HCL's Axon unit leads Q2 numbers

The growth in the October-December quarter sales of SAP and Oracle were reflected in the India’s fourth largest IT services firm HCL Technologies enterprise application services segment.

HCL Axon that represents HCL’s enterprise application services (EAS) grew 6.5% for firms second quarter ended December 31, 2011.

The company’s stellar performance during the quarter, net profit growth of 43.3% and revenue growth of 34.9% year-on-year, was led by EAS unit, followed by custom application services (5.4%) and engineering and R&D Services (4%). For EAS unit this was one of the strongest quarters for HCL, said company officials.

“Other than the fact that SAP also announced fairly good numbers, which also helped us in signing more contracts. We were also successful in garnering a good share of discretionary spend that clients had. The growth was also driven by European and US markets,” said Steve Cardell, President EAS.

Cardell also added that though the application and software major Oracle did not meet market expectation when it announced its December quarter numbers, for HCL, Oracle implementation among clients grew quite healthy.

A recent Barclay’s report said: “While a direct extrapolation from SAP results would not be prudent, the results do highlight two key positive trends. One, even within the current macroeconomic uncertainty, demand at the enterprise level continues to hold up and in specific instances (like SAP) is quite strong. Two, there has been little pressure on the pricing front, as also argued by the Indian IT services companies and evident from SAP's margin performance.”

From growth perspective Cardell maintained that they are well placed to win contracts in the next few quarters, though discretionary spends from clients will be under pressure. “Almost 75% of EAS is discretionary spend. Only a third comes from application and support. While we have been able to win large chunk of deals this quarter, we are cautiously optimistic as we step into the next few quarters,” he added.

Cardell agreed that the uncertainty over the European debt issue is making several clients take a pause when it comes to deciding IT spends. “For us UK is a strong market. Other than the government segment which has been slow on spending, the clients are growing fine. But our clients in the Continental Europe are taking time to decide as the macro situation is still not clear. Hence when it comes to discretionary spends they are taking a pause,” he said.