eBusiness and applications outsourcing specialist Syntel announced it has benefited from the increasing interest in offshore outsourcing as it unveiled its financial results for the fourth quarter and year ended December 31, 2001.
Full year revenue from Applications Outsourcing and e-Business increased 12% to $148.3 million from $132.5 million in the prior year. These two areas represented 87% of the total 2001 revenue as compared to 80% in 2000. Total revenue for 2001 increased four% to $170.8 million from $164.8 in the prior year.
Pro forma net income for 2001 increased 17% to $25.3 million or $0.65 per diluted share from $21.7 million or $0.55 per diluted share in 2000. Pro forma amounts in 2001 exclude $4.1 million (net of tax) related to an impairment of investments and write-off of software development costs and $0.8 million in operating losses related to the company’s incubator investments. In the prior year period, pro forma amounts excluded $13.2 million (net of tax) for the goodwill impairment write-off of the 1999 Métier acquisition and $ 0.5 million operating losses of the company’s incubator investments. On a GAAP basis, net income for 2001 increased to $20.4 million, or $0.52 per diluted share compared to $8.0 million, or $0.20 per diluted share.
Syntel’s better-than-expected earnings reflect the Global 2000’s increasing interest in offshore outsourcing of their strategic IT solutions, said Bharat Desai, Syntel Chairman and CEO. Our results benefited by increased utilization of our offshore capabilities as recent project wins ramped up and long-term recurring relationships continued to migrate. As more work was performed from our lower cost centers in India, our gross margins improved both sequentially and year-over-year.
Desai added, The challenging economic environment is causing a growing number of corporate IT departments to seek out more cost effective and value added services. Industry analysts are projecting that a large percentage of prospective companies will be utilizing offshore services for the very first time. Data from Forrester suggests that U.S. firms will double their offshore IT budgets by 2003 and two-thirds of those surveyed plan to go offshore for strategic IT activities. While IT spending levels are not back to normal, we are excited and encouraged by this trend as Syntel’s on-site customer centric focus and seamless offshore delivery is an attractive model, especially to the first time adopters as our domestic presence shoulders the responsibility and complexities involved in offshore delivery. This provides additional comfort for the client and has contributed significantly to wins like HCA, Conseco, and GMAC, who are first-time offshore adopters.
During 2001, Syntel added more than 45 new corporate clients to its roster and launched over 220 new engagements in the applications outsourcing and e-Business arenas. For the fourth quarter, more than 84% of the company’s revenues came from customers who had been doing business with Syntel for more than a year.
Based upon current market conditions for IT spending, Syntel expects the first half of 2002 to look similar to the last two quarters of 2001, in terms of overall financial performance. The company anticipates a stronger second half of the year and is projecting increases for its strategic focus areas- Applications Outsourcing and e-Business.