The Nasdaq-listed technology bellwether raised its forecast for the fiscal year on hopes of sustained demand for outsourcing services, but that forecast also came in below analysts’ expectations, weighing on the company’s shares. Infosys shares closed down 4.8 percent at 3212.3 rupees ($71) on the Bombay Stock Exchange.

Infosys is the country’s second-largest software exporter by revenue after Tata Consultancy Services Ltd.
As the first major Indian company to report its earnings, Infosys’s results are seen as an indicator of the technology sector’s health. Sector leader Tata Consultancy is slated to report its earnings on Jan. 17, while third-ranked Wipro Ltd. reports on Jan. 21.

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Did he really mean to compare one of India’s most-respected IT firms to a stolen car parts operation?

“I do wish to clarify a previous mischaracterization of these firms, where I labeled them as ‘chop shops.’ That statement was incorrect, and I wish to acknowledge that,” Sen. Schumer said Thursday as the visa fee change, which was attached to a $600 million border-security measure, cleared the Senate.

“In the tech industry, these firms are sometimes known as ‘body shops’ and that’s what I should have said.”

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We’re pretty sure that was a slip. After all, the term “chop shop” refers to shady places of business where people dismantle stolen cars and sell off their parts. Surely he isn’t comparing the legal outsourcing of America’s jobs to the illegal selling of America’s brake pads and V-8 engines?

It is likely the senator was going for “body shop,” also a derogatory term, but one that describes firms who shuffle low-cost tech engineers around the globe.

Sen. Schumer’s office didn’t immediately respond to a request for a comment or clarification on his remarks.

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With staff attrition inching higher toward pre-recession levels, Indian outsourcers are now searching for talent in the lost sheep lot. Infosys Technologies and Tata Consultancy Services, the country’s two big outsourcers, are welcoming back performers who’ve left their companies in search of greener pastures.

Infosys, the country’s second largest software exporter by sales, has opened a “green channel” initiative, whereby employees who have left the organization can join again with minimum processing time. The policy currently only applies to positions in India.

The new initiative follows a less successful human resources program called Infosys Role and Career Enhancement, or iRACE, which created tougher performance benchmarks and less-frequent promotions, resulting in several experienced staff exiting the firm. Infosys management maintains the “green channel” program will help it leverage employees’ learnings from other experiences.

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The largest Indian tech firms, including Tata Consultancy Services Ltd. (TCS.NS), Infosys Technologies Ltd. (INFY) and Wipro Ltd. (WIT), all reported strong financial results in recent weeks, benefiting from a global uptick in spending on technology services by businesses such as banks and insurance companies and renewed interest in outsourcing as a cost-cutting measure.

The turn of events marks a reversal from a year ago, when Indian firms were reeling from a steep drop in orders for software services. But the tech-services sector differs now from the Indian firms’ boom years of 2003 to 2007, and new hurdles have arisen.

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Another strong sign of improving times was a 5.2 percent on-month growth in business volume, as well as the addition of 47 new clients and the hiring of more than 9,000 employees.

“The results are pretty decent for the quarter. The guidance definitely indicates that they are feeling pretty confident about their ability to grow in the given environment,” said Tejas Doshi, vice president of research at Sushil Financial Services Pvt. Ltd.

Infosys’ consolidated net profit in the three months through March was 16.00 billion rupees ($360.6 million), down one percent from 16.15 billion rupees a year earlier and compared with 15.59 billion rupees in the previous quarter.

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The Association for Computing Machinery on Monday is announcing that the Berkeley computer-science professor is the winner of the latest ACM-Infosys Foundation award. (The foundation set up by Infosys (INFY), a computer-services firm based in India, sponsors a $150,000 prize along with the award).

Brewer, 43, is being recognized for his contribution to the development of “highly scalable Internet services.” That means breaking down jobs that once required large expensive server systems so they can be handled by many inexpensive, small machines–the way Google (GOOG) and other Web farms now routinely operate.

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For years, India’s big tech firms positioned themselves as a cheap alternative to U.S. and European competitors for tasks such as software maintenance and database upgrades. They were content to take whatever work companies like Citigroup Inc. (C) and BT Group PLC parceled out to offshore specialists.

But the days of 30 percent annual revenue growth from such work are over, a casualty of the global economic downturn and increasing competition in the tech services industry world-wide. Now, Indian companies such as Infosys Technologies Ltd. (INFY) and Wipro Ltd. (WIT) are racing to broaden the services they offer and compete for higher-level work that usually goes to larger rivals including International Business Machines Corp. (IBM), Hewlett-Packard Co. (HPQ) and Accenture Ltd. (ACN).

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Caso says the group is likely to take another leg down, forecasting that April conference call season will see most of the companies issue guidance below Street expectations. He writes that “demand remains lackluster and decision-making slow.” Customers budgets are down 10-20 percent this year, he contends, but with many operating on a month-to-month basis and focused solely on cutting costs. Caso writes that he is hearing pricing has come down close to 10 percent, and that existing contracts are being repriced. He also says the sector is seeing increasing competition for deals from Accenture (ACN) and IBM (IBM).

Caso cut his ratings today on Cognizant (CTSH), Wipro (WIT), Infosys (INFY) and Syntel (SYNT) to Underperform from Market Perform. He also reduced EPS estimates for all four companies. Caso said the stocks could see another 15-30 percent decline from Friday’s close.

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Vydianathan offered six factors affecting her revised view of the sector:

• “Uncertainty” in the banking and financial services industry.
• Potential slowdown in Europe and in other industries.
• Poor visibility for demand.

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