BENGALURU: Days after larger cross-town rival and former sector bellwether InfosysBSE 0.88 % reported lackluster numbers that fell short of expectations and forced investors to punish the company’s stock, the spotlight will now squarely be on WiproBSE -0.48 %‘s first-quarter numbers on Tuesday.
While Wipro has already set the bar low for the June quarter with a lukewarm growth forecast in April — the June quarter is also typically a slow one for Wipro — this quarter is still an important one for the company to make a statement and set the tone for the rest of 2016-17, as it searches for an elusive turnaround in fortunes under new chief executive Abidali Neemuchwala who will soon complete 200 days in office. Internally Neemuchwala has set ambitious targets for his key lieutenants and is aggressively pushing them to drive the company’s top-line growth to about 12-14% at least in FY17.
While investors are likely to give Neemuchwala a runway of at least a few more quarters to start delivering on his promise of restoring Wipro’s growth rates to industry levels and above, the former TCSBSE -0.34 % executive would like to see results much sooner, given Wipro’s prolonged turnaround attempts for the better part of the last five years. Here are five things to watch out for when Wipro reports its first-quarter results on Tuesday:
Performance of key verticals such as Energy & Utilities : What was once Wipro’s best-performing engine of growth has now turned into one of the company’s weakest spots, after a worldwide slump in oil prices that has cost Wipro nearly $500 million in annual revenue.
The energy and utilities business, which contributes well over $1 billion of annual revenue currently, is in the doldrums at the moment, with global oil prices undergoing a prolonged slump that is unlikely to end anytime soon. However, while Wipro also has the largest amount of exposure among large-cap peers to this vertical with large clients such as BP and Shell, it also stands to benefit the most when global oil majors decide to consolidate IT operations among a select few technology vendors. It has already benefited when a similar consolidation took place in the BP account — the bigger question remains as to whether the company will see more such deals on a consistent basis in the coming quarters.
Q2 revenue guidance and actual Q1 performance: The September quarter is typically the strongest one for Wipro during a financial year. Investors will, therefore, expect a strong guidance of at least 3-5% sequential revenue growth. Anything short of that will be deemed disappointing by the market. Investors will also expect Wipro to at least meet the higher range of its own guidance for the June quarter.
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More details of strategy under CEO Neemuchwala: In the last quarter, CEO Neemuchwala highlighted the key pillars of his new strategy, including details on how the CEO’s office handles the company’s key top 15-20 customer accounts.
Since Neemuchwala took over, Wipro unveiled a brand new organizational structure earlier and has delegated key areas to the company’s top-performing managers. Investors will expect a progress report from Neemuchwala, as well as further details on his new turnaround strategy.
Updates on performance of Wipro Digital and Holmes: While Wipro still relies on its core outsourcing business for maximum growth, the company internally has also laid out specific road-maps of growth for newer bets like the company’s artificial intelligence platform Holmes and the progress at Wipro Digital. Internally Wipro wants the digital business to touch $1 billion in revenue over the next 3-5 years. Watch out for management commentary on newer services.
Startups and M&A: Wipro recently made a foray into Israel with an investment in Israeli venture capital firm TLV Partners, which potentially gives it access to a portfolio of new-age enterprise tech and cyber-security startups. Wipro plans to make at least 8-9 investments in early-stage ventures every year and has also been aggressive on M&A over the past five years. Watch out for announcements on new investments in startups or tuck-in acquisitions that Wipro is typically known for.