Satyam Reports Strong Gains In Sales, Profits, But Sees Wages IncreasingSatyam Reports Strong Gains In Sales, Profits, But Sees Wages Increasing

Outsourcer Satyam Computer Services on Friday reported big gains in profits and revenues, but like the rest of its Indian peer group, is facing increased expenses as wage inflation hits India's red hot tech services sector.

For the fourth quarter ended March 31, Satyam said revenues increased 34% to $300.7 million, while net income rose 36% to $62.3 million. For fiscal 2006, Satyam's revenues climbed 36.1% to $1.04 billion, while net income increased 42% to $249.4 million.

Despite the impressive gains, Satyam, along with other major Indian outsourcing companies such as Wipro, Infosys, and TCS, is facing an inflationary environment as tech giants like IBM, EDS, and CSC move to bolster their own Indian workforces by hiring tens of thousands of workers. "There is higher demand for associates with the right kind of talent," conceded Satyam chairman B. Ramalinga Raju in a statement. Satyam plans to increase salaries 18% to 19% in fiscal 2007 to retain and attract staff, he said.

The rising costs are hitting Satyam's balance sheet. Expenses rose faster than revenues in fiscal 2006, climbing 51% to $124.3 million. Despite the influx of foreign competition, Satyam expects relatively strong sales growth in 2007. Raju sees revenues for the coming year increasing by between 25.2% and 27.3%. Demand will remain strong due to "greater acceptance of the global delivery model," he said.