Sandeep Mahindroo -- IR S. Gopalakrishnan -- CEO and Managing Director S.D. Shibulal -- COO V. Balakrishnan -- CFO Ashok Vemuri -- SVP and Global Head, Banking and Capital Markets; Strategic Global Sourcing

Avishai Kantor – Cowen & Company Mark Zgutowicz -- Piper Jaffray Joseph Foresi – Janney Montgomery Scott Bhavan Suri -- William Blair & Company Edward Caso – Wells Fargo Glenn Greene -- Oppenheimer Karl Keirstead -- Kaufman Brothers David Grossman -- Thomas Weisel Trip Chowdhry -- Global Equities Research Rod Bourgeois -- Bernstein George Price – Stifel Nicolaus

Ladies and gentlemen, good morning, good afternoon, good evening, and welcome to the Infosys second quarter earnings conference call. As a reminder, all participants' lines will be in the listen only mode, and this conference is being recorded. There will be an opportunity for you to ask questions at the end of today's opening remarks. (Operator instructions). I would now like to hand the conference over to Mr. Sandeep Mahindroo of Infosys Technologies Limited. Thank you and over to you, Mr. Mahindroo.

Thank you for (inaudible) to discuss Infosys’ financial results for the quarter ending September 30, 2009. I am Sandeep from the Investor Relations team in New York. Joining us today on this call is CEO and MD, Mr. Gopalakrishnan; COO, Mr. S.D. Shibulal; and CFO, Mr. V. Balakrishnan along with other members of the senior management team. We will start the proceedings with a brief statement on the performance of the company for the recently concluded quarter, followed by the outlook for the quarter ending December 31, 2009, and year ending March 31, 2010. Subsequently, we will open up the call for Q&A. Before I pass it on to the management team, I would like to remind you that anything that we say which refers to our outlook for the future is a forward-looking statement and must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available with our filings with the SEC, which can be found on www.sec.gov. I would now pass it on to Mr. S. Gopalakrishnan. S. Gopalakrishnan: Thanks, Sandeep, and good morning, good afternoon, good evening to everyone. We had another quarter of good performance, all round good performance across all aspects of business, surrounding our customers, on the employee side, as well as how we manage the business. We have seen good performance this quarter. We added about 35 clients, the top 10 clients grew 5.9%. Our customer satisfaction has increased even in these tough time and we do a customer service satisfaction survey and customer satisfaction has increased. We have exceeded our guidance at the upper end. Revenue increase sequentially, volumes increased sequentially, pricing stable, utilization improved. We have been able to transition some work offshore, so offshore has increased. We are able to sustain our operating margin, slightly improved. And we continue to add employees, compared to last quarter, there is a net increase in employees this quarter. On the EPS side, we have exceeded again our guidance -- against the guidance of $0.51, we had $0.56. Overall, when we discuss with clients, they feel that the worst is behind us and this is the second quarter where we're getting that signal from our clients. And of course, we will have to wait for the next budget cycle to see how this is going to be sustained over the next fiscal year. But definitely, we feel more confident about the current situation. We have increased our guidance for the rest of year. We have given a compensation increase for our employees. And overall, all in all, as I said, good all round performance. Let me now pass it on to my colleague, Shibulal, to give you more data on the (inaudible). S.D. Shibulal: This is Shibulal. As Kris said, the demand environment (inaudible). We're seeing customers willing to talk to us, discuss spending and targets. At the same time, we're also seeing the customers being very cautious and I think it is understandable given the environment. We are not expecting a big splash at the end of this year. Even though they have money, we believe that customers will keep it. We at this point expect the budgets to be flat (inaudible) next year. We have had good client wins this quarter. We have added 35 new clients (inaudible). That takes the total number of clients in the Fortune 500 (inaudible) more than $1 million (inaudible). Our top client gives us [ph] 4.6% of our revenue. Top 10 clients give us only 6.2% [ph]. The growth has been all around. The top 10 clients grew by 5.8% and the remaining clients, the non-top 10 grew by 1.8%, so the growth has been all around. From a logical perspective, we have seen better traction in BFSI, retail, and energy and utilities. Manufacturing is lagging behind and that we believe does make sense. In the BFSI segment, we are working with five clients on the merger and acquisition related technology work. We are working on system integration opportunities related to the mergers and acquisitions in these cases. From a service perspective, we have seen better traction in business process management, infrastructure management and in system integration. System integration I believe is as I said is a result of the M&A related work, which we are doing in the financial services. Consulting and package implementation has come down marginally this quarter. From a geographic perspective, US has gone up and Europe has marginally come down. Europe is definitely lagging behind in stability. This is as usual because even in the downturn I think Europe was lagging behind. We have added 6,000 people this year, this quarter, net 1,500. We have increased our recruitment for the year. Now the recruitment for the year is 20,000 and this is in comparison with 18,000 number, which we give you last quarter. The 2,000 additional people will be in BPO and in lateral recruitment in ITL. Our DSO is extremely healthy. It is 56 days. Last quarter was also 56 days. The DSO above 90 days is 77.9%. So with that let me now hand off to Bala to give you the financial details. V. Balakrishnan: Good evening, everybody. Good morning to some of you on the call. This quarter had been extremely good. We have seen revenues increasing by 2.8%; in constant currency it grew by 1.2%, because most of the major currencies has appreciated against the US dollar. For example, Australian dollar appreciated by 10%, UK pound appreciated by 6%, and so also the euro. So we're seeing the constant currency growth at 1.2% for the quarter. The volume growth had been 2.3% and offshore volume growth is 3%, that is a very good news. Pricing was stable. It increased by 0.4%, but in terms of constant currency, it declined by 1.1%. The gross profit slightly went up during the quarter and so also the operating margin. Operating margin went up to 30.3%. We guided for a $0.51 EPS and we did $0.56. So the DSO days are 56 days, the collection has been extremely good. The quality of the receivables is extremely good. We are ending the quarter with $2.8 billion of cash. As far as guidance is concerned, we revised our guidance to reflect the current environment. For the next two quarters, the upper end of the guidance assumes 1% revenue growth. We have increased hiring guidance from 18,000 to 20,000. We're going to hire 2,000 more, mostly at the lateral with the experienced people because we have enough freshers in the system, and we need to build the middle layers and keep the model ready for growth when growth comes in. The top 10 customers grew by around 6% during the current quarter, it was extremely good; in constant currency terms they grew by 3.5%. Almost all the subsidies have become profitable. They are contributing positively to the bottom line of the group except Brazil which is still in the growth phase and investment phase. Our guidance for the next two quarters assumes some 1% sequential growth in revenues at the upper end of the guidance. For the next two quarters, the margins could get impacted because we have given a wage hike. Starting October 1, we increased wages in India by 8%, and outside India by 2%, which will impact the margin by two percentage points. So first two quarters, we have seen incremental positive margins. In the next two quarters, it could get impacted by around 200 basis points. So for the -- overall for the year, we could be within the 50 basis points to 100 basis points band as compared to last year. In the beginning of the quarter, we also spoke about some of the investments we are making in terms of hiring more on-site people and also increasing the sales and marketing, that we will continue to do. We have already given some 126 offers for people to join on-site. Of that some 72 people joined during the quarter, rest of them will be joining in the next quarter, and we will continue this process in the future quarters also. The incremental growth in revenues and some of the cost initiatives we took have yielded results and that will buffer this investment. So going forward, we will be able to absorb this investment and only incremental impact on the margins could be due to the wage increases which we are giving effective October 1. So overall for the year, the margins could be within a narrow band as compared to last year. It's an extremely very good quarter, and the next two quarters our guidance reflects the environment and what feedback we got from the clients. With this, I will conclude. We will open up the forum for questions.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. (Operator instructions). Our first question is from the line of Mr. Moshe Khatri of Cowen & Company. Please go ahead. Avishai Kantor – Cowen & Company: Yes. Hi. It is Avishai Kantor for Moshe Khatri. Just two, three questions to begin, one can you comment on the major drivers for the strong performance in both BFSI and retail? S. Gopalakrishnan: I will start with retail and I will ask my colleague Ashok to talk about some other -- some other positives on the BFSI space, where we are getting growth. So in the retail you know one, we work with some of the largest retailers in the industry, so we have very strong relationship. I think we work with I think seven out of the top ten retailers. Second, retailers are going through a couple of very interesting transformations. One is the move from print media to digital media, the digital marketing campaign, digital marketing transformation they are going through. Second is digitization of the information flow in the supply-chain, so that they can get near real-time information about sales that is happening in the store, all the way down the supply-chain. The third is actually improvements that are happening in the store to provide better customer service, a better technology-based environment in the store for self service and things like that. So there is investment happening in the retail space even now. The third thing is, we work with some of the largest grocery companies, and in the downturn, they have seen actually a positive impact on their business. It looks like consumers are eating less in restaurants, but buying ready-made meals or take home meals or something like that, and that is also positively impacting retailers. And hence they are investing in technology, they are investing in IT systems. We also benefit from some of the consolidations that are happening, which is actually a common theme across many of the industry segments in which we are working. Now let me pass it on to my colleague, Ashok Vemuri, who heads banking and capital markets to talk about the BFSI space and where he sees traction.

Thanks, Kris. So clearly in Q2, we have had about 3.5% growth in the BFSI sector and with the addition of six new clients in the sector equally distributed between the US and Europe. We are seeing -- the good news is that decision-making is now happening, there is increased traction which is getting converted, is going beyond conversation to actual deals. The bad news is that the decision-making is still happening at the top of the house, and it is a fairly longer decision cycle time. So we're seeing interest in clearly in the asset management space, we're seeing it in securities and investment firms. We're seeing a lot of interest in regulatory compliance risk, internal audit. We have made some good strides and progress on work in M&A related deals. Retail banking, I think is reflecting the high unemployment, so that is a little slow. Cards is slow but with some regulatory changes etc., we do expect significant portion of the cards business to come our way. Europe is a little I think -- is a couple of – is lagging behind. I think there is a phase lag there, but again Continental Europe which has not been our stronghold is showing signs of increased willingness to partner with offshore players. We have seen traction in Australia. We have seen traction in Asia, ex-Japan, and some amount of Japanese clients getting active in regions outside of Japan. So on the whole, I would say that we are beginning to see some traction, I would still think we are in the woods. so to speak, and we will have to wait to see how the budget etc. pan out before we actually are able to conclude whether we are in a better position than we were previously. Avishai Kantor – Cowen & Company: Thank you. My next question, you had a very nice sequential up tick in clients wins, going from 27 up to 35, can you please breakdown the client wins by verticals, basically BFSI, retail and telecom? And also what was the sequential growth in your largest client this quarter? Thank you.

May we move on to the next question? S.D. Shibulal: The client wins have been in – Hi, this is Shibulal. The client wins have been across the verticals. As I said, three of them are in Fortune 500. There is no specific vertical where there is a major win, I do not have the sheet in front of me, but I remember seeing a number like seven in BFSI. The remaining is spread evenly. Avishai Kantor – Cowen & Company: Seven in BFSI? S.D. Shibulal: Seven, yes. Avishai Kantor – Cowen & Company: Thank you very much.

Thank you, Mr. Khatri [ph]. Our next question is from the line of Mr. Mark Marostica of Piper Jaffray. Please go ahead. Mark Zgutowicz -- Piper Jaffray: Good evening. It is Mark Zgutowicz for Mark Marostica. Just a question on your revenue guidance, just a little bit of a disconnect here, your revenue guidance implies you know relatively flat growth in the second half, and obviously you have seen a couple of good volume trends sequentially over the past couple of quarters, just curious is there is something on the horizon that you're seeing that gives you caution there, along those lines can you speak to your expectations for growth in Europe in the second half? S. Gopalakrishnan: No. Typically the December and March quarters are soft quarters because December is more a holiday season and March because of the first quarter and the client finalizes the budget. Our guidance reflects the environment because clients are still very cautious, even though they are seeing some optimism, but still cautious about the future. And quite possibly we will have much better visibility when they finalize their budgets for next year, that could be somewhere in January time frame. So we had given a sequential growth of 1% at the upper end of the of the guidance for the next two quarters to reflect what the client is telling us about their business environment. And on Europe, I will ask Shibu to talk. S.D. Shibulal: Europe at this point is lagging behind the US on stability which is expected because even on the downturn, Europe's lagged behind US on the downturn, and so that is what we're seeing. And across the board, UK as well as the continental Europe is lagging behind. At the same time, we are quite positive about Europe in the long run. We are investing in different countries in continental Europe. We are investing in Germany, in France. We believe that this will be of -- these markets will be of great importance to us in the future. Mark Zgutowicz -- Piper Jaffray: Okay. And then just a couple unrelated questions on headcount, the 2,000 incremental that you have added your guidance there, what percentage of that is lateral, and if you could comment on what your fresher lateral mix is right now? S. Gopalakrishnan: Well, it is mostly lateral, all of it is lateral for Infosys Technologies, and it will be a fresher and lateral for the BPO, because the combination of the corporate level for everybody, so there'll be two levels, one for Infosys Technologies, the parent company, and for the BPO. The BPO has seen a reduction in headcount or this quarter compared to the previous quarter. INFY has added, INFY does not require any freshers, but requires laterals. Laterals are people of experience of more than two and a half, three years. Mark Zgutowicz -- Piper Jaffray: And your current mix there and sort of maybe trends next year on the lateral hiring side? S. Gopalakrishnan: No. We don't have a view on lateral hiring for the next year. We only have a view for this year because we don't have the numbers for next year. And for the lateral hiring for the parent company, the hiring will be in specific areas where we have seen growth like infrastructure management services, or where there is very specific skills required as in the enterprise solutions group, and not across the board for all units. Mark Zgutowicz -- Piper Jaffray: Okay. And your current mix on the fresher lateral side of the equation today? S. Gopalakrishnan: What is that? Mark Zgutowicz -- Piper Jaffray: What is your current fresher lateral mix today? S. Gopalakrishnan: Well, out of 20,000 people that we are going to hire gross today, 15,000 will be freshers and 5,000 will be laterals. Our normal percentage could be 60-40, 60 freshers and 40% laterals. But this year the hiring is less, and the fresher hiring is because of the offers we made last year, not out of necessity, but the need to keep our commitment, so the ratio will be slightly different this year. Mark Zgutowicz -- Piper Jaffray: Okay. That is helpful. And then just one quick final question, on the selling and marketing front, can you just talk about investments that you are making here and whether the levels you're running at now as a percentage of sales are sustainable through the remainder of this year? S. Gopalakrishnan: No. We had given guidance. We said we will hire some 100 people this year. We already hired some people this quarter; next two quarters, we will be hiring balance of them. It will not substantially change as a percentage of revenue because most of the cost is employee costs. Mark Zgutowicz -- Piper Jaffray: Right, thanks very much.

Thank you, Mr. Marostica. Our next question is from the line of Joseph Foresi of Janney Montgomery Scott. Please go ahead. Joseph Foresi – Janney Montgomery Scott: Hello. My first question here is on discretionary spending. It looked like volumes were up, have you seen -- but obviously what development looked like it was down, have you seen any pick up in discretionary spending quarter over quarter? S. Gopalakrishnan: The volumes were up by 2.3% this quarter, on-site volumes 0.5, offshore volumes 3%, so definitely volumes are up this quarter. We are seeing some discretionary spend happening in retail and BFSI, discretionary projects being sanctioned etc. You know sometimes may be due to the regulatory changes or related to compliance, risk, new risk models in the BFSI space as Ashok talked about. I talked about retail. So there are -- there are discretionary spends happening, maybe not "discretionary" but definitely new projects. Joseph Foresi – Janney Montgomery Scott: And then it looks like we're seeing some positive indicators, hirings increasing, you are putting [ph] through wages again, pricing stable, at this point, do you guys get the sense from your clients that you may be bottomed prior quarter and now and that things are probably going to improve going forward? S. Gopalakrishnan: Yes. We will get a better or more confidence in that when we see the next year's IT budgets. See this year, the IT budgets are estimated to be down by about 6% to 8% from last year. Current indications are that IT budgets are going to be flat from the current level to next year which is I think is an improvement because that shows that companies are able to maintain the current level of expense going forward. But they're going to put that money to better use. They're going to look for more efficiencies. They are going to look for more flexibility which means outsourcing and variable cost. So -- and we're seeing discretionary spend going up. So the environment definitely is better today than last quarter and seems to be improving. Joseph Foresi – Janney Montgomery Scott: Okay. And then just one last quick question on budgets since you mentioned it. When do you expect to get visibility on those budgets and do you think again visibility will be better next year you know compared to year just so we can get a general time frame of when you think things will start to come into picture [ph]? S. Gopalakrishnan: Current indications are that there should not be too much delay in budget finalization. We expect budgets to be finalize in the first quarter, maybe mid-January to mid-February some time frame. Joseph Foresi – Janney Montgomery Scott: Does the lack of a flush mean that there may be some pent up demand next year? S. Gopalakrishnan: Yes. You know we expect the flush not to happen this year maybe and the monies to be carried forward, added to next year's budget. Joseph Foresi – Janney Montgomery Scott: Okay. Thank you.

Thank you, Mr. Foresi. Our next question is from the line of Bhavan Suri of William Blair & Company. Please go ahead. Bhavan Suri -- William Blair & Company: Thanks. Hi guys. Just a couple of questions on the pipeline, could you just give us a little color on how the pipe is looking and what the quality and size of deals is that have been added year-to-date this year? S. Gopalakrishnan: See, there are two parts -- a two-part answer to this. One is when you look at large deals, I mean these are deals which require investment of six months to eight months of effort and things like that. So here you know to some extent the pipeline is based on the investments we want to make in such deals. So we do do a lot of due diligence, we qualify the deal strictly and typically we pursue about 12 to 15 deals and we have 12 to 15 deals in the pipeline which we are actually working on. And the good news there is we are seeing confidence returning and clients wanting to close deals. We don't yet how fast it is going to be but definitely there is confidence returning on that. The second is you know our traditional model of working with clients, working with existing relationships, and as projects close, you know typically they start some other projects so that the capacity can be retained, and the knowledge can be retained within the project and things like that. Again, and our repeat business has been ninety eight point I think eight I think this quarter which is as strong as it has been in recent past, actually very strong repeat business. We have not -- we have not lost any major customer, and one more data point is that our top 10 customers grew 5.8% this quarter, much higher than the company. So all this point to actually better traction at this point. Bhavan Suri -- William Blair & Company: You know a couple of quarters ago you had mentioned that deals may enter the pipeline for say $150 million, but by the time discussions are complete, the deal value was much less. Is that pattern still continuing? S. Gopalakrishnan: Yes, it is still continuing. That is because the clients are much more sensitive to -- you know sensitive to what size they qualify these things very well. They cut any unnecessary requirement and things like that, so yes. And also sometimes it gets split across multiple suppliers. So there are many reasons why you know when we finally win it is much smaller. Bhavan Suri -- William Blair & Company: Okay. And then just one last quick question on the hiring of sales people and domain experts, it appears that's been tougher than expected, you know you didn't expect -- you didn't spend them the first quarter and margin was better because you didn't hire all the sales experts in domain resources, you know is it tougher to get those, that seems a little odd given the environment, so a little color on that possibly? S. Gopalakrishnan: See, we have always been very selective. First of all, it is difficult to find good people even in this environment, and we have always been very selective. Second, good people are still continuing to work where they are, you know they are not switching, right? And so, it is sometimes difficult. Third, once you make an offer, it takes some time for the person to join, you know it is not that the next day they will come and join. So as Bala said, 123 offers, 70 people joined, the rest are going to join next quarter. So we're making effort, we are finding the right people, trying to find the right people, and bringing them in. We will continue this hiring. It is counterintuitive in some sense but good people are difficult to find even in this environment. Bhavan Suri -- William Blair & Company: Okay. Great, thanks Kris.

Thank you, Mr. Suri. Our next question is from the line of Edward Caso of Wells Fargo. Please go ahead. Edward Caso – Wells Fargo: Good evening. Just wondering if you could give us a sense of the pace of vendor consolidation and you're sort of relative wins and losses in that area. S. Gopalakrishnan: Ed, out of the nine large deals in the first half about I think three are consolidation deals. We are able to win most of the consolidation, I can't see any one large one we lost actually, some were announced publicly also. Okay, one -- and Shibu tells me, one we lost in the consolidation, but three we won. Edward Caso – Wells Fargo: Could you talk a little bit about your move here to raise wages? I was under the impression you really didn't need to do that and maybe talk about why you're doing it at this time and do you expect your competitors, particularly the tier 2 to have to follow? S. Gopalakrishnan: Till now nobody has done as broadly as Infosys has done. You know they have talked about some increase to some people. We are giving an average 8% increase in India and 2% outside India. And the reason for this is that, Ed, you know we have done reasonably well under the circumstances. We have sustained our margins under the circumstances. You know it was challenging but we have sustained our margins. And unlike you know developed markets, you know in India, there is growth. GDP growth is around 7%, and is expected to go to 8%, 9%. We have seen signs of increased attrition in BPO already because as the situation improves people start looking for opportunities to switch and things like that. To some extent, we felt that it is the right thing to do to reward our employees because we have done well this quarter. Second, we want to make sure that we are able to retain the good people, so we will choose – we will use this amount wisely and reward the right people. Edward Caso – Wells Fargo: Bala, can you talk a little bit about your foreign exchange assumptions, particularly against the rupee dollar, did you take the quarter end number in your guidance, did you take – it's moved a fair amount in October, have you taken last night's close, can you give us sort of a sense, sort of what numbers you're using and what the impact is to margins in your guidance? V. Balakrishnan: See, normally we take the rupee dollar rate at the end of the quarter to project for the future quarters, but whenever there is a drastic change in the currency environment, we do take the current rates. The rupee ended at 48.11 or so to a dollar by the end of September, but grew to 47 for the next two quarters, that means an appreciation of something around 3%, which will have something around 120 basis point impact of the margin, but is absorbed because we have seen some growth and incrementally we are guiding for a higher number for the full year. We believe that in the short-term rupee could appreciate because a lot of money coming into the country that is putting pressure on the currency, so next two quarters anyway we assumed at 47. So if rupee appreciated substantially from that level, probably it could impact the margin more than what we guided. Edward Caso – Wells Fargo: Last question, efforts to sort of combat protectionism in the US, particularly as now businesses are starting to pick up, it actually will become a concern. Are your efforts, your approach in line with that of the approach taken by NASSCOM? S. Gopalakrishnan: Yes. We're completely in sync with NASSCOM. We are participating in all initiatives by NASSCOM. This is definitely an area of concern. We do believe and I talked about as an answer to the previous question that it is challenging to find people with the right skills and things like that even in this environment. So you know we will work with NASSCOM. Edward Caso – Wells Fargo: Thank you.

Thank you, Mr. Caso. Our next question is from the line of Glenn Greene of Oppenheimer. Please go ahead. Glenn Greene – Oppenheimer: Thank you. Just a quick question on pricing, if you could just give a little bit more color, you talked about stability, but is there any way to contrast across verticals and geographies, any disparities, or is it stable across the board? S.D. Shibulal: So it is not across the board. We have seen stability in financial services and their focus is on getting system integration done, especially whenever there has been structural changes and M&A activities. We have seen traction in retail because of our thought leadership predominantly. We work with eight of the top retailers in US and about nine or ten of the top retailers across the world. And we have invested heavily into retail over the years and so we are seeing traction there. Energy and utilities is another space where the downturn and impact has been different or minus [ph] or different, we are seeing traction there. In manufacturing, we are not seeing stability, which is expected, because the retail sales has not picked up. And whatever pick up has happened is still you know taking care of the supply inventory overhang. That means that the manufacturing will not pick up and that is what we're seeing in the manufacturing segment. Europe is lagging behind US in being stable. Of course, they were -- I believe they were lagging behind even in the beginning in the downturn, so they're lagging behind on stability also. Glenn Greene – Oppenheimer: So are you talking about stability in demand or pricing or they are sort of following and tracking together, the pricing with demand? S.D. Shibulal: No. My comments are more related to demand. From a pricing perspective, I think we are stable all around. Most of the pricing renegotiations are behind us. We have not seen a second round of renegotiations. There are some sporadic wants but that is part of normal business. We will see an impact of the pricing renegotiations which we did last two quarters or four quarters, for the next two or three quarters. This quarter we have seen a downturn in revenue productivity of 1.1% in constant currency, so there is still tailwind defect which will show up. We had predicted a downturn of 5% in revenue productivity from the beginning of the year. For the year, we still expect somewhere between 4.5% to 5%. Glenn Greene – Oppenheimer: Okay. Then just back to wage inflation for a second, was this sort of an off cycle wage increase, is this your normal cycle for doing wage increases, or something that prompted you to do it now? And secondarily, do you think that we are sort of at a range of call it mid-to high single digit wage inflation going forward in out years or is it too early to tell? S. Gopalakrishnan: See, every year we give a compensation increase in April, that is our cycle. This year we deferred it because of the challenges in the environment and the slowdown etc. But we told our employees that if situation improves, we would look at a midyear increase. We have seen improvements in the situation and we felt that you know given the environment in India etc. this is appropriate. Regarding next year, we have to wait and see at this point. You know let us say overall situation in the industry increase and there is a mismatch between supply and demand, you know the growth picks up and supply is limited, then definitely compensation would go up in the industry. Glenn Greene – Oppenheimer: Great. Thank you very much.

Thank you, Mr. Greene. Our next question is from the line of Karl Keirstead of Kaufman Brothers. Please go ahead. Karl Keirstead -- Kaufman Brothers: Hi. Thanks for taking the call. I have got a question about Infosys growth rate relative to overall IT budgets. Chris, you mentioned that IT budgets were down about 6% to 8% in fiscal 2010 and it looks like Infosys revenues would be about flat, so in other words you outgrew enterprise IT budgets by about 6% to 8%. I am wondering do think that relationship is likely to hold or to increase next year and the year after? Thanks. S. Gopalakrishnan: See, offshore growth has always been higher than IT services growth globally. So when you compare offshore industry, you typically look at growth of Indian IT industry. We have been -- we have been around the same number or slightly better, we have been leading the industry. Now this year, NASSCOM has projected a growth of about I think 4% to 5% for the industry for the year, including BPO. So we have to wait and see where we end up at the end of the year. Karl Keirstead -- Kaufman Brothers: But do think it is fair for us to assume that Infosys next year can outgrow overall IT budgets by a similar magnitude, call it 5% to 10%? Is that a reasonable assumption for now? S. Gopalakrishnan: I can't predict out next year. All I can say is that Infosys has been on par or better than industry and I will leave it at that. Karl Keirstead -- Kaufman Brothers: Okay. Thank you.

Thank you Mr. Keirstead. Our next question is from the line of David Grossman of Thomas Weisel. Please go ahead. David Grossman -- Thomas Weisel: Thanks. I guess the first question I have is on the margins, you know despite multiple headwinds you are reporting exceptionally high levels of profitability the last three quarters, even after normalizing for currency. So I guess you know the first question I have is really what underlies this trend? I know you have guided down the second half of the year to reflect you know hiring and the decision to put in the annual wage increase but you know can you perhaps give us some insight into how we should think of the margins in a more normalized environment relative to your historical levels of profitability? S. Gopalakrishnan: No, we have been saying all along that we have multiple levers on the cost side, that is utilization or revenue productivity or the scale benefits we get on SG&A are the mix of business. We use some of the levers at some point of time to make sure the margins are not impacted and we also focus much more on the cost side during the year. Because the environment was bad, we have to make sure that we put the monies in the right areas for us to incrementally grow faster. So the revenue growth comes in, that itself is a big buffer for the margins. So we use all these levers at some point of time to make sure the margins are not impacted. Having said that, the currency is one issue, which is external to us. We don't know how it is going to behave, that could have an incremental impact on the margins, and also the tax rate. Otherwise, I think on the operating level side, we have managed it well, and we believe that we have enough levers on the cost side to make sure the impact is minimized. David Grossman -- Thomas Weisel: Right. You have done a great job of managing the margins you know during this period. But I guess I'm thinking when you go into a more normalized growth mode you know should we expect the margins to come down perhaps to the levels that we saw you know back in the 2007 and 2008 timeframe when you were growing at more normalized rates, again currency aside? S. Gopalakrishnan: See, David, you know we have you know two aspirations. One highest margin in the industry, in our industry; and two, we want to limit it, and our limit is because we said it should be highest, we said we should be around a net income of about 26% or 27%. So in a normal environment, we do start investing in multiple new initiatives, so then what happens is investment dollars increase, investment in sales and marketing increases, band building increases, etc. Currently the environment is such that you know we need to pull back some of those investments. We are being very selective as Bala said. Now we pick and choose. The choice is very, very important to make the right investments in this environment. So we are still investing in a few, but much less than what we would do in a normal environment. David Grossman -- Thomas Weisel: I see, thank you. And just one other thing. You know I heard what you're saying about you know the hiring and the wages and some of the rationale for that, but it is hard not to read that as a fairly kind of bullish sign despite your cautious outlook. So I guess my question is, are you know kind of taking some of these actions in response to I guess the strength, your confidence, and the visibility in the pipeline? Or are you just looking at you know kind of risk reward in terms of you know what the actual cost versus the benefit of building a bench in India right now at this point in the cycle? S. Gopalakrishnan: So it reflects the confidence in the strength of the model. It reflects our relationship with our customers and our ability to sustain those relationships. Third, even in this environment, you know there are requirements for specific roles and skills etc., so we have to continue to recruit. And lastly, yes, if we find an opportunity to build up a certain segment or sector in anticipation of some growth coming in, you know we would make those investments. So for example we are starting government sector now, public sector. We're investing in India at this point because we believe that is important for the future. So we will continue to make investments in certain sectors for creating future engines of growth. One more point I would like to add, we also honored all the offers we made in campuses and things like that, and that is the bulk of the recruitment this year. We enhanced the training from four months to six months but we feel you know you have seen utilization starting to pick up, so when things improve we will improve utilization, utilize these people, and then start recruitment again. David Grossman -- Thomas Weisel: I see. Thank you very much.

Thank you, Mr. Grossman. Our next question is from the line of Mr. Trip Chowdhry of Global Equities Research. Please go ahead. Trip Chowdhry -- Global Equities Research: Thank you, and good execution. I have two quick questions. First is regarding consolidation, excluding M&A and deals [ph] consolidation, what are you seeing? Like which systems are getting consolidated, what applications are getting consolidated, and where are they moving from? Like what were they doing before and what are they doing now? And then I have a follow-up question. S. Gopalakrishnan: You know it's a very detailed low-level question actually, which technology to which technology. Seem it is really, you know broadly you can say that when M&A happens, you know you have two systems now. You have to decide and consolidate one system. And this is applicable to financial systems, it is applicable to HR, it is applicable to other platforms they have. So it is actually very, very -- you know very, very -- it is typically standard practice in M&A and things like that. It is not about people moving from one technology to another technology, that is also happening. But this is -- when we talked about consolidation, it is about M&A related integration activities. Trip Chowdhry -- Global Equities Research: Okay, thanks. The other question I had is regarding the capabilities of the world, have you seen any shift or changes in the business environment, like the world before recession, during recession, and say post recession that you think Infosys will need to adjust the capabilities because there may be some underlying shift, maybe in technology, procurement, anything you're seeing, because definitely the world is not the same before recession and during recession and history tells that post position may be very different also. So what are you seeing in that space? And thanks, that's all. S. Gopalakrishnan: Yes. It never is the same thing, right. It doesn't go back to the same situation afterwards. I will just give you, you know, because that is a rather philosophical statement, but let me be very specific. See, in this downturn, we saw an increased acceptance for pay-as-you-go model where the customer wants true variability, they want to actually work with you on and operational expense model rather than a CapEx model, and we have seen traction. We have provided those kinds of services to our clients, we have for example two clients in HR outsourcing, which is priced per employee rather than based on effort and things like that. So that may be a trend which is going to be sustained beyond this downturn and may see a pickup of pay-as-you-go, this is also you know based on the trend of cloud computing and things like that. Trip Chowdhry -- Global Equities Research: Very good, thank you.

Thank you Mr. Chowdhry. Our next question is from the line of Mr. Rod Bourgeois of Bernstein. Please go ahead. Rod Bourgeois – Bernstein: Yes, guys. I just wanted to understand, in your guidance for the next couple of quarters, are you assuming the current demand environment continues at its same pace? In other words, your commentary today says clients are more optimistic and discretionary spending has improved, are you assuming those precise trends remain in place, or does your guidance leave room or some buffer in place in case those trends start to falter again? S. Gopalakrishnan: Can you just repeat it quickly, you know briefly can you just repeat the question? Rod Bourgeois – Bernstein: Yes. I'm just trying to understand if your guidance assumes the current demand trends remain in place at the same pace or if you are including buffer in your guidance in case the macro trends go the other way? S. Gopalakrishnan: No. The environment continues to be challenging. This quarter we saw a sequential growth of 2.8% but we have assumed only 1% growth in the next two quarters at the upper end. So clearly, we are not going overboard at this point. We're being cautious. And it is based on a model we have, based on visibility we have. It is based on our reading of the situation. Typically, the first quarter of the calendar year, budgets get finalized. You know it is better to get visibility into that and then say, yes, things have really improved. So we want to be cautious at this point. I wouldn't call it buffer etc., I would just say we want to be cautious. Rod Bourgeois – Bernstein: All right. And then just a real quick question on the tax rate side, when you started the year, you had a certain plan in place to increase hiring onshore, and I presume that that affected your tax rate mix and your overall tax rate outlook. Given how your onshore costs ramp up has played out, is there any material changes to your tax rate outlook for this year and also into next year based on how the onshore costs are playing out at this point? S. Gopalakrishnan: No. The changes in the tax, the effective tax rate is based on India rather than outside India. It is based -- because outside India the mix actually matter and you know the revenue mix has not changed that much offshore versus onsite. In India, we have some you know tax incentive schemes etc., some of our units have come out of that and effective tax rate have gone up because of that. That is all. So it is about India. Rod Bourgeois – Bernstein: So what tax rate change should we look at for the next few quarters and also for fiscal 2011? S. Gopalakrishnan: Right now, effective tax rate is about 20 -- V. Balakrishnan: Right now the effective tax rate is somewhere around 20%, 21%. That will remain so for the full year. It could change next year depending on how much we – work we do in SEZs and STPs. Hopefully, it could be somewhere around 25%. So this year it could be somewhere between 20% and 21%. Rod Bourgeois – Bernstein: Thank you, guys.

Thank you, Mr. Bourgeois. Our next question is from the line of Mr. George Price of Stifel Nicolaus. Please go ahead. George Price – Stifel Nicolaus: Hi. Thanks very much. A couple questions, first, just wanted to make sure I understood the 8% wage increase, does this include any impact from promotions or is the 8% a fully like for like number? S. Gopalakrishnan: Everything is included. This is the average including everything. George Price – Stifel Nicolaus: Okay. So I guess… S. Gopalakrishnan: For offshore 8%, onsite 2%. George Price – Stifel Nicolaus: Okay. Right. So can you I guess do you have any sense of if you took away the upward bias to your wage base from promotions that you are just looking at, what raises you know at a – for people staying at the same level, what would the increased rate be roughly? S. Gopalakrishnan: See, the number of promotions would not be very large compared to the base actually. The base, today we have effectively about 85,000 employees would be eligible for some kind of raise actually, the parent. And promotions, because of some re -- you know we looked at some of the roles and things like that, so we have done some analysis, and you know effectively you know the impact of the promotions maybe for about a small percentage of the people at this point. George Price – Stifel Nicolaus: Okay. So not -- it doesn't sound like much of an impact, that 8%? S. Gopalakrishnan: No, it is not. So that is why the impact of promotions is very small. George Price – Stifel Nicolaus: Okay. And you say that you know when somebody previously asked a question around the wage increase and you mentioned, you said something along the lines of given the environment you know in India, you thought this was appropriate. So should we think about you know given the macro growth that in India relative to you know the more developed economies, you know where most of your revenue comes from though, should we basically think about wages having a much quicker and more sizable up tick early in the cycle, you know more quickly I guess getting back to the kinds of increases that we saw you know in the last up cycle? S. Gopalakrishnan: No, I don't think so. I don't believe so. You know we have to wait actually you know. We see that across the industry, growth is picking up, and see right now there is actually sufficient supply. You know we felt it is the right thing to do for our own employees, because they worked very hard in delivering this result. So we have to look at what the industry does, what our competitors do etc. and what the situation is next year before we can say. At this point, I don't know. George Price – Stifel Nicolaus: Okay. You mentioned the up tick in energy and utilities, what kind of work is going on there? You know you talked a little bit obviously about what is happening in BFSI but can you talk about kind of some of the key areas where you are seeing strength in terms of types of spending, types of projects in energy and utilities? S. Gopalakrishnan: SAP implementation, one large chunk; we are doing some interesting work on sustainability in the area of smart grids and things like that, you know I think it is not (inaudible) but something to do with gas meters and things like that. So some very interesting work in energy utilities, of course, there's some traditional maintenance kind of work also, maintenance and sustenance kind of work. George Price – Stifel Nicolaus: Okay. Last question… S. Gopalakrishnan: We have a broad range of services today, infrastructure management is growing as an interesting service for utility companies, SAP related work, and then some innovation related work in sustainability, climate changes etc. George Price – Stifel Nicolaus: Okay. Last question, just -- and there was a question before around margins and you know normalized margin ranges when you get back to more normalized growth range, you know I want to kind of piggyback on that. I just noticed since fiscal 2004, sales and marketing, if I pull that out as a percentage of revenue, if you kind of look at it on a trailing four quarter basis to smooth out any you know one quarter movement, on a trailing four quarter basis, sales and marketing since fiscal 2004 has declined from about the mid 7% range to now under 5% for the first time. And since fiscal 2Q08, the absolute dollar spend on sales and marketing has actually been flat to down. I mean what do you think about that trend, how should we think about that trend and the implications going forward? S. Gopalakrishnan: See, sales and marketing is not proportionate to revenues. It is based on the number of customers, etc. Please see that repeat business is growing. Our customer size is growing, that is you know the number of larger relationships is growing, etc. So it does not grow proportionate to revenue, it grows proportionate to probably the relationships. So one of the things we date in this downturn is that we try to rationalize our customers. You know about 100 customers give 87% of our revenues, 100 customers give about 87% of revenues. So we did some -- we didn't discontinue any relationships but we kind of brought in more efficiency in our sales and things like that and that did help us with some cost control. George Price – Stifel Nicolaus: Okay, great. Thank you very much. S. Gopalakrishnan: So, thank you, everyone. Unfortunately, we are completely out of time. Wonderful questions, and as always, your support has been tremendous, the participation has been very good. Our investor relationship managers are all known to you, so if you have further questions, want to talk to anyone of us, you know, please put in your request, and we will connect back with you. So thank you again, and have a wonderful day.

Thank you gentlemen of the management. Ladies and gentlemen, on behalf of Infosys Technologies Limited, that concludes this conference call. Thank you for joining us on Chorus Call Conferencing Service and you may now disconnect your lines. Thank you.