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HCL Tech Loses A Client, Warns on Profits, Demonstrates Excellent Use of English


HCL Tech has announced a profit warning:


To summarize:

  • Revenue growth will be bad
  • Due to currency issues, their USD earnings are going to be down 80bps. But who cares about USD earnings – we should care about rupee earnings, which at 66 to the USD is juicy right? Right?
  • One customer – a fairly rich one, apparently – is leaving. They are in the “process of disengagement” which is pretty cool lingo to use if you’ve been fired. (You’re being disengaged from the company. Now go.)
  • And then, there is a “skewness in revenue growth due to transition timelines for complex engagements especially in infrastructure services“. My head is spinning. Or, my cranial vortex is exhibiting centrifugal motion. (I could get a job writing press releases)
  • And that is pretty darn good English if you ask me. Not that it gets the message across but perhaps that was an intended consequence.

The last point is likely to be related to the inflection point in IT that we’ve mentioned earlier – that the cloud is reshaping the concept of infrastructure services, by offering things productized at a fraction of the cost.

But that’s conjecture. HCLTech was +3% today, though it’s been in a horrible range for a while:


The warning is symbolic – expect bad numbers. While they haven’t stated an issue with the rupee numbers (due to depreciation) the numbers will probably be affected in rupee terms also, given they have lost a large client.

The market should see IT stocks react later today in the US (Infy and Wipro are listed). Let’s hope the news isn’t something blown out of proportion.


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