VanceInfo Technologies Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: VanceInfo Technologies (NYSE: VIT  ) dropped 32% in intraday trading today after issuing disappointing earnings and guidance, and the CEO stated, "the near-term outlook for our industry lacks clarity."

So what: Non-GAAP EPS of $0.21 rose a modest 5% year over year and fell short of the $0.23 consensus estimate. GAAP EPS of $0.16 fell from $0.17 in the year-earlier quarter. Revenue of $68 million grew 32% year over year.

Now what: Wage inflation, particularly in China, is pressuring earnings while macroeconomic weakness is causing revenue growth to slow. For the third quarter, management said it expects revenue of $69 million to $72 million, growth of 24% to 29%, and non-GAAP diluted EPS of $0.19 to $0.21, below the consensus estimate of $0.25. For 2011, management expects revenue of "at least" $275 million and non-GAAP EPS of $0.84 to $0.90, below the consensus estimate of $0.97.

Interested in more info on VIT? Add it to your watchlist by clicking here.

Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 16, 2011, at 2:50 PM, jackiechan0009 wrote:

    I bought, was this a good idea or not?

  • Report this Comment On September 13, 2011, at 12:03 PM, jackkreuz wrote:

    You have the China fever just like Lone Pine Capital. A few months ago, they bought 4.5 million shares, but do they really think that a company that reports having 165 million dollars in cash needs a collateralized bank loan for 3 million at a rate of 5.31%? They should frequently check whether the shareholder registers of the Chinese subsidiaries still show the NYSE-listed VanceInfo as its major shareholder. But they have to check the one that was filed with the provincial companies' registrar, not the one provided by the company. Once they do that, they should check that the cash has been there for a prolonged period of time, and not just two days before the due dilligence. Even if there is cash, it will be hard to determine, for example, whether the funds really come from a short term loan by a local bank to Shuning Chen, who could have pledged his assets for that loan in an attempt to demostrate the availability of such cash by the company. There are other checks that they could do, and I expect they do them for the sake of Lone Pine Capital investors. In the meantime, I hold on to my opposite bet: Short 4,507,146 shares of the Cayman Islands-incorporated VanceInfo under the belief that Shuning Chen is a con-artist that has embezzled over 150 million dollars from foreign shareholders and is busy building a commercial building 20 km outside of Beijing.

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