Indian IT outsourcer Wipro
In rupees, which is both the company's functional and reporting currency, fiscal 2010 fourth quarter revenue grew 8% versus the year-ago period. Diluted earnings per share, meanwhile, fared much better, up 20.7% for the quarter.
For the fiscal year, revenue climbed 6%. Annual earnings-per-share growth, at 17.9%, also came in beneath quarterly performance, reflecting weaker results earlier in the year.
But as U.S. investors who are using Wipro's NYSE-listed American depositary shares (ADSs) as a reference, we're of course interested in dollar-based results. After all, that's the stuff that drives the price action of the company's dollar-denominated shares. Unfortunately, we're clearly not the geographic crowd to whom Wipro management caters.
See, Wipro translates results into dollars based only on the quarter-ending -- and in this case, year-ending -- exchange rate. And that rate differs from the realized rate, which is what affects operating fundamentals throughout the quarter and the year, particularly because a large portion of Wipro's fixed costs are in rupees.
For what it's worth (and I don’t think it's much) using the Q4-ending exchange rate, quarterly EPS jumped 50%, to $0.18, while full-year EPS of $0.70 advanced a slightly greater 52%.
Wipro's reporting conventions are, quite honestly, incredibly frustrating. Consider that competitor and likewise Indian-based Tata Consultancy switched its reporting currency to U.S. dollars back in 2008 for the express purpose of making it easier for investors to compare its results to those of international competitors. Moreover, Indian IT company Infosys
Ultimately, the difficulty for U.S. investors lies not just in evaluating Wipro's own dollar-based performance but also in comparing such growth to that of its Indian peers. Our only true gauge, at the end of the day, is rupee-based results. In those terms, Wipro's fiscal 2010 EPS growth of 17.9% blows away Infosys' 4% gain but comes in a good deal shy of the 33% jump reported by Tata Consultancy.
I've been positive on the fundamentals underlying Wipro's service offerings. But given the company's decidedly unfriendly attitude toward U.S. shareholders, combined with the generally airy valuations among the Indian IT names, investors may want to favor the industry's U.S.-based companies.
Wipro, what say you?