Infosys: Strong Position in a Still Growing Market - Concerns Overblown

Industry leader with 25%+ revenue growth prospects trading at 19X this year's earnings on concerns about 1) slowdown in tech spending 2) weak dollar vs rupee 3) rising wages in India. To address each concern:

1) Company managed to maintain 30%+ growth rate during the last tech spending downturn. To be fair, pricing did go down, eating into the company's operating margins which went from 33% to 28%. Management believes the pricing will be more sustainable now given the more established nature of offshoring model and extremity of tech bubble burst. I think the recession scenario for 08-09 is ~20-25% revenue growth combined with 200bps margin contraction

2) I don't really think anyone can predict what currencies will do in the short term, but company does engage in active hedging to mitigate any potential impact

3) Wages are indeed growing driven by shortage of qualified employees. However I believe India still offers a very attractive and cheap offshoring destination, and Infosys should be able to pass through the wage increases to the customers in the long term, although U.S. recession would create temporary pressure.