Satyam's Q3 disappoints; stock loses 5 per cent

Rex Mathew
19 January 2007

Third quarter results of Satyam Computer are below market expectations and have led to a sharp decline in its share price. Though the company managed to achieve an impressive growth in operating margins on a sequential basis, sequential growth in both bottom line and top line is very subdued and way below the growth rates achieved by other frontline technology companies. Rupee appreciation was the major factor, which affected the company''s performance.

To make it worse, the company has lowered its revenue guidance for the full year in anticipation of further rupee appreciation. However, the company has modestly hiked its revenue guidance in dollar terms.

For the quarter ended 31 December, 2006, consolidated net profit has declined 21.49 per cent to Rs337.23 crore, or Rs5 per share, as compared to Rs429.54 crore, or Rs6.42 per share, for the previous year quarter. Sequentially, consolidated net profit has increased 5.45 per cent from Rs319.81 crore, or Rs4.75 per share, for the previous quarter.

Consolidated revenues for the quarter increased 31.28 per cent to Rs1,661.12 crore from Rs1,265.29 crore for the previous year quarter. On a sequential basis, consolidated revenues went up 3.7 per cent from Rs1,601.88 crore for the previous quarter.

During the previous year quarter, Satyam had booked a one-time income of Rs216.43 crore from sale of its stake in Sify. Adjusted for this amount, net profit has increased 58.24 per cent on a year-on-year basis.

In Dollar terms, revenue growth was 6.7 per cent and profit growth was 8.55 per cent on a sequential basis. These numbers are lower than the growth rates reported by other large companies in the sector.