Wipro Ltd (WIT) 2008 Q2 法說會逐字稿

Good morning.

My name is Lisa and I'll be your conference operator today.

At this time, I would like to welcome everyone to the Wipro second quarter earnings call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

(Operator Instructions).

Thank you.

Mr.

Ramasubbu, you may begin.

Thanks, Lisa.

Good morning, ladies and gentlemen, and good evening to the participants across the globe.

Rajendra, Lalit, Arvind join me from Bangalore in extending a warm welcome to all the participants to Wipro's second quarter results and earnings call for the period ended September 30, 2008.

We have with us today Mr.

Azim Premji, Chairman, Mr.

Suresh Senapaty, CFO, who will comment on the US GAAP results for the period ended September 30, 2008.

They are joined by Joint CEOs Suresh Vaswani and Girish and other senior members of the Wipro management team, who will be happy to answer questions.

During the call, we might make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act 1995.

These statements are based on management's current expectations and are associated with uncertainties and risks, which could cause the actual results to differ materially from those expected.

These uncertainties and risk factors have been explained in detail in our filings with the Securities Exchange Commission in the USA.

Wipro does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of filing thereof.

The call is scheduled for an hour.

The presentation of the first (sic) quarter results will be followed by a question and answer session.

The operator will walk you through the procedure for asking questions.

The entire earnings call proceedings are being archived and transcripts will be made available after the call at wipro.com.

I'm available on email and through mobile as well to take any questions and table it to the Wipro team, in case you're unable to ask questions for any technical reasons.

Ladies and gentlemen, over to Mr.

Azim Premji, Chairman, Wipro.

Good evening and good morning to all of you, depending on where you're located.

Thank you for joining our call.

I'm sure you'll have seen our results for the quarter ended September 30, 2008.

I'd like to spend some time reflecting on our performance for the quarter and our strategy going forward.

Following that, Suresh Senapaty, our CFO, will share financial highlights.

And the management team will be happy to take questions.

Wipro Limited recorded revenue growth of 7.5% sequentially.

In our IT Services business we achieved revenue of $1.11b, with year-on-year growth of 29%, significantly outperforming our guidance of $1.089b.

In rupee terms, our revenue growth in IT Services was 36% year-on-year.

What makes the result satisfying is that it has been achieved in the context of a deteriorating global economic environment.

Several large financial organizations have either gone under or have been sold.

There is a significant credit squeeze and central banks are taking unprecedented steps to infuse liquidity into the system.

Credit is the lifeline of any economy and that lifeline seems to have been impaired.

The overall sentiment is cautious.

The economic crisis has spread globally.

What all of this means to our IT business is that we need to move from a business as usual approach to a more transformational approach that will help our customers realize better cost and service optimization in their times of need.

I would like to focus on our initiatives, which we believe will be the game changers in the current environment.

First, our Global Programs Team has been instituted with the specific purpose of capitalizing on the rising number of transformational opportunities.

With discretionary spending being cut, we believe that our growth will be fuelled by transformational deals.

Our Global Programs Team has been able to create a decent pipeline of transformational opportunities.

Second, in difficult times, customers look for partners with strong consultancy and domain capabilities to realize cost or service transformations.

Our consulting team of 1,000 plus is focused on enhancing the quality of dialog, the quality of relationships and the quality of work which we do for our top customers.

Currently, about two-thirds of our consulting revenue comes from mega and gamma accounts.

These are accounts of revenue more than $50m and accounts of revenue more than $100m per year.

Our consulting capabilities are also enabling downstream revenue from our large customers.

Our domain capabilities are among the best, as we have invested in the vertical structure 10 years back.

Thirdly, we are increasingly moving towards a non-linear model and significant investments are directed towards this initiative.

Our investments in the platform-based BPO meant that we have grown revenues at 40% year-on-year in '07, '08, with a 16% increase in headcount.

It also meant that we could maintain margins in the BPO business last year, in spite of significant rupee appreciation.

In IT Services, our non-linear initiatives are centered around three themes - intellectual property creation, efficiency enhancement and delivery organization.

These are expected to generate returns going forward.

Finally, our global integrated delivery model instituted at the beginning of this financial year is starting to deliver productivity gains.

We have been able to make significant headway on utilization, without compromising on our ability to fulfill demand requirements.

We're also expanding our global presence with strong presence in nearshore centers.

This will enable us to provide nearshore capabilities with specialized skills aligned with customers' business needs from regional centers.

Overall, I'm confident that we have made the right investments for the future and we'll be able to weather the near-term challenges posed by the slowing global economy.

I will request Suresh Senapaty, our CFO, to comment on financial results before we take questions.

Good morning to all of you in the United States and good evening to those of you in Asia.

Let me commence my highlights by highlighting the fact that, for the convenience of the readers, our US GAAP financial statements have been translated into dollars at the noon buying rate in New York City on June (sic) 30, 2008, for cable transfers in Indian rupees, as certified by Federal Reserve Bank of New York, which was $1 is equal to INR46.45.

Accordingly, revenues of our global IT Services segment that was $1,110m, or in rupee terms INR47.3b, appears in our earnings release as $1,019m based on the [convenient] translation.

Wipro Limited revenues grew 36% year-on-year and our net profit grew 1% year-on-year.

Our IT Services revenue for the quarter was $1,110m against a guidance of $1,089m, a sequential growth of 4%.

In constant currency terms, our sequential growth was about 5.6%.

We continue to publish our adjusted non-GAAP net income in addition to publishing results as per GAAP and also provide a detailed reconciliation between GAAP net income and adjusted non-GAAP net income, to help our stakeholders see our results clearer.

Our adjusted non-GAAP net income for the quarter, excluding the translation loss of ECB, external commercial borrowing, of INR1,156m and fringe benefit tax on ESOPs of INR86m was INR9.47b.

This translates to an EPS of INR6.51, which is $0.14, representing a YOY increase of 16%.

We had a tax write-back in quarter two of 2007/8, excluding which our year-on-year growth would be 18%.

We have had well-rounded growth for the current quarter.

Our Retail and Transportation vertical recorded strong sequential growth of 9.2%, whereas Financial Services and Manufacturing and Healthcare recorded a growth of 7.8% and 6.7% sequentially, respectively.

Our differentiated service line of Technology Infrastructure Services recorded a sequential growth of 9%, whereas Testing Services and Package Implementation grew 7.1% and 6.2% sequentially, respectively.

Our Infocrossing acquisition exhibited good traction and sequentially grew higher than the Company average.

Our Americas business grew 3.3% and Europe grew 4% sequentially.

Constant currency growth sequentially is 7.6% for Europe.

We won six multi-year multi-million dollar deals during the quarter.

Our strong focus on large deals and global programs is reflected in our deal wins and the healthy deal pipeline.

Overall, India and Middle East business continues to have tremendous traction, with 48% year-on-year growth and 14% sequential growth, 19% at constant currency.

Our strong presence in products in addition to services in this geography continued to give us leadership on end-to-end systems integration and total outsourcing deals.

During the quarter, we added 28 new customers.

Our investment in account mining is reaping a dividend, with our number of clients more than $50m on a trailing 12-month basis increasing from 14 in quarter one to 16 in the current quarter.

The margin for the combined IT Services was 20.3% in quarter two, against 20.1% in quarter one.

We gave salary increases to offshore employees, effective August.

We were able to offset the impact of salary increase through improvement in realization and utilization.

In the current quarter, our realization improved by 1.9% for onsite and 1.8% for offshore, sequentially.

On a year-on-year basis, rates for onsite and offshore improved by 5% and 4.6%, respectively.

Our improvement in rates, in spite of adverse currency movements vis-a-vis US dollar, was through a mix of changes in customers, non-linearity initiatives and increased realization in fixed price projects.

Our proportion of fixed price projects increased 500 basis points year-on-year and 100 basis points sequentially, to 31.6%.

Our continuous focus on utilization has seen us move the lever from 67.9% in quarter one to 70.3% in quarter two on gross basis.

The utilization, excluding support functions, was 77%, an improvement from 74.4%.

We believe that our utilization will remain in the narrow range from here on.

We added 2,241 employees from campus during the quarter.

Our IT Products business had a spectacular quarter, with sequential growth of 31% and year-on-year growth of 44%.

Wipro Consumer Care and Lighting business continued to see good momentum, with industry leading growth rates of 36% year-on-year.

Our domestic business continued its robust revenue growth, achieving our 14th consecutive quarter of 20% plus growth.

Unza continues to grow well in all the countries we operate in.

On the foreign exchange front, our realized rate for the quarter was INR42.65 versus a rate of INR41.16 realized for the quarter ended June 30, 2008.

On a quarter-on-quarter basis, ForEx gave us a positive impact on margins by about 38 basis points.

As at period end, after assigning to the assets on the balance sheet, we have about $2.17b of contracts at rates between INR39.50 and INR47.

For the quarter ended December 2008, we expect volume-led growth.

We will have the impact of salary increases of our BPO employees as well as full quarter impact of offshore employees in the current quarter.

We'll be glad to take questions from here.

Lisa, we can start with the Q&A.

Very well.

(Operator Instructions).

And our first question comes from Moshe Katri from Cowen & Company.

Yes, thanks.

You spoke a lot about the transformational deals that you're focusing on.

You're saying that the pipeline looks pretty decent.

I'd appreciate some more comment or maybe some more details about that specific pipeline.

How would you be able to compete on those deals with some of the more -- the stronger players on the transformational side, like an Accenture?

And then, obviously, you did provide precautionary guidance for the December quarter.

Are you just being cautious here or you're actually seeing delays or cancellations in your pipeline of deals?

Thanks.

Hi, Moshe.

Girish here.

Two separate questions, so let me take them one at a time.

So you said -- you asked about how we are hoping to win deals on the transformational side against some of our global peers.

So the short answer to that is that we see that happening more and more where we have a combination of outsourcing and transformation, because clients see the value of outsourcing work to us and then expecting us to transform that as a part of an overall contract.

So, it is a cycle that we go through.

We start with some work that will get outsourced, which we'll transform and then further outsource again, once the transformation is complete.

And I think, in this way, they get the benefit of some of the transformational gains that they get, which gets ploughed back into the transformation investment, and further get maintained through a subsequent outsourcing contract.

So, the whole cycle of outsourcing and transformation is what we're seeing traction in.

So, we've seen that in multiple cases, which is why it gives us confidence that we'll be able to do more and more of that going forward.

On the second question on guidance, I think the current environment is such that we have to be cautious because a lot of our clients are going through some amount of uncertainty and a lot of decisions are on hold.

And we can only give guidance based on what visibility we have now.

In addition to that, where we have billing on a time and materials basis, there is a certain amount of risk inherent in this quarter because of the number of days of vacation which happen in the end of this quarter.

Okay.

And the last question, this is for Mr.

Premji.

Obviously, you've been with the Company for a long time.

Can you kind of compare and contrast this period of uncertainty to what we've gone through from '01 to '03?

Thanks.

I think '01 to '03 was a reaction to a balloon, whereas this one is not a reaction to a balloon.

I think that's one fundamental difference.

I think, two, in terms of certainly the IT services industry from India, it is significantly more mature today than it was in '01, '02 and is doing work which is significantly more embedded into customer requirements and customer strategy than what it was during '01, '02.

So I see that also as a significant strength so far as the industry is concerned.

Would you like to supplement anything on that, Girish?

No.

I think the difference this time, Moshe, is that in 2001, 2003 the slowdown was really led by an excess on the expense side and restricted to the tech sector, whereas this time it is likely to be far more pervasive because it is probably going to affect all sectors of the economy.

Thanks.

Your next question comes from Trip Chowdhry of Global Equities Research.

Thank you.

Mr.

Premji, I was just wondering, in terms of a downturn which could be quite long, probably two years or so, a product company normally spends a lot in innovation, R&D and other stuff.

What does a services company do in a downturn?

And how do they -- what do they do to make sure that once the uptick occurs they are much better positioned than anybody else?

And then I have a follow-up question also.

Sure.

Hi, Trip.

Girish Paranjpe here.

Let me try and take a shot at that.

So, in some ways, if you look at the growth, especially for global providers out of India, is that we have had almost an uninterrupted period of growth from 2002, middle onwards, till 2007.

And it has been a fairly high rate of growth, somewhere between 40% -- 35% to 45%, depending on which year you look at.

So, in some ways, the slowdown actually helps us to re-look at what we have been able to do and take stock of what further competencies we need to build, maybe do some amount of spring cleaning of some of the things that get accumulated when you have four or five years of uninterrupted growth.

So it's a great opportunity, if you look at it positively, to take a breather and to get ready for the next session.

The other question I had was, once your customer goes under, do they inform you like we have gone under, or all of a sudden they just stop paying you?

What are the dynamics?

How do they wind it down?

Having gone through that experience twice in the last four weeks, I can only say that they know of it when we see it on CNBC ourselves.

So I don't know whether we'll get any advance -- more advance notice than that.

But I think one good part of what we currently do, and this may be of interest to you, that in both those cases we have managed to kind of continue the relationship with the successor organization.

And our hope is that our business will not get significantly impacted.

And this may be an opportunity to have a wider client base.

And does the client prepay you?

Like suppose I am a company which has gone under and I have, say, 100 employees and I am using them and I owe you $100.

Are they prepaid or do they like -- they pay after the work is done?

And in a situation where the customer goes under, what happens to the money which has not been paid yet?

Do you put it into collection agency or how does it work?

So, first of all, our endeavor is not to work for companies which are 100 people, so.

No, I'm just giving an example.

No.

So then we are talking about big banks which have been affected in the current slowdown, right.

So, which is a very formal process of how they handle critical services which are provided to them and what part of our receivables are secure and how they'll get paid for by the successor organization.

So, again, touch wood, and I don't want to express satisfaction too early, but I would say the impact on us has been minimal of both of those situations.

Perfect.

All the best.

Thank you.

Thanks.

Thank you.

The next question is from Joseph Foresi of Janney, Montgomery and Scott.

Hello.

I wonder if you could talk a little bit about some other pieces that were in the model this quarter.

It looked like other revenue dropped off sequentially.

I wonder if maybe you could talk a little bit about what caused that drop off.

And also, there appeared to be a loss in other income.

Maybe you could also talk a little bit about that.

Yes.

I think, so far as the others is concerned, it is a small Wipro infrastructure engineering business that we have which primarily addresses the domestic market, but also there is a piece in Europe.

And in both those segments there has been, particularly from an infrastructure spend point of view, there has been a complete slowdown.

As a result, there has been a lot of headwind and there has been a decline in the growth from June '08 to September '08 by almost about 30%.

Part of it is the currency and part of it is the real decline in terms of the outlook.

But that [to a degree] will be focused in the (inaudible) revenue.

And that has impacted the overall other income, which is --

So other income has two components.

There is a swing of about INR160m.

And one is with respect to a INR40m incremental fringe benefit tax on ESOPs, which under the US GAAP has to be taken through the P&L, while the money that -- the fringe benefit tax that we collect goes into the reserve.

So it is -- one is INR40m and the balance amount is primarily because of the reduction in the profits arising out of the dip in the revenue of what I've just explained.

So, these are the two big factors for the other income decline that was seen that one talks about from June '08 to September '08.

And what particularly -- I know you said it was an infrastructure business.

What specifically are you doing in that business?

That business deals with the hydraulic cylinders, which is a component which goes into manufacture of construction equipment such as dumpers, excavators and stuff like that, which is in a traditional business which Wipro had started in the seventies.

And do you expect that to -- do you expect to outgrow that loss?

What do you expect from other income in that particular business or other revenues next quarter?

Well, typically, that business tends to be cyclical anyway.

So we have been having very good growth on that part of the business over the last three years.

So we expect, particularly from an Indian economy perspective, a lot of steps the government is taking.

And we expect that in the next few months we will see much more infusion of investment, much more lowering of the interest rates in terms of what actions, initial steps that we have seen from the Reserve Bank of India as well as the government of India.

So we would expect the domestic market to pick up in the next two quarters.

And so far as Europe is concerned, I think it's anybody's guess, as much as yours as mine, because we have got impacted so far as quarter two is concerned.

And I think it will take a while before that starts picking up.

So the business is expected to be flat to slightly up, it sounds like.

Yes.

I think the -- at least the next one or two quarters we will see more or less similar to what we are in quarter two.

Okay.

And one last question.

Just on the margin trajectory, obviously they came in, but you put through, I think, some wage increases.

What do you expect from margins in the back half of the year and what are you expecting for the full year?

Thank you.

Yes, I -- yes, Suresh.

This is Suresh Vaswani here.

Our margin outlook going forward is a stable margin environment with a positive bias.

So, if you look at our margin performance last quarter, we have improved our margin.

And we've improved our margin on the back of some rate increases that we've got.

But more, more than that, it's been driven by productivity, it's been driven by utilization, it's been driven by a bigger thrust on fixed price projects and it's been driven on operational excellence.

So, going forward, we still think we have adequate levers in terms of driving operating efficiencies.

We have adequate levers in terms of driving non-linearity in our delivery model.

And with that, we believe we can sustain a stable to a positive operating margin bias going forward.

Thank you.

Our next question is from Arvind Ramnani from Bank of America Securities.

Hi.

Just a couple of questions.

Arvind, could you be louder, please?

Sure.

Can you hear me?

Yes, we can hear you now.

Sure.

What kind of work are you doing in the Financial Services?

What customers or segments are fuelling 41% growth in Financial Services?

So, I think we've had good traction with clients in Europe.

And a lot of work that we do, even in the US, has been fairly critical for clients from a continuity perspective.

So, we have not seen significant reduction in the work that we do, even in the challenging situation in the US.

And in Europe, we actually have seen good growth which is on the back of new orders that we won and the scale up that happened with big clients.

Great.

Also, what is Wipro doing to help reaccelerate overall growth, assuming that this economy continues to weaken?

More specifically, can you comment on the specific solutions that you are developing to address current client needs?

Let me give you two perspectives.

Number one, from a customer perspective and from a market perspective, we are focusing our energies in terms of growing our existing accounts through a stronger client engagement structure and through much more alignment of the various practices and the various services that we had behind the client engagement manager in these specific accounts.

So, clearly, grow the existing account is one aspect of mitigating the challenges that we face.

The second thing is we are looking for opportunities or we are hunting opportunities in accounts where instead of staff augmentation type of contracts we get more services type of contracts, and where we believe we have an opportunity to scale our services in the account.

So that is from a client market addressing perspective.

In terms of specific practices, in addition to what we've been doing in context of the vertical practices, the service lines and the domains over the last couple of years, we've invested in a strong Global Programs Team which has the ability to go for large transformational opportunities with customers or to create transformational opportunities with customers.

So that is one initiative.

The second initiative is building up a strong consulting base within Wipro, so that we are able to bring the value of all that we represent in terms of IT and BPO from a consultative framework to our customers and then lead it into system integration and transformational type of projects.

The third initiative that we have taken, and this we may have spoken about in the past, is strong alliances with technology partners.

So, we have five major strategic alliances - Cisco, Microsoft, AMC, SAP and Oracle.

And we are co-innovating with them, we are doing joint solutioning with them, so that we are able to bring that value of a technology provider and a service provider to some of our customers.

So these are some of the broad initiatives that we're taking to risk mitigate us in this economic environment.

Sure.

Also, are you developing anything that addresses immediate client needs?

There's a lot of merger activity taking place and in many ways the world has really changed in the last couple of months.

So are you developing any solutions that address these immediate needs of clients?

Yes, hi.

Girish here.

Absolutely.

So we know that in many cases clients will have to address the issues of integration, especially with mergers taking place between big banks.

Also, there is an increased focus on trying to bring process and technology together.

So we have worked out on a framework for application integration and application rationalization, which will really help clients integrate their differing application architecture and get benefits of synergy when they merge two organizations.

And we have got real life practical experience working with banks on how to bring process and technology together, and then to move it on a global delivery model, so that they get the benefit of both the synergy as well as the arbitrage that comes out of relocation.

Sure.

What is factored into your third quarter guidance other than your macro headwinds?

More specifically, do you have project delays, slower client decision making, cancellation?

How pessimistic is the view of basically your third quarter results?

Guidance is a point of time estimate of what we think this quarter is going to look like and it takes into account all the things that you mentioned.

There will be some project delays.

There will be some cases where decisions are on hold.

There are some cases where we expect clients to declare two weeks off at the end of December, which will affect billing.

It takes into account some cyclical downturns in some of the industries, like semiconductor.

So, all of that is baked into our forecast and it is as realistic as it can be at this point of time.

And also, Arvind, the cross currencies, that means the dollar appreciating significantly over Indian rupee as well as the other currencies.

Compared to what we had as average for the quarter versus how we ended the quarter two, and how it has moved from September end to today, there is a fair amount of what you call, in dollar terms, there is a contraction.

So I think everything has been taken into account from what we are forecasting here because there are so many moving lines there in the short term that is happening.

Sure.

And one final question.

I think it's safe to assume we'll have similar client push backs in '09 as we had in '08.

So what is Wipro doing to address that, to make sure that when these project budgets get delayed you're actually part of the process versus just being given a lower budget?

Our -- again, because we focus so heavily on account management and putting a senior team on the ground, the idea is that we are working collaboratively with clients and not waiting to be told.

Great.

Thank you very much.

The next question is from Ashish Thadani from Gilford Securities.

Yes, good evening.

I just wanted to go back to the operating margin discussion, specifically the IT Services operating margin you mentioned was 20.3% this quarter.

And if I'm doing the math correctly, it's down 150 basis points year-on-year, despite some very substantial currency tailwinds.

So how do we reconcile this gap?

Yes.

Ashish, A, so far as the currency tailwind is concerned, we haven't benefited much out of it.

But B is the acquisitions that we've done, Infocrossing, and as you knew that it will be margin dilutive for some time.

So that had an impact of about 1% plus.

So net/net, overall, if you adjust for that, we are pretty much holding on.

Okay.

And there are two items I just wanted to revisit also.

The Financial Services vertical, the quarter-on-quarter growth was very strong, as was pricing.

Was there anything that was very unusual to this quarter or should we expect some kind of a steep fall off in the coming quarters?

Hi.

Girish here.

No, we were much more concerned when we started the quarter because of the uncertainty that surrounded the industry.

And thanks to our deep relationship with clients and also through the grace of God we've not been too badly affected.

So we've had a decent quarter, last quarter.

And other than what we mentioned in overall guidance, I don't think there are any unusual factors to look forward to in this quarter.

Okay.

Thank you.

Our next question is from Kanchana Vydianathan from Pacific Crest.

Hi, thank you.

I guess a couple of questions.

Let me start out with, in your press release you highlighted a few of the key wins that you won during the quarter.

I was wondering if you could elaborate a little more.

What would be the average annual contract value for these wins?

You've mentioned that these are multi-year, multi-million dollar deals.

Yes.

They will be -- typically, we classify them only if they're large size, not all of them.

They have to be at least more than $25m.

And this would range somewhere between $30m to $100m.

Okay, got it.

My second question is, in terms of looking at your utilization, so utilization has been inching up quarter-on-quarter and your hiring still continues to be a little muted.

Help us understand, looking into Q3 and Q4, what should be our expectation in terms of hiring and also in terms of utilization?

We do not give specific guidance vis-a-vis every line item in terms of utilization and hiring.

But all we can say is that quarter three and four, as we look forwards, is mostly like volume growth.

And within that context, we'll continue to work on various productivity improvement areas and so on and so forth.

And hence, we would -- just in time kind of concept we will adapt to be able to add on people.

Got it.

With respect to pricing, you've actually seen good pricing increases during the last quarter, as well as during this quarter when compared to your peers.

Can you elaborate a little more as to what is driving that revenue productivity improvement that you're seeing?

Is it the new contracts that you're signing that's coming up on higher pricing and that's driving the billing rate increases?

So, while I'll request Suresh Vaswani to answer that, just to clarify on your other point when you talked about the size of the deal, that is basically -- when I said it is $30m to $100m each, and they are total contract value.

Not annual contract.

Not annual, per year kind of thing.

It's $30m to $100m, each of them over a period of time.

Got it.

This is Suresh Vaswani here, answering your question on rate realization and pricing.

So it's a combination of multiple factors.

Yes, the new contracts that we're signing or we have been signing have been at better rates progressively, compared to some of our earlier contracts.

We've also been able to renegotiate some of our contracts that have come up for renewal.

But you know the most important factor is the overdrive on operational efficiency, the overdrive on productivity, which is manifested in the substantially increased utilization that you see.

And also I think increasing ratio of fixed price projects in the overall make-up of our services, which gives us the flexibility to drive productivity and therefore better rate realization.

So, even in this environment, you're actually able to renegotiate contracts and get pricing increases?

Is that correct?

Well, we've been able to renegotiate some.

Especially places where we've done an extremely strong job, customers are fairly open to price increases.

Got it.

And one final question.

I guess looking at your Infrastructure Management Services, you've seen a very nice growth in this quarter.

Can you help us understand, was that driven by the Infocrossing?

Was that driven just by Wipro?

And also, what will be the contribution of Infocrossing in that revenue?

The Infrastructure Services business, now we report it as an integrated Infrastructure Services business, which comprises our traditional Technology Infrastructure Services business, comprises Wipro Infocrossing and also comprises our Infrastructure Services business in the India and the Middle East.

So what you're seeing is an integrated picture, because we have integrated basically all the service lines into one consolidated Infrastructure Services line.

So, factors that are responsible for growth, one is of course in the India and Middle East market we've done extremely well, particularly on the Infrastructure Services side.

So that has given us a kicker.

And second is the combination of Infocrossing and the combination of Infrastructure Services.

And this is really from a future perspective, I'm not necessarily talking about the current numbers, puts us in front of some very large integrated infrastructure services opportunity which hitherto we would not have been able to quote in front of customers.

But the combination of the onsite capability and the managed data center services capability of Infocrossing with the strong remote infrastructure services capability that we have is creating large opportunities for us and will be responsible for the growth that we see in this sector.

Got it.

Thank you.

That's very helpful.

Your next question comes from Mark Marostica from Piper Jaffray.

Good evening.

It's actually Mark Zqutowicz for Marostica.

I was just hoping if you could quantify how much of the improvements you saw in margins was related to utilization versus rate increases.

And then, if you could also quantify the correlation, if there is any, between your increasing fixed price concentrations with margin improvement that we're seeing.

I'm trying to get roughly an idea of what levels of utilization we need to start to increase your net hires again.

Yes.

There was a similar question before and we said that it was very difficult for us to project and give it to you.

All we're saying is that it is a constant process of trying to innovate, trying to improve productivity.

And we have seen in [table] two the expansion through the combination of multiple factors.

A, we did get some price increases.

B, we got price realization improvements by virtue of driving a high level of productivity in the fixed price projects.

And C, there is a change in the mix in terms of customers and the services.

As a combination of that, we've been able to get the (inaudible).

And, going forward, it will be our continued endeavor on all those three points, including utilization.

Yes, we've done a good job on utilization so far and our objective would be to sustain and improve going forward too.

Is there a level of fixed price concentration in your business that you can maintain a higher level -- or run utilizations at higher levels than historically for longer periods of time?

Can you draw some correlation there?

Well, the fixed price projects as a percentage of total revenue is about 31% as of September, and we think we can go up further in that.

And particularly when we're looking at more and more non-linear kind of drive and we're in with the outcome-based kind of methodology, some of that will add on to that kind of stream of revenue that we have.

So does that enable you -- so, back to the question on utilization, does that enable you to run utilization rates or sustain them at higher rates than you have historically?

Or will you need to -- if you get above, say, the 80% level, will you need to continue to ramp net hires, as you have in the past?

We are in little bit uncharted waters here, because I think our current utilization is fairly high and I don't think too many people have gone way above that in terms of utilization levels.

But what we have seen is that, yes, as you said, fixed price contract does give us fungibility and ability to utilize resources much better.

How much better it can be and what is exactly the correlation between utilization and fixed price projects is hard to say.

And we are really not -- we are really pushing on both kind of parameters, not necessarily completely dependent on each other.

Sure.

Fair enough.

Thank you very much.

Thank you.

Lisa, we don't seem to be having other questions.

Make one announcement for any follow-up calls.

I don't have any questions pending on email.

Make an announcement for follow-up calls and then we can close the session.

Okay, thank you.

We do have two questions that have just come into the queue.

Would you like to take those?

Yes, please.

Okay.

Ed Caso of Wachovia.

Hi, yes.

This is Chris Wicklund for Ed this morning.

Could you comment on the number of campus offers made this year for next year?

We have made about 14,000, Ed, for (multiple speakers) '09.

For next year we've made around 8,000 campus offers, for next year.

Okay.

And the number that starts this year is 14,000.

Is that correct?

Yes.

Okay.

Are you guys still tracking to just stick with that number, as far as bringing them all on?

So we intend to -- so we've made 14,000 campus offers for this year.

We intend to take most of them.

But there could be a one or two quarter lag in terms of our taking on all the 14,000 people on board.

We've taken roughly 2,500 people this quarter on board.

Okay.

Thank you.

And then also, can you share what you're seeing in the global tech, media and telecom, I think that's the vertical, what you're seeing right now as far as the landscape?

Yes.

So it's a fairly tough environment.

One is, as you know, on the telecom equipment side already there has been significant consolidation and some of the big players are in a fairly challenging financial situation.

Also, on the semiconductor side, there is some cyclical downturn that is in progress.

So, those are the kind of two challenged verticals within TMT.

We still are fairly optimistic on service providers area and on the media.

Great.

Thank you.

Our next question is from Kanchana Vydianathan of Pacific Crest.

I guess one thing is, just looking at your industry verticals, the Manufacturing and Healthcare and Retail again had a good quarter.

Looking at your pipeline, I believe that you're working on other deals that you're bidding for.

Can you help us understand what exactly are you seeing, the strengths and weaknesses?

This is Suresh Vaswani here.

Yes, you're right.

BFSI, Retail, Manufacturing have been driving growth for us so far.

And going forward, in terms of the outlook or the deal pipeline, it is concentrated around these sectors and the telecom service provider sector.

One more element in our overall get-up, so to speak, is also our thrust on the emerging markets, India and Middle East markets, where we are seeing significant traction.

And that also forms a significant part of our opportunity base across all the sectors that I just mentioned.

Okay.

And one final question.

Looking at your ADM growth, the ADM was muted growth this quarter.

Can you help us understand what exactly is happening?

Were there any specific industries where the ADM offering did not grow?

I think ADM is perhaps the most mature in terms of offshoring and outsourcing into India is concerned.

And the real growth drivers insofar as -- the new growth drivers are really the Infrastructure Services business, the Package Implementation business, which has done significantly well this quarter in terms of a 6% or 7% sequential growth.

So, Package and the Testing Services business, which again has shown a significant sequential and year-on-year growth.

So, really the answer is ADM is more mature and therefore growing from a market perspective at a lower rate compared to some of the more new generation services.

And these are the differentiated services for us and these are the services that have been driving growth for us.

So, is it fair to assume that going forward we would still continue to see -- if you look at the growth in the new offerings to exceed the growth in the ADM?

Yes, definitely.

You will see more growth happening across the newer service lines, relatively speaking, compared to ADM.

Okay, great.

Thank you.

Your next question comes from Nitya Thomas' line.

Yes, hi.

Could you give us an update on the progress improving margins on the Infocrossing business?

And how much longer should we expect to see a dilution from that acquisition?

You know the Infocrossing acquisition -- this is Suresh Vaswani here.

The Infocrossing acquisition was really a strategic acquisition from the perspective of financing our complete Infrastructure Services offering for the US market.

So, from that perspective, going by the deal pipeline that we've created and going by some of -- we do believe that we will -- we are in advanced stages of finalizing some of the contracts.

We do believe that it is beginning to deliver on the strategic intent in terms of enhancing our Infrastructure Services.

And you've seen the sort of presence we have on Infrastructure Services.

From a margin perspective, yes, Infocrossing has been dilutive from a margin perspective.

But we are driving two things.

We're driving revenue synergies, which I just spoke about.

And we are driving cost synergies also, because a lot of the work that Infocrossing does can also be delivered out of India.

So, from a medium-term perspective, we do believe that the Infocrossing margin would be very similar to our Infrastructure Services margin, which is broadly in line with the overall margin that we enjoy as an organization, as an IT Services business.

Okay.

Thank you.

And just on the utilization of the data centers within that business, what progress has been made there in terms of bringing that up?

Sorry, I didn't get the question, please.

Utilization in data centers.

Nitya, can you repeat the question?

Yes.

I'm just wondering (multiple Speakers).

I think you're talking about data center utilization.

That's right.

I think what we would -- we don't give out exact numbers.

But we do have adequate capacity to take care of the requirements, at least in the short term.

So there's adequate capacity for us to take on more customers and we don't envisage any major CapEx expenditures, at least for the next one to two years.

So, that is capacity utilization has gone up but we can do more.

Okay.

Thank you.

Thank you, Nitya.

I think, Lisa, you can -- there's no other questions now, so we can just make one announcement and then we can close the session.

Very well, thank you.

Are there any other questions on the queue?

There are no other questions in queue, sir.

Okay.

Thank you very much for the participation.

Rajendra and other people in India team and myself are available for any offline discussions, and there is a digitized replay as well.

Thank you very much.

Lisa, you can close the call.

Ladies and gentlemen, this concludes your conference call.

You may now disconnect.

Thank you.