HiSoft posts lower profit; raises 2011 outlook
Source: Marketwatch View: 582 Date: 2011-11-16

HiSoft Technology International Ltd.’s HSFT -0.08% third-quarter profit fell 7.8% as higher spending on certain services weakened the information-technology company’s margins.

The provider of outsourced technology services still raised its outlook for the year after the latest results beat expectations, calling for adjusted earnings between 90 cents and 91 cents an American depositary share with at least $216 million of revenue. Its August view predicted 76 cents to 80 cents with at least $194.5 million of revenue.

Chief Executive Tiak Koon Loh said the spending had paid off by building momentum in higher value-added solutions, with 20% of the top line coming from higher value-added solution services in the company’s consulting and packaged solutions category.

One of China’s largest tech outsourcing companies by revenue, Hisoft has posted uneven earnings over the past year even as its top line balloons. The firm’s sliding stock over the past few months--a casualty of growing concerns over accounting practices at some of its U.S.-listed Chinese peers--has belied Hisoft’s own steady expansion, the research firm Susquehanna wrote in a note to clients.

In the latest quarter, the company posted a profit of $4.4 million, or 14 cents an American depositary share, down from $4.8 million, or 16 cents an ADS, a year earlier. Excluding stock-based compensation, acquisition-related costs and other items, earnings rose to 26 cents from 21 cents as revenue climbed 52% to $58.9 million.

The company’s upbeat August forecast called for 22 cents to 23 cents per ADS on $56 million to $57 million of revenue.

Gross margin narrowed to 35.6% from 37.3% as the company invested more heavily in higher value-added service offerings.

HiSoft’s ADS closed at $11.87 Monday and were mostly inactive after hours. The company went public last year at $10
 

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