Commentary: Billing-rate cuts, lowered hiring plans feared as technology spending squeeze begins to bite HONG KONG (MarketWatch) -- Investor sentiment hasn't been as low at the start of an earnings season in several years as it will likely be ahead of quarterly results from India's best known software company this week. For investors in bellwether Infosys Technologies , and indeed the entire software sector, the company's earnings report Friday will bring a moment of truth after the face of Wall Street changed forever in the quarter that just went by. And the mood on the street can be gauged by the fact that in the past week alone, several brokerages downgraded the stock's ratings, as well as the company's earnings estimates for the current and next financial years. Headline numbers from India's second-largest software company aren't expected to be so bad. In fact, they should be quite good, or at least as good as Infosys' forecast of more than a 22.1% year-on-year growth in earnings-per-share to 23.52 rupees (50 cents), while revenue was projected to expand by a minimum 27.4% to 52.29 billion rupees ($1.12 billion). But the numbers would pale in comparison, if the positive impact of a steep depreciation in the rupee this year versus the U.S. dollar were excluded. In fact, the rupee's weakness is expected to be the only reason the company may cling on to the annual forecasts it made in July, even though the macro business environment has deteriorated significantly since then. In spite of a sharp fall in the past two weeks, shares of Infosys and peers have outperformed the broad markets this year, and a weak rupee is largely responsible for that. At Friday's closing prices, Infosys' stock is down just about 21% so far in 2008, against a 38% tumble in the value of the 30-stock Sensitive Index, or Sensex. All eyes will be on the management's post-results discussions for their latest analysis of the business climate. Close attention will be paid in particular to their assessment of the order pipeline and for signs of delays in execution, in addition to billing rates and recruitment plans. As a matter of policy, Infosys doesn't comment on client-specific issues, but it will definitely be under more pressure to come clean on the status of various existing orders this time. Billing rates -- a function of demand -- are estimated to weaken somewhat, after either edging up or tugging the flat line for several quarters. And recruitment plans will be closely watched as they reflect the company's confidence in future orders. In a detailed report released last month, CLSA noted that a survey of 45 engineering colleges across India found that the number of job offers made by the country's top four software companies dropped as much as 19.8% from a year ago, with Infosys also reducing the number of college campuses it visited to around 620 from 1,079 in the previous year. With close to two-thirds of its revenue coming from North America, and a third of its billing exposed to the troubled financial sector, Infosys is certain to take some blows from the crushing impact of the financial crisis on its clients' technology spending in time to come. Just how hard those blows could be will perhaps be known this Friday.

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