April 15 (Bloomberg) -- Infosys Technologies Ltd., India’s second-largest computer-services provider, forecast its first annual drop in dollar sales as customers pare orders during the global recession.

Revenue in the year ending March 31 will fall 3.1 percent to 6.7 percent to range between $4.35 billion and $4.52 billion, Bangalore-based Infosys said today.

“The forecast doesn’t appear to be very good,” said Viswanathan Vasudevan, who helps manage $250 million, including Indian technology stocks, at Aquarius Investment Advisors Pte. in Singapore. “The company has been known to be conservative in giving their annual guidance and I believe they are definitely playing it safe given the global recession.”

Infosys expects to reduce prices as the worst slowdown in six decades in North America and Europe, which contribute 90 percent of sales, forces clients to trim spending. The software provider may also face stiffer competition in India after the sale of Satyam Computer Services Ltd. this week following a $1 billion accounting fraud.

Infosys declined 2.8 percent to close at 1,370.6 rupees in Mumbai trading, the most since March 30. The stock, the biggest loser on the benchmark Sensitive Index today, earlier fell as much as 7.8 percent, its biggest drop since May 17, 2004. The index rose 2.9 percent.

Budget, Price Cuts

A survey last month of the software provider’s top 135 customers, contributing 83 percent of sales, showed 89 percent of them will cut their annual technology budgets this year, Chief Operating Officer S.D. Shibulal told a news conference today. More than two-thirds of those surveyed indicated double- digit reductions, he said.

“These budgets aren’t etched in stone and they could go down depending on the situation,” Shibulal said. “Clients are unwilling to take decisions quickly, so that’s the challenge.”

Spending on technology products and services will drop 3.8 percent this year, researcher Gartner Inc. said last month.

During the quarter, Infosys added 37 clients while 41 existing customers didn’t renew contracts, Shibulal said.

Infosys, which maintains computer networks and runs call centers for clients including BT Group Plc and Goldman Sachs Group Inc., expects its prices will fall 6.5 percent this fiscal year, Chief Financial Officer V. Balakrishnan said.

‘Worst Economic Scenario’

“This is probably the worst economic scenario we have seen in our life time,” Chief Executive Officer S. Gopalakrishnan said. “Hopefully we will not see such a scenario again.”

The World Bank last month forecast the global economy will shrink 1.7 percent this year and warned surging unemployment may inflict another blow on world output.

Infosys also forecast a 13 percent decline in earnings in the current quarter to 47 U.S. cents per American depositary share as dollar revenue drops 6.5 percent to 8.2 percent to range between $1.06 billion and $1.08 billion.

Earnings per share will be 96.65 rupees to 101.18 rupees this fiscal year, less than the 98.3 rupees to 102 rupees predicted by analysts, based on the median of three estimates.

Operating margin, which tracks the percentage of sales less operating expenses, will decline by 3 percentage points to 30 percent in the year to March 31, Balakrishnan said.

Rupee Boosts Profit

Still, the rupee’s 21 percent drop against the dollar in the year ended March 31 bolstered the value of overseas earnings in the fiscal fourth quarter.

Net income climbed 29 percent from a year earlier to 16.1 billion rupees ($324 million) in the three months ended March 31, beating the 15.6 billion rupee median of 20 analyst estimates compiled by Bloomberg in the past four weeks. Earnings per share increased to 28.16 rupees from 21.83 rupees.

Fourth-quarter sales climbed 24 percent to 56.4 billion rupees. In January, the software exporter forecast revenue of 54.9 billion rupees to 57 billion rupees and earnings per share of 26.49 rupees for the three months ended March 31.

A weaker rupee “provides some buffer to margins” for India’s software exporters, Julio Quinteros, a Goldman Sachs analyst, wrote in a note to clients on April 7. Quinteros has a “neutral” investment rating on Infosys.

Tata Consultancy Services Ltd., India’s largest computer- services provider, will report fourth-quarter earnings on April 20 and third-ranked Wipro Ltd. on April 22.

To contact the reporters on this story: Harichandan Arakali in Bangalore at harakali@bloomberg.net.

Last Updated: April 15, 2009 08:28 EDT