Wipro (NYSE:WIT), India's third-largest IT outsourcer, posted another knockout quarter, with the company's results outdone only by management's upbeat guidance. However, investors may be better off confining their admiration to Wipro itself, since its stock is trading at its highest levels since the tech bubble.  

Total revenue for fiscal 2010's third quarter came in at $1.5 billion, translating to a 6% year-over-year gain. Stronger client demand lifted employee utilization, which in turn helped drive margin expansion. The end result? Net income and earnings per share jumped 19% -- just shy of the previous quarter's win.

Looking to the future, management described the deal pipeline as "the strongest we have seen," no doubt owing to the corporate world's cost-cutting bonanza, which looks poised to continue well into this year. To support that expected demand for efficiency-boosting services, management added nearly 5,000 heads to its IT Services segment (by far the largest of the company's divisions).

The bad news is that a firmer market has employees jockeying for the highest-paying gig. Wipro's attrition hit double digits last quarter, up from a recent 9% average, and above that of Indian competitors Infosys (NASDAQ:INFY) and Tata Consultancy. With employees in the driver's seat, the Indian companies will likely be forced into a wage-hike race -- potentially at the expense of margins.

That said, Wipro is emerging as my favorite of the Big Three Indian IT outsourcers. For one, I like its geographic footprint, where the U.S. has been declining as a percentage of revenue, as India, the Middle East, and other emerging markets drive growth.

Second, and more importantly, Wipro is the leader in the fast-growing business of remote infrastructure management (RIM). No, no, we're not talking about operating a boom crane with a BlackBerry from 3,000 miles away. Instead, the service involves monitoring and managing networks, servers, and data centers from offsite locations. Basically, Wipro sets up a "virtual extension of the client's working environment" at an offshore location, complete with client-specific hardware and software. Ultimately, the client receives the same level of customized service, at a fraction of the traditional onsite cost.

In recent years, the Indian RIM industry has vastly outpaced the overall outsourcing sector -- a trend that has ample room to run. As a leading force, Wipro derives roughly 15% of its total revenue from RIM services, compared to about 8% for Infosys and Tata Consultancy. During the recently completed quarter, Wipro's RIM-related services headlined sequential revenue growth. Should the growth rate for such well-established businesses as software development and call center management begin to level off -- or even fall -- Wipro's got pole position on its peers.  

So, wait, I shouldn't buy Wipro stock? At the very least, I recommend thinking twice (because, contrary to Bob Dylan wisdom, it may not be alright). Obviously, fiscal 2010 will be a bang-up year, but how could it not, given the cyclical rebound?

The real question is fiscal 2011. Here, Capital IQ pegs analyst estimates at 13.9% EPS growth. That certainly isn't shameful, but it's also a far cry from the five-year average of nearly 24%. I'll grant that the estimate may be conservative, yet it's still hard to justify a near 10-year high on the stock.

With a fiscal-2011 PEG ratio of 1.4, Wipro is trading at a discount to Infosys' 1.7. But at the risk of sounding like a broken record, I'll once again refer investors to the lower valuations tagged to shares of IT competitors IBM (NYSE:IBM) and Accenture (NYSE:ACN). Or, for exposure purely to a hardware upgrade cycle, Intel (NASDAQ:INTC) could be a bargain that yields quality growth in 2010.

In the meantime, placing Wipro at the top of your watchlist may be the boldest move you want to make.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.