Patni Computer Systems Ltd. Monday missed analysts’ expectations to report a nearly 93% fall in its second-quarter net profit as expenses rose at a faster pace than revenue.
The disappointing results caught investors unaware, as a recent change in management failed to stem the company’s inability to benefit from a revival in technology spending since 2008, analysts said.
Patni Computer–one of the pioneers of the Indian outsourcing services industry–has continued to lag behind rivals such as Tata Consultancy Services Ltd., Infosys Ltd. and Wipro Ltd. since India first saw demand for its services rise in the late 1990s due to concerns over the millennium bug.
For the three months through June, the outsourcing services company reported a net profit of 108 million rupees ($2.4 million), down from 1.47 billion rupees a year earlier, based on U.S. accounting rules.
This was despite a 311.8 million rupees foreign exchange-related gain, compared to a gain of 197.6 million rupees last year.
Patni Computer’s revenue grew 5.7% to 8.22 billion rupees, while its cost of revenue sans depreciation and amortization expenses rose 17.5% to 5.51 billion rupees in the past quarter.
The Mumbai-based company was expected to report a 29.3% fall in net profit at 1.04 billion rupees, while revenue was likely to rise 10.4% at 8.59 billion rupees, according to a poll of 13 analysts.
“It’s surprising to see revenues decline in a matter of two months after the new management took control,” a local analyst said, asking not to be named. Before the company’s management changed, executives had suggested a 3%-4% likely sequential growth in quarterly revenue in 2011, he added.
In May, Mr. Murthy told investors he had fired some senior executives at Patni Computer and recast its board. Four months earlier, a consortium including iGate and private equity firm Apax Partners LLP had agreed to buy a 63% stake in Patni Computer in a deal worth $1.22 billion. iGate owned an 82% stake in Patni Computer as of May 12.
Mr. Murthy, now also the chief executive at Patni Computer, expects results to stabilize in 2012 after merger-related charges are evened out, a press release said.
Patni Computer incurred a one-time severance-related charge of $17.5 million, the release added.
Staff utilization fell to 75.7% from 80.1% last year as attrition rose to 22.9% from 21.5% last year. The company had 18,372 staff at the end of June.
For the three months through June, the outsourcing services company reported a net profit of 108 million rupees ($2.4 million), compared with 1.47 billion rupees a year earlier, based on U.S. accounting rules.
Its revenue grew 5.7% to 8.22 billion rupees, while its cost of revenue sans depreciation and amortization expenses rose 17.5% to 5.51 billion rupees in the past quarter.

Source:http://online.wsj.com/article/SB10001424053111903591104576467461920759164.html