Wipro Ltd (WIT) 2009 Q4 法說會逐字稿

Good morning.

My name is Melissa, and I will be your conference operator today.

At this time, I would like to welcome everyone to Wipro's quarter four results and earnings call for period ended March 31, 2010.

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).

Mr.

Sridhar Ramasubbu, you may begin your conference.

Thank you, Melissa.

Good day to all of you.

This is Sridhar, and I'm joined by the IR team in Bangalore in extending a very warm welcome to all the participants to Wipro's Q4 results and earnings call.

We have with us today Azim Premji, Chairman; Suresh Senapaty, CFO; who will comment on the IFRS results and on key takeaways for the quarter and year ended March 31, 2010.

They are joined by Joint CEOs of IT business, Suresh Vaswani, Girish Paranjpe, and other senior members of the Wipro Management Team who'll 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 uncertainty and risk 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 Securities Exchange Commission in the US.

We do not undertake any obligations to update forward-looking statements to reflect events or circumstances after the date of filing thereof.

The call is scheduled for one hour.

The presentation of the Q4 FY'10 results will be followed by Q&A.

The operator will walk you through the Q&A process.

The entire earnings call proceedings are being archived, and transcripts will be made available after the call at our Company's website.

Replay of today's earnings call proceedings will also be available via telephone post the call.

During this call, I am also available on email and through mobile as well, to take any questions and table them to the Wipro team in case you are unable to ask questions for any technical reasons.

Ladies and gentlemen, over to Mr.

Azim Premji, Chairman, Wipro.

Good day to all of you.

Let me give you an overall picture before I get on to the specifics of the business units.

Wipro Limited had another strong quarter, with an 8% year-on-year growth in revenue, and a 21% year-on-year growth in profits.

For the full year, we grew 5%(Sic-see press release) in revenue and [18%] in profits.

Overall macro environment is getting better each quarter, and we seem to be returning to a more normal business environment.

Conversations with multiple Fortune 100/500 CEOs confirmed that they are significantly more confident and optimistic of the future than before.

I'd like to now talk about the IT business.

We've had another good quarter following a strong performance in Q3.

Our IT Services business grew near the top end of our guidance of 4.7% on a constant currency basis.

Billable [net comp] adds have been among the strongest that we have seen since the slowdown started.

Strong broad-based growth continues, despite the impact of cross currencies.

Growth has been volume-led, with uptick in volumes of 4.1%.

This follows volume growth of 4.7% in Q3.

We have seen strong growth with Healthcare, BFSI, and Energy & Utilities, and in the service lines in BPO, TIS, Consulting and Testing.

Challenged verticals like telecom and technology have had a strong quarter following through a strong quarter in Q3.

We expect budgets to be marginally up this year, but more importantly, we expect budgets to be spent this year.

We are already seeing some initial pickup in discretionary spend.

We have done an excellent job in improving margins this quarter by 60 basis points to 24.2%, despite giving salary increases in February, and challenges with the stronger rupee and weaker cross currency.

Operating margins for the year have expanded by 243 basis points to 23.4%.

We have continued to build on the operational excellence achieved in financial year '10 with improved revenue and operating leverage.

This is key to our strategy.

Non-linearity is a huge movement within the organization.

and we are driving this across the organization within delivery, as well as on the revenue side.

We continue to work on newer commercial models which are win-win for the customer, as well as for us.

We continue to invest in industrial-led solutions, and on driving offerings around our technology teams like Green and Cloud.

We are strongly committed to driving globalization.

Our aim is to increase the percentage of locals in our workforce overseas to 50% in the next two years.

As of quarter four, 39% of our overseas people are locals versus 29% a year ago, a significant increase of 10%.

We expanded our delivery presence overseas with the inauguration of the center in Curitiba, Brazil, and a new development center in Melbourne, Australia.

We continue to invest in the front end and moving up the value chain with customers.

Our Consulting business continues to grow and capture clients' mindshare.

We have hired 38 partner level people in financial year '10, and plan to continue to aggressively build on this in financial year '11.

A few words about our Consumer Care & Lighting business.

Our India Household business continues to grow on the back of our flagship brand Santoor, which is the number three brand in India.

In our international business, the second half of the year has been much better for us.

While some of the smaller developing markets like Vietnam, Indonesia and China -- we are small in China -- have seen strong growth throughout the year, our bigger markets like Malaysia, Hong Kong and Singapore, have also bounced back in half-year two.

Wipro Infrastructure Engineering; positive news is that we have gained market share during the downturn and further cemented our relationship with our key clients.

This bodes well for the future.

We are today the world's largest third party hydraulics player in (inaudible) in the [field].

India market is strong and has returned to peak levels.

Europe has bottomed out, and we are starting to see the first signs of recovery.

Our Eco-Energy business, which we started exactly a year back, has got off to a good start.

We've had some stellar wins of orders, and our order pipeline is strong going into the current year.

We operate there on three axes.

On one axis, we give green solutions to customers; commercial customers, industrial customers and home customers.

On the other hand, because of our new, very innovative and very progressive policy for the Government of India for the solar mission, we are in the process of supplying solar within the key plants.

As for the global customers as well as for the Indian customers, we are offering managed services which are end-to-end management of energy infrastructure and usage for our clients.

We leverage a part of the major distribution and direct selling networks of our IT Services business globally to leverage this.

Our confidence in our Eco-Energy business model has increased significantly, validated by the market success.

In terms of other achievements, we won the 2010 Global Impact Award from Metro Atlanta Chamber of Commerce under the category of Economic Development, Foreign Direct Investment, for success in job creation and positive impact on Atlanta's economy in 2009.

Wipro also released its second sustainability report.

The report is prepared in line with the Global Reporting Initiatives framework, and has been rated A plus by GRI.

Highlights include a 19% improvement in energy efficiency over the past five years, and 32% of the water requirements of Wipro are met through water recycling and harvesting.

I now request Suresh Senapaty, our CFO, to make some opening statements.

Before I delve into our financials, please note that with effect from this quarter, we will report our financials in IFRS based on (inaudible) guidelines.

(Inaudible), your voice is low.

Can you speak up a little bit?

For the coming year, we have also shared our IGAP results this quarter.

Starting next quarter, we will only share IFRS results.

Please also note that for the convenience of readers, our IFRS financial statements have been calculated into dollars at the noon buying rate in New York City on March 31, 2010, for cable transfers in Indian rupees as certified by the Federal Reserve Board of New York, which was $1 equal to INR44.95.

Accordingly, revenues of our IT Services segment, that was $1,166 million, or in rupee terms INR52.6 billion, appears in our earnings release as $1,170 million based on the convenient translation.

Our IT Services revenue for the quarter ending March 31 was $1,166 million on a reported basis, a sequential growth of 3.5%, and year-on-year growth of 11.5%.

On a constant currency basis, our IT Services revenue was $1,180 million, a sequential growth of 4.7%, and a year-on-year growth of 7.8%.

As we had suggested last quarter, we are seeing broad-based growth across verticals and service lines.

We saw the challenged verticals of telecom and technology posting strong growth at 6.6% and 6.5% respectively.

BFSI posted another strong quarter of 4.6% sequential growth rate.

Energy & Utilities and Healthcare & Services both posted a sequential growth rate of 4.7% and 9.8% respectively.

Our differentiated service lines of Testing, GIS, grew upwards of 5% sequentially in the current quarter.

With development spend starting to stabilize, Product Engineering Services delivered 5.7% sequentially.

Europe continues to be an exciting market for us illustrated by 8.6% sequential growth on constant currency terms in the quarter.

Our investment in emerging markets continues to pay good dividends.

Our India and Middle East business grew 26% on a year-on-year basis, while other emerging markets grew 13% sequentially.

We continue to see particularly strong traction in Australia.

We saw volumes continue to be strong in the current quarter, with 4.1% sequential growth.

We continue to drive productivity and non-linearity, as proportion of fixed-price projects increased by 1.8% to 44.3%.

Price realizations in constant currency increased by 1.3% offshore and 0.9% onshore.

On a reported basis, our offshore realization has increased by 0.2%, while onsite realizations dropped by 0.4%.

Our focus on operations helped us expand margins in the current quarter by 60 basis points, despite headwinds of salary increase and rupee appreciation.

As of March 31, 2010, our DSO was at 61 days.

Our IT Products business showed year-on-year growth of 2% in revenues in the current quarter.

Wipro Consumer Care & Lighting business continued to see good momentum, with revenue growth of 27% year-on-year, and [GPIB] growth of 16% on a year-on-year basis.

On the ForEx front, our realized rate for the quarter was INR45.11 versus a rate of INR45.84 realized for the quarter ended December 31, 2009.

On a quarter-on-quarter basis ForEx gave us a negative impact to margins, including the impact of cross currency of 0.7%.

As at period end, we had about $1.7 billion of ForEx contracts at rates between INR40 to INR50.

Our net cash balance on the balance sheet was INR44 billion.

We generated a free cash flow of INR8 billion during the quarter.

We will be glad to take questions from here.

Melissa, you can start the Q&A.

(Operator Instructions).

Your first question is from the line of Trip Chowdhry of Global Equity Research.

Your line is open.

Execution.

Two questions; first regarding the European market.

About a couple of years, there were a lot of deals which were supposed to be up for renewal, but economic downturn probably put a dampener on it.

I was wondering, have those deal conversations started to occur again?

And, if so, do you think increasing part of those deals with be both offshoring and outsourcing?

And then I have a follow-up question.

Hi, Trip.

Girish here.

I think what we've seen change from the past years is a genuine movement within Europe to global delivery and (inaudible), but it has to be adapted to the European context.

So there is a significant amount of planning and, I would say, organizing that has to be done to be able to [handle] the relative legislative protection that exists in Europe relating to people.

So we have to find some work solutions around that.

But we have at least a large European enterprise which we want to be globally competitive, and are more than willing to embrace global delivery.

Okay.

The second question I had was regarding your Cloud initiative, and I was wondering, can you give an update like which sectors are you seeing early adopters of Cloud, and any other commentary in terms of any new capabilities you are building to address the potential need that may come down the road?

Thank you very much.

Your next question is from the line of (inaudible) of the Morning Star.

Your line is open.

On question for Execution.

We didn't answer the question --

One minute.

Melissa?

Melissa, that person has not been answered, so just hold on.

We have to go back to the answer.

Go back to the --

Yes.

Go ahead, Suresh.

The question was on Cloud and what we see as an adoption of Cloud and what the full strategies are.

So clearly, Cloud is there in the CIOs mind, in the -- in basically the customer -- the user segment.

We do see that large enterprises are looking seriously at understanding Cloud and understanding Cloud technology and what it could mean for them in terms of their IT transformation.

We do see that customers will, especially the large customers, will look -- and I'm talking medium term here in terms of the combination of leveraging on private Cloud technologies, leveraging on public Cloud and, of course, leverage the application of the traditional IT applications.

And these people form the pillars of their overall IT strategy and overall IT operations.

As so far as we're concerned, we do not have Cloud as yet.

One of the big areas of investment going forward, and we are positioning ourselves as service providers that understand the Cloud and is able to implement -- and is able to integrate Cloud solutions for customers, and do exactly what I said earlier; that's use private Cloud technology, use certain public Cloud, and this may relate to large enterprises.

And integrated with the -- seamlessly with the IT applications, that's the traditional IT systems, so that you get the best of all worlds, so to speak.

So that is our Cloud strategy.

We are playing the Cloud [opportunity] as a system integrator and [picking] in certain specific markets globally, and particularly on the emerging markets.

We have launched and we will continue to assess launching of our own Cloud based solutions.

So, for example, in India, we have launched our -- we've launched a fairly comprehensive healthcare ERP solution, so to speak, on the Cloud.

That [is linked] also to mid-sized hospitals in India.

Okay, Trip, is that good enough?

Okay, Melissa, we can go with the next question.

Your next question is from the line of (inaudible) of the Morning Star, your line is open.

Hi, guys; congrats on a good quarter.

My first question is related to the fixed pricing.

I think it's been turning up in the last few quarters.

So what do you think is a comfortable level?

And second thing is, what kind of impact would that have on the margins?

Would you be able to quantify, say, if [FP] goes up by 1%.

Read the first question -- have you got it?

Yes.

You know, there is an underlying assumption that fixed price is inherently risky because traditionally it has been used to do system integration work.

And in many system integration contracts, there will be some big fixed price.

That is [41%].

There is a [premium] (inaudible) inherent risk in taking on this [number].

Alternatively, fixed price has been used in kind of globalised (inaudible) where again we (inaudible).

I think what we have done is to do a lot of (inaudible) based deals which are relatively low deals, but are also on a fixed priced basis.

This is why we have (inaudible) managing fixed price at [44%] our revenue.

We [will be] taking it a bit higher as long as it (inaudible) to underline what we are doing on a fixed price basis.

(Inaudible) and it's something that we can take a risk on.

So frankly, we are comfortable with the flexibility now that we have.

Based on the (inaudible) that we have done, yes, in most cases the fixed price work that we have done is [hired] markets than comparable work done on a (inaudible) basis.

But we hesitate to share the exact percentage of margin accretion that we have as a result of that, because [it could undermine] work (inaudible).

To answer the question then, so in the future, we could expect this to go up further?

(Inaudible).

Okay, my next question is related to the application of global management.

I think the last three quarters, there was trimming down, but this quarter there was a good bounce, so I just wondering how do we interpret this going forward?

Yes, the market is quite up, and since there was a pickup in demand after the relatively long period of global, there's a lot of people who find out what else is available in the market (inaudible).

We think it possibly will quieten down in maybe quarter two.

From our side, we are taking many steps, including a possible [wage reduction], which we [need to agree first] to respond to the market situation.

And we'll take other steps where they're necessary, but in the short term, it looks like we have [controlled] the higher level of attrition.

Okay, thanks for that.

Your next question is from the line of Nabil Elsheshai of Pacific Crest Securities.

Your line is open.

Yes, thanks for taking my question.

First, I just wonder, just a follow-up on the earlier question on the Cloud, since we talked about it.

When you mentioned the hosted healthcare application, I was wondering if that's something that is contributing to the growth, the strong growth in Healthcare, or is that still a pretty small segment of that business?

It is something we launched recently, so it is not significant in terms of impact on the volume and on the revenue.

The significance is in terms of (inaudible), succeeding, and the potential scale it offers us in both in India and some of the emerging markets.

Okay, so if I could step back a bit, I was wondering if you could comment, and I know you're not giving annual guidance, but we saw some pretty aggressive growth numbers out of some of your competitors at the top line.

I was wondering if you could maybe give me your thoughts on, at least industry growth rates, or if you think a high teen growth rate is something that's achievable this year.

It's -- let's say, industry growth rates, as indicated by NASSCOM McKinsey is expected to be between [13% and 15%] for the current financial year, so that will be industry growth there.

You're right, we do not give guidance for the year.

We guided for the growth rate.

We guided between 2.1% to 4.2% sequential growth for the next quarter.

But broadly speaking, we certainly as a Company will grow our sales in terms of driving our own growth ahead of industry (inaudible).

Okay, great.

And then when you do look at either next quarter or going forward, what are your expectations that are built into the pricing environment?

Do you expect it to continue to be flat?

I have heard some things about the potential for maybe some price increases going forward.

Is that something that's feasible?

I think in the [year], thinking about the next couple of quarters, we certainly believe that we can hold on to our price realization that we've achieved in quarter four.

And the price realization that we've achieved in quarter four on a constant currency basis has been up, has been an increase, so we've achieved increase in price realization.

We do believe that we can sustain our current price realization for the next couple of quarters.

I think the discussion with most customers today is more in terms of what strategic value we can deliver to them, and not necessarily on coupon rates and prices from us.

We're really looking at how we can comment, how we can enable them to transform their business, and how we can deliver more value.

But long story short, yes, the pricing, or price realization's sustainable.

Okay, great.

And then maybe you could provide an update on some of the purchases you guys have made in terms of public sector.

I think you guys have focused a little bit on state and local.

What kind of traction have you guys seen there, and what kind of push-backs, if any, are you getting?

So we have last year, (inaudible) started addressing the public sector, the government sector globally.

We do address the government sector and the India market fairly aggressively, and we have a fairly large (inaudible).

We have launched a government vertical as a part of one of our (inaudible) deals that focuses exclusively on government.

We're talking generally the US North, and I would say the Australian markets.

We've made inroads into Australia.

We are bidding for fairly -- reasonably priced contracts in Europe in the government sector, and in the US we do have a -- we do Medicaid back office work for the State of Missouri, and we would like to replicate that again for some more opportunities that will be coming, as we (inaudible) for the next level of Medicaid (inaudible).

That's great.

Lastly, there's a trend that people talk about in terms of provider consolidation and maybe potential share loss for the Tier 2s going to Tier 1s, such as yourselves.

(a) is that continuing and (b) maybe if you could tie that to -- if it is tied to growth and larger accounts, and what you're seeing in the activity for large deal or installed base upgrade or add-on type of business?

I think some of them (inaudible) already happen because as clients have looked at that portfolio and they've thought that they would spend less, in the last 18 months (inaudible).

Also, I would think more (inaudible) based outsourcing (inaudible) for them to consolidate their suppliers and not have multiple people doing that.

So I think there is a certain natural rhythm by which the changes have taken place, and will continue to play out over the next couple of years.

And being a Tier 1 player, I think we do tend to [be in] some [flexible foundations].

Okay, and you mentioned Atlanta.

How is the --?

I guess what should we look for in terms of the trend of onshore build-out, both from a sales perspective as well as a delivery perspective?

We couldn't get the question, there.

So I was just trying to understand a little bit better I guess the localization efforts you guys have been going through; hiring in local markets, both -- again, from a go-to-market perspective and from a delivery perspective.

So we are driving the -- clearly, we are driving localization, and we're driving localization -- addressing it across all geographies.

So just to give you a sense in terms of our workforce which is local outside of India, this is now up from 29% to 39%, so that's a significant move up.

In terms of -- a large proportion of our sales people are local.

So 40%, 40% of our sales people are local.

Okay great.

Sorry, (inaudible) to get it right.

(Inaudible).

56% of our sales people are local, so we've driven a fair amount of localization as it relates to our sales as well.

And it is -- basically localization is a big part of our clients in terms of strategic plan people [in post].

Where do you think that number goes to?

Sorry?

I was just trying to understand.

If it's 56% today, I'm assuming you're continuing your localization efforts.

Where does that number go to from a sales perspective?

(Inaudible) I spoke about gross sales which is 56%.

The earlier number that I spoke about was 39%, which is all the workforce that we have in our global geographies.

Right.

The broad drive for us is to at least make the global workforce at least 50% local.

Okay, that's --

That is the drive we [make].

Okay.

Since we are already at 56%, so we will drive it further, but in terms of the overall workforce, our goal is to [reach] 50%.

We are currently at [29%].

And what's the impact on margins if you do that?

So just to answer the question, then maybe we can move on.

Sorry, I'll --

In terms of margins, we don't see a significant impact on margins on account of localization.

We're completely [committed] to get people from India with the local people, and (inaudible) the possibility of the cost (inaudible) rather than cost (inaudible) because you don't have to pay for (inaudible), you don't have to pay for living expenses, you don't have to pay for visa, etc., etc.

Okay.

Okay, thank you, guys, for taking my questions.

Thank you very much.

(Operator Instructions).

Your next question is from the line of Jeff Rossetti of Janney Montgomery.

Your line is open.

Hi, thank you for taking my question.

I'm calling on behalf of Joseph Foresi.

I just was wondering if you could provide the offshore wage increases, what quantify that, and how that is expected to impact attrition going forward.

Yes, recently that we gave that [rate class] in the range of 8% to 9%; [not] across the board.

Of course, some people got more than that, and some people got less than that.

We have factored that into our margin.

That is -- two months of that is impacted into this model for this quarter.

And the customer impact of that is not (inaudible) [0.1%] in terms of margin.

Okay, and your assumptions for attrition, as it's picked up in this quarter?

We have reported quarterly and annual attrition of 17%, which on [NTM] basis is more like 12.1%.

Last 12 months, 12.1%.

We do expect that given the relative (inaudible) in the demand environment that attrition will take maybe a quarter or two to stabilize, but that's our expectation at this point in time.

Okay, and you've spoken about Healthcare before.

For this particular quarter, was it -- the Healthcare growth, was that coming from India, or was -- could you elaborate on maybe what was contributing to growth for the vertical?

Growth was broad-based across -- it's not exclusive to India.

And also, (inaudible) Healthcare and Services.

Okay, and any levers that you can point to as far as -- to provide some -- I know you said margins are sustainable from this point.

Can you point to any levers that could maybe provide some upside?

Joe, this is Manish Dugar here.

Some of the things that we have done probably are yet to complete, and those are in the nature of improvement in utilization, looking at changing the quality of sales, which has led to more [subscribers], better realization.

So as Girish mentioned earlier, rate utilizations have been going up, and if we are able to continue our drive on better quality of sales, non-linearity, we will continue to see movement there.

There is a bit of volume growth increasing, (inaudible) pressure then to look at lower cost of delivery.

This is also that much more, so that basically was (inaudible).

And there is a potential insofar as acquisitions is concerned which doesn't get normally measured in the matrices that you see with utilization, etc.

And we have seen some improvement in our acquisition profitability in the last couple of quarters, and we will believe opportunity exists to make them even better.

And having said all of this, our focus on automation in the processes, our focus on continued cost take-outs, and our focus on ensuring that we make internal processes more and more efficient strongly levering the sales.

So margin sustainability, and certainly it is something that we have visibility on, and unless there's a huge impact of [things] because of currency, we see the margins to remain in that range.

Okay.

Thank you for taking my questions.

Thank you.

Your next question is from the line of Ed Caso of Wells Fargo Securities, your line is open.

Hi, good morning, this is Chris Wicklund for Ed Caso.

Ed, this is (inaudible).

We can't hear you.

(Inaudible).

Can you hear me now?

No.

Can you hear me now?

Yes, but very faintly.

We're not able to hear you, Chris.

Can you, if you are on a speakerphone, can you pick up the handset and speak?

No, I'm not on a hand --

You're better now.

Is that --?

Yes, you're okay.

You're okay now.

Okay.

Hi, this is Chris for Ed.

Girish or Suresh, could you talk about your pipeline for larger opportunities, specifically which verticals are the most active and also if there's been any change in the length of sale cycles?

We will answer, as we obviously have said, answer that question, and the question is related to pipeline -- which vertical?

So one of the trends -- hi, Chris.

This is Martha Bejar.

One of the trends that we continue to see is the increasing pipeline for large deals within our Company.

While I will not talk about specific numbers, I will tell you that the actual uptake is very encouraging for all of us.

And they're going across in a very diverse day; across multiple business units or multiple verticals for us.

We see a lot of action within the Retail business, within Manufacturing, within the Healthcare business.

We see actions in the Telephone business, so we're pretty excited about the opportunities within that, the (inaudible) large deals.

I think that Girish spoke too about some consolidation in the market, and that presents opportunities for us as well going forward.

But the pipeline is the big discipline and focus within the organization, quality pipeline that is.

Okay, thank you.

There's one thing at this point that I would like to add there.

In terms of our -- booking of my figures in quarter four, it's above $1 billion or so.

So we did $1 billion large deal order booking in these (inaudible) last quarter.

Okay, that's helpful.

Thank you.

And, Suresh, how should we think about the IT Services margin?

I'm sorry, I believe you mentioned that you think it's sustainable here in a narrow range.

Yes, we do believe that price realization and our operating margins are sustainable in an narrow range, and I'm talking about sustainable at the levels of 1 to 4.

Okay, thank you.

Specifically, we do not give guidance, but all we're saying is from immediate to longer term, we want margins to (inaudible).

Sure, understood.

And then, have you given a fresher hiring target for this year from the campus?

Could you repeat that?

Have you given a campus hiring target?

Again, that's not a number we share, but as we have given revenue guidance, most of it is expected in the form of volume growth.

As you were saying, pricing is a stable environment that we're looking for, and therefore of course we are focused on (inaudible).

Obviously for that, most of the growth will be to make hiring vertical happen.

Okay, and lastly on tax rate expectations for this fiscal year and fiscal year 2012?

Yes, if you look at the tax for the full year of 2009/'10, we're looking at 2 percentage range from there on for the current year, and hopefully for the next year.

Okay, that's helpful.

Thank you.

Thank you.

Your next question comes from the line of Ashwin Shirvaikar of Citi.

Your line is open.

Thank you for taking my question.

I apologize; I got on a little bit late, so this may have been asked, but can you comment on Europe?

It had a pretty good performance.

Within Europe, what's working; what's recovering faster; what's not?

If you can do a geographical breakdown within Europe.

And any differences in the recovery vis-a-vis the US?

Okay.

We'll have Martha answer this question, please.

So in Europe overall, we are seeing a very interesting stronghold for us in France and in Germany.

Ireland and the UK we continue to be excited about the growth that we're seeing there.

I think in general though, Ashwin, I would say that a lot of the deals are very much transformational, which is a trend that we're also seeing in the US.

I think there is a -- it's a very similar trend.

Our customers are asking of us more value, more enhanced value that we can offer to their own P&L in additional to taking costs out.

And so we're becoming much more of trusted advisers to them, and feel that's becoming a very strong trend for us in Europe, but not dissimilar to what we're seeing in the United States.

Does that answer your question?

I'm not sure --

Martha, he was asking, are you seeing specific --?

Vertical-wise, which vertical is doing better in Europe?

Some color.

Right, so I did get part of the question answered; the geographical piece, that was quite helpful, but also on a vertical basis, if you could answer that.

So we're seeing strength in our Retail business, or within the Retail business in Europe.

We're seeing strength within the Finance business.

Healthcare, we're seeing strength in Healthcare and Services; and E&U, which is our Energy & Utilities, is one that continues to grow.

Those guys are going through some very interesting transformation which is presenting opportunities for us.

I would say that those are top picks.

Okay.

And when you guys talk about transformational projects, and a couple of other companies have also indicated transformational projects are picking up, what is a couple of examples of transformational projects?

Do you really mean ERP, or are you talking about combination business process and IT projects?

What does it mean for you?

Let me answer that.

This is Suresh Vaswani here.

Typically, transformation projects are system integration projects, and a good example of that in the UK would be what we have spoken about in the past [months], where we are doing a full scale implementation of Oracle Retail; Oracle Retail, (inaudible) that it completely transforms.

It's a business model, and for that, we need this Oracle Retail implementation.

Okay, that's helpful.

And one last question, if I may.

The availability of talent; if the early surge or rate inflation back to levels of a few years back is any indication, is that something that worries you today, and how do you propose to deal with it going forward?

I understand non-linear approaches would help, but in terms of just pure availability of talent and -- if you could comment.

We've been -- yes, the market opportunities, demand is picking up, so that does bring in a challenge and it relates people, and people attrition, and so on.

I think, in the plan, we need a lot to -- we need a lot globally, we need a lot in the domestic market, and we have the ability and we are able to attract topflight talent from -- topflight (inaudible) from various companies.

We have, for example, built up a fairly strong consulting and business advisory team, and that has been built up, clearly, largely from (inaudible) persons that we've taken into our organization.

So net-net, given our brand, given our standing in the industry, given the customer traction that we have, we do believe that we can attract the right talent.

Okay, got it.

Thank you.

(Operator Instructions).

Your next question is from the line of Nabil Elsheshai of Pacific Crest Securities.

Your line is open.

And discretionary spending, I was wondering if there's -- if that is just the same as the verticals where you're seeing strengthening.

I think you said Healthcare, Retail, Energy, or if there's other areas.

And then in addition to that, does that mean new package implementation?

Does it mean custom development?

When you say discretionary, what exactly does that mean in terms of new types of projects?

Hi, Girish here.

When we say discretionary, we specifically (inaudible) [reduced] spend, what we call BAU spend.

Apart from the fact that it's spend needed to launch a new product, or it's something -- money spent to enter a new market or to streamline the operations.

Those are the kinds of projects that I think we share that now.

They tend to be fairly cross vertical (inaudible) where discretionary spend is happening, but it's fairly broad-based.

I think that the trends that we are seeing in fact, while discretionary projects are happening, there is a certain rigor which is there when launching those projects, developing much more [globally] than upstream and defining the business case, defining the outcome, etc., etc.

And the money is also being spent in the (inaudible).

So I would say discretionary spending is back.

It is across [ADM] and [package improvement implementation].

It is across verticals, but it is much more [circumstance].

Okay.

And then I wonder if you could just give a little more color on the rebound in telecom and how sustainable that is.

It seems to have been, not just for you guys, but an area of hit and miss then for a lot tech companies.

So what are you guys seeing as far as budgets and spend in that vertical?

Telecom perhaps comes in two colors.

One is telecom equipment vendors who -- that piece has been the most challenging because of industry consolidation and (inaudible) Chinese (inaudible).

And I think broadly speaking, industry consolidation is still in progress, and what I think how we have tried to tackle it is to expand our list of projects.

Traditionally, we (inaudible) delivering services to this industry, but in the last 24 months, we've enlarged the list of projects to offer (inaudible) or IT solutions to this sector, and as a result of which we've seen the small stability in our revenues.

When it comes to telecom service providers, that we still think is a growth industry, and we've seen significant growth there in this hemisphere, almost 11% sequential growth on like-on-like basis.

Some of it has come from emerging markets, but we think there is potential in telecom, even in the built-up countries.

Okay, great.

Thank you, that's very helpful.

(Operator Instructions).

Are there any more questions, Melissa?

There are no further questions at this time.

I'll turn the call back over to you.

Okay, I think we can close the call.

Thank you very much for the participation.

I, myself and Azim and Rajendra are available for any offline questions.

Thank you.

This concludes today's conference call.

You may now disconnect.