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Syntel Reports Fourth Quarter and Full Year 2010 Financial Results


• Q4 revenue of $144.9M, up 23% from year-ago quarter and 3% sequentially
• Q4 EPS of $0.71 per diluted share
• Full Year revenue increase of 27% to $532.1M
• Full Year EPS of $2.73 per diluted share
• 2010 year-ending cash & short term investments of $287.2M
• Global Headcount of 17,383 on December 31, 2010, up 38% versus prior year

Syntel, Inc. (Nasdaq:SYNT), a global information technology services and Knowledge Process Outsourcing (KPO) firm, today announced financial results for the fourth quarter and full year, ended December 31, 2010.

Fourth Quarter Financial Highlights

Syntel's revenue for the fourth quarter increased 23 percent to $144.9 million, compared to $117.8 million in the prior-year period, and increased three percent sequentially from $140.5 million in the third quarter of 2010. During the fourth quarter, Applications Outsourcing accounted for 76 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 14 percent, e-Business contributing eight percent and TeamSourcing at two percent.

The Company's gross margin was 38.4 percent in the fourth quarter, compared to 50.2 percent in the prior-year period and 39.6 percent in the third quarter of 2010. Selling, General and Administrative (SG&A) expenses were 17.4 percent in the fourth quarter, compared to 17.0 percent in the prior-year period and 17.7 percent in the previous quarter. Fourth quarter income from operations was 20.9 percent as compared to 33.2 percent in the prior-year period and 21.9 percent in the third quarter of 2010. The sequential reduction in operating margin was the result of appreciation in the Indian rupee, advanced hiring which lowered utilization levels, and costs associated with facility expansion programs.

Net income for the fourth quarter was $29.8 million or $0.71 per diluted share, compared to $35.8 million or $0.86 per diluted share in the prior-year period and net income of $30.4 million or $0.73 per diluted share in the third quarter of 2010.

Full Year 2010 Financial Highlights

Revenue for 2010 increased 27 percent to $532.1 million, from $419.0 million in 2009. The Company's operating margins in 2010 contracted to 22.7 percent, compared to 29.9 percent in 2009. Net income for the year was $113.6 million, or $2.73 per diluted share compared to $118.5 million or $2.86 per diluted share in 2009. Year-over-year margins and earnings were pressured by the impact of wage increases, currency fluctuations, and costs associated with investments in hiring and infrastructure.

During 2010, Syntel spent $22.5 million in CAPEX, largely in support of campus infrastructure, paid $30.7 million in dividends ($0.74 per share), and finished the year with cash and short-term investments of $287.2 million. The Company added 30 new clients during the year and ended 2010 with 17,383 employees globally.

Operational Highlights

"We are extremely encouraged by the overall performance of our business in 2010, and are optimistic that the demand environment for our services will remain healthy in 2011," said Syntel CEO and President Prashant Ranade. "Growth has been broad-based for Syntel across service offerings, verticals, and clients. This provides us with increased confidence that our strategic investments and go-to-market approach are on the right track."

"In 2010, Syntel's revenue grew by 27%. During the same period, global headcount increased 38% and our physical infrastructure capacity expanded by 9,000 seats," said Ranade. "We will continue to invest in the long-term sustainable health of our business, with a focus on driving enhanced value for all key Syntel stakeholders."

2011 Guidance

Based on current visibility levels and an exchange rate assumption of 45.6 rupees to the dollar, the Company currently expects 2011 revenue of $600 to $630 million and EPS in the range of $2.65 to $2.90.