Greyhound Research perspective on Wipro Q2 Results
With a sequential growth of 1.8% Q-o-Q, Greyhound Research believes that this quarter has been poor and far from industry standards. Their business continues to be a well balanced portfolio between Infrastructure and application services, but BPO, product engineering and ADM continue to decline. While Wipro continues to have strong focus on cloud services, they need to increase their focus on Cloud-delivered managed services.
• Customer size distribution.
o Wipro is increasingly targeting small ticket deals under a million USD – from 511 customers in the last quarter, the customer base has increased to 524.
o This is a clear indication of the company’s trajectory to focus on smaller deals particularly delivered via managed services delivery model.
• Business Strategy is evolving with new leadership but growth still tilted from existing service lines.
o Wipro’s decision to invest in open source practice to address emerging technologies is a great decision to strengthen its business strategy.
o Rishid Irani’s decision to put together a team to run Wipro’s $100 million corporate venture is the right way to broaden their base through investments in IP’s.
o Having said that, sequential growth continues to be tilted towards Global Infrastructure Services and Business Application Services QoQ growth remains sluggish at 3.0%.
o Wipro is on a plateau growth for most verticals other than oil where strong revenue seems to be pouring in and substantial increase in Healthcare, Life Sciences and Services.
• Heavy reliance on US but with increasing focus on emerging markets.
o America continues to be important from revenue generation perspective while the focus is slowly shifting in APAC and other emerging markets.
o The company has been expanding their outreach in Emerging Markets – their deal with AS / Nexia Turkey is a solid proof point to compliment their expansion strategy.
o Greyhound Research has been privy to multiple other deals that the company is currently negotiating in Emerging Markets.
o While Digital and other emerging technologies is a focus, most of these conversations continue to have traditional IT services as the cornerstone.
• Future for Wipro lies in its strategy of ‘pruning to grow’
o Wipro has started a three year exercise to become a leaner company; we believe that this pruning is bound to scale up the growth curve for the firm.
o Utilization is lower than industry standards, and their decision to decrease their employee base is a clear indication to increase their employee utilisation level.
