confident about sale cycle now -- Can you just elaborate on that?

I was comparing the sales cycle right now with the sales cycle from about nine months back. Nine months back the sales cycles were impacted adversely [ Inaudible ] at that plan site linked to the uncertainty in the economy and their business. That uncertainty has gone away. The economy is not going great guns yet, but certainly businesses have better grips on [ Inaudible ] them as businesses and they're willing to make decisions in predictable times.

So are the sales cycle is getting crunched, or are they as long as they used to be in the past?

I wouldn't say that sales cycles are coming down because they're the kind of views we're working on, they continue to be strategic. If anything, they are getting to be more important for our clients, and clients are putting you know, placing larger bets on offshore outsourcing. And that makes these deals a little more complex, their size and they tend to take longer to [ Inaudible ] so no I wouldn't say the sales cycles are coming down, but what is happening is that the decisions are getting made in predictable times frames as planned and that's really what is working to our advantage.

Okay. Just one last question.

Another call is waiting. Thanks. We'll go to the next one.

We have Rahul Dhruv; of Salomon Smith Barney . Please state your question.

Yeah, hi. Actually, I didn't finish my earlier question. That's the reason I came back. What I was asking is what is the training cycle? How much time, say, for example, 1800 people hired last quarter, when would they effectively start getting billed?

A sales cycle of 14 weeks.

14 weeks?

Yes.

Okay. Sorry?

[ Inaudible ] all of them do not get used the next morning.. The utilization of people would take a few weeks, so we will get that solved in the new projects [ Inaudible ].

Right. Okay. And one question for you actually was, do you think there's any change in strategy? Is it necessary to change the strategy now to go after (inaudible) projects?

I believe it is to go after the customers, and if the customers happen to be voice, then we will do so. We do have a call center which is part of a larger service center. But our first (inaudible) really is to look at the customer as a specific entity, and once we establish the relationship with the customer, we want to expand that as much as possible by providing [ Inaudible ].

Right. So that is a strategy, I mean, don't you think that it's necessary to really scale up initially to go into voice?

We have seen a lot of these as a non-voice, we're also seeing a number of these that are voice. And so we will scale up as appropriate. Like I said, we have our work capability today. It's not huge, but it's very much there, and we have a very active pipeline of both voice and non-voice.

Sure. One last question was for Nandan. I asked this question last time around also. Is that if you see that your average revenue per client is still lower $2.5 million, it's a new high this quarter again, but if this is to become a billion dollar company next year and 2 billion dollars in a couple of years, then would you be having more clients would be uneconomical to manage so many more clients, so is there a strategy put into place or are you seeing a trend where average revenue per client for your top 50 or top 100 can increase considerably? And I have a follow-up question to the same thing.

I'm sorry, I got the first part, but can you just repeat the full question again, if you don't mind?

:Yeah, what I'm saying is that $2.5 million right now per client and if you are to become like a $2 billion company in a couple of years you would effectively be close to having 800 or 900clients which really may be uneconomical to manage, is the strategy put into place or do you have the visibility from your client base where you can use the existing client base to increase that $2.5 billion? Is still a very, very small portion of our clients' budget.

Well, you know, I think -- first of all, I think there is enough potential in our existing client base to increase our share of wallet [ Inaudible ]. I think we have enough clients who have the size, the scale, and we still really are really a small part of this trend. Now, if you take our million dollar clients, we have about 100 of them,--99 (inaudible) side and the total revenues from these guys is about $570 million, so these 99 clients is about $5.7 million dollars a piece which is not bad. And today we have, you know, 30 clients to do more than $5 million, and we have seen over $30 million. So I think that it's -- I think there's room in the client base to expand-our share of wallet.

Great. Ummm..(Inaudible.)

If you hold off, we'll come back to you. Thanks.

Sure. Okay.

We have Madally Gash from Merrill Lynch online with a question. Please state your question.

Yeah, I just had one question which is in terms of your revenue guidance for the next quarter, I wonder if you could give us a sense of what is your broad assumption with respect to offshore mix and, you know, more pricing as compared to this quarter? In terms of growth?

(Inaudible) 207 and between 200 that we get now and 204 and 207 [ Inaudible ].

Okay. And if I would just ask one last question, in terms of the new customers who you have added on in the last three quarters, would you say that the project ramp-up that's been happening is you know, as you had anticipated when you had signed them on, or do you see some hesitancy on the part of customers to actually start specific projects?

Yes, we are very hesitant. In fact, if anything, I am [ Inaudible ] with our partners as more certain about their intent to do outsourcing and in which much more of a hurry to get there quickly. So I would say [ Inaudible ].

Okay. Good to hear that. Thanks.

We have M. Parajah; (ph) CSFB with a question. Please state your question.

Hi. This is M. Parajah (ph) from CSFB. I have one quick housekeeping question. How many clients had you added this time or in the last two quarters for strategic outsourcing? And I have another question of why IPO? Why strategic outsourcing if you're having so much traction in our current business itself? And to follow up, what kind of sources do they entail, and more important, what about strategic outsourcing having seen what happened? (Inaudible) Thanks. Hello?

[ Inaudible ] it's not a sum that is defined well enough for us to [Inaudible ].

I can't hear you. The audio is really bad. Can you please speak up?

Okay. What I was saying was that strategic outsourcing is the way we look the at world of outsourcing. It is done in a fashion that we think is qualified to outsourcing. We don't add the outsourcing. It's not really [ Inaudible ] outsourcing is about, from a client perspective, they may call it something else. They may consider it to be, you know, private work [ Inaudible ] ].

Sure.

Really the answer to that question [ Inaudible ].

This is Kris. [ Inaudible ] when you look at the outsourcing, you know, you can go to the applications management of systems, add to that application management [ Inaudible ] and the employees, somebody calls taking application, you can see the operating sector, moving toward I. T. outsourcing, you can see again, and lastly, [ Inaudible ] it's a very [ Inaudible ] you know, what they may call outsourcing. And specific managed [ Inaudible ] I see also things that we expect will start converting over the next 18 months to two years. They're already starting [ Inaudible ] over time. And they are needed so that as the company grows, as we do larger amounts of business we have the plan. [ Inaudible ]so we don’t have to work with larger companies to do I. T. work. We can do one stop jobs for these companies. [ Inaudible ] So that's our process. (Inaudible) [ Inaudible ] what uniquely we can do, where we can do it currently. And if we can’t do any of these things we may not [ Inaudible ] for example (inaudible) and managing. It's other managed from India part of the time is managed from the customer site or customer city. [ Inaudible ] gets the work from India. It's not [ Inaudible ] we want to manage that (Inaudible)..

All right.

Okay. I think with that, we'll wind up with one last question on email if that's okay.

Yes. Our last question comes from Kamir Asis from Credit Suisse First Boston. Please state your question.

Thank you so much. First of all congratulations On a very strong quarter. I have actually two questions if you don't mind. If you take step back and look at Infosys and, you know, clearly on-site offshore margin as explained, but if you [ Inaudible ] say we are becoming a consulting company, which typically has lower margins, we are going to I. S. offshore [ Inaudible ] which has lower margin. We will pay taxes more, so isn’t it true that margins will come down and come down quite significantly? That's my first question. Also if you could address, I understand Infosys is going some organization changes. What are your resources and what are you planning to address? That's all. Thank you.

We had said that we have [ Inaudible ] for 2010, and from 2005, we will see an increase in the tax rate, but some of the units we have of somewhat a tax policy. Consulting company and having more on-site, our [ Inaudible ] is to have an offshore model. Our greater declines in the work. That's not necessarily implied, but we will have much, much greater on-site (inaudible) and much greater decline in the margins. We do want to be an offshore business. That leaves a constant advantage. So I don't think that [ Inaudible ] concerned, for us is the services business. They are providing service in I. C.O, and to that, we should have specific margins and the last part of IPO (Inaudible) is going to be offshore in India.

: IPO, and we are trying to the [ Inaudible ] it's not about doing the [ Inaudible ] in a traditional matter, we have built it [ Inaudible ] our strategy is to the same thing with the technologies there development that is been the global margin that we provide.

So could you also also [ Inaudible ].

Complete [ Inaudible ] we make the same with respect to that, in terms of providing new services and a product example [ Inaudible ], we added services like consulting, and as we grow, we'll have to constantly keep changing to prove the business is an ongoing source. Thanks.

Okay. With that, I think we'll wind up this conference call. I apologize for the audio quality. I hope to have a transcript on our Website, www.Infosys.com as soon as possible so that you can pick up the pieces of information that you might have missed hearing on the call. Thank you all for joining us and staying on for this long one hour. I will available for the U.S. day on my Mobil phone for any questions that you might have, and we look forward to speaking to you at the end of this quarter and March 31, where we'll speak about the year ahead and performance for this year gone by. Thank you, ladies and gentlemen, and have a great day.

Thank you. Ladies and gentlemen, thank you for participating in our conference today. You may now disconnect.--- 0