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Syntel Reports Third Quarter 2006 Financial Results


Q3 revenue increase of 18.3% to $69.2 million over Q3, 2005
Q3 EPS of $0.35 per diluted share
Sequential headcount growth of 13% to 7,506

Syntel, Inc. (SYNT), a global information technology services and Business Process Outsourcing (BPO) firm, today announced financial results for the third quarter, ended September 30, 2006.

Third Quarter 2006 Financial Highlights

Syntel's total revenue for the third quarter increased 18.3 percent to $69.2 million, compared to $58.5 million in the prior-year period and 7.5 percent sequentially from $64.4 million in the second quarter of 2006. The Company's gross margin was 38.4 percent in the third quarter, compared to 39.7 percent in the prior-year period and 35.6 percent in the second quarter of 2006.

During the third quarter, Syntel's focus area of Applications Outsourcing accounted for 72 percent of total revenue, with e-Business contributing 14 percent, TeamSourcing at six percent, and Business Process Outsourcing (BPO) at eight percent.

The Company's Selling, General and Administrative (SG&A) expenses were 18.9 percent in the third quarter of 2006, compared to 18 percent in the prior-year period and 18.1 percent in the second quarter of 2006. Syntel's income from operations was 19.5 percent in the third quarter, compared to 21.7 percent in the prior-year quarter and 17.5 percent in the second quarter of 2006. During the quarter, Syntel reversed a tax reserve of $2.0 million, which had the positive effect of increasing EPS by $0.05 per share.

Syntel's global headcount grew 13 percent sequentially during the third quarter of 2006 to 7,506 as compared to 6,669 at the end of the second quarter of 2006. The Company finished the quarter with cash and short term investments of $75.8 million. This was after the payout of $51 million for the special one-time dividend of $1.25 per share.

Syntel added two new clients in the quarter and launched 82 new engagements. The Company added three new "Hunting Licenses" or preferred partnership agreements during the quarter, taking the total to 79 strategic relationships.

Operational Highlights

"Syntel's focus on People, Service Offerings and World-Class Infrastructure is beginning to yield results, as evidenced by our increased momentum," said Syntel Chairman and Chief Executive Officer Bharat Desai. "Our objective is to align even more closely with our strategic clients and deliver game-changing technology and business solutions that enable them to run their businesses more effectively. Our clients tell us Syntel's model is more flexible, innovative, and impactful than our competitors; we will continue to leverage and build on this critical value proposition."

"During the third quarter, Syntel was pleased to officially open our new 40 acre state-of-the-art technology campus in Pune, India," said Keshav Murugesh, Syntel Chief Operating Officer. "The new campus is receiving rave reviews from both our clients and our employees who are based there. This is an important step forward, both from a client comfort and employee relations standpoint. This is the first of additional infrastructure inroads we will be pursuing this year, and beyond."