Infosys quarterly results leave analysts puzzled and hurt

The street wasn't expecting a blockbuster on Friday, when Infosys announced Financial results for the third quarter. Consensus estimates were for lukewarm numbers. Instead, Infosys served up numbers too good to be true. Caught off-guard, investors went into a buying spree, pushing the stock up 17%, its highest single-day jump in a couple of decades.


But a lot of equity analysts, who had a not-so-cherry outlook on the stock, are licking their wounds. For a company languishing for nearly two years, Infosys' performance was like a bolt out of the blue for them. A sense of collective hurt prevails because they say they were given to believe something else by the Infosys management. ET takes a look at how it unfolded, and what it can mean.


Runup

In December with just 2-3 weeks left in a traditionally soft quarter, Infosys CEO SD Shibulal and CFO Rajiv Bansal interacted with brokerage houses, including JP Morgan and UBS Securities, individually. According to reports published by brokerages, the management painted a bleak picture marked by delayed decisions, project ramp-downs, unexpected shutdowns at clients, and hurricane Sandy washing out a few days work. Analysts warned investors to remain cautious as they thought Infy may miss its forecast and further lower its 5% sales growth guidance.


Managing perception

According to analysts, Infosys wanted to manage expectations, and, through that, perception. Under attack from investors, media and staff, Infosys has been under a cloud of negativity after underperforming industry for quite some time. The negative spiral had to be stopped. Analysts understand why Infy did what they think it did. But, that is a fry cry from the Infosys the street knows, the Infosys of co-founder Narayana Murthy, who wanted transparency in information available to insiders and investors. Green shoots of growth may be sprouting but trust is the biggest casualty for now.