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Syntel Reports Fourth Quarter and Full Year 2011 Financial Results

• Q4 revenue of $172.4M, up 19% from year-ago quarter and 3% sequentially

• Q4 EPS of $1.05 per diluted share

• Full Year revenue increase of 21% to $642.4M

• Full year EPS of $2.94 per diluted share

• 2011 year-ending cash & short term investments of $320.4M

• Global Headcount of 19,484 on December 31, 2011, up 12% 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, 2011.

Fourth Quarter Financial Highlights

Syntel's revenue for the fourth quarter increased 19 percent to $172.4 million, compared to $144.9 million in the prior-year period, and increased three percent sequentially from $167.6 million in the third quarter of 2011. During the fourth quarter, Applications Outsourcing accounted for 75 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 15 percent, e-Business contributing eight percent and TeamSourcing at two percent.

The Company's gross margin was 42.1 percent in the fourth quarter, compared to 38.4 percent in the prior-year period and 39.8 percent in the third quarter of 2011. Selling, General and Administrative (SG&A) expenses were 11.4 percent of revenue in the fourth quarter, compared to 17.4 percent in the prior-year period and 21.9 percent in the previous quarter. Fourth quarter income from operations was 30.7 percent of revenue as compared to 20.9 percent in the prior-year period and 17.9 percent in the third quarter. The sequential rise in operating margin was aided by the depreciation in the Indian rupee, partly offset by advanced hiring, which lowered utilization levels, and compensation-related costs.

After reversals of tax reserves and additional tax provisions, having a net favorable impact of $1.9 million, net income for the fourth quarter was $44 million or $1.05 per diluted share, compared to $29.8 million or $0.71 per diluted share in the prior-year period and net income of $26.2 million or $0.63 per diluted share in the third quarter of 2011.

Full Year 2011 Financial Highlights

Revenue for 2011 increased 20.7 percent to $642.4 million, from $532.1 million in 2010. The Company's 2011 operating margin was 21.5 percent, compared to 22.7 percent in 2010. Net income for the year was $122.9 million compared to $113.6 million in 2010. EPS for 2011 increased 7.7% to $2.94 per diluted share from $2.73 per diluted share in 2010. Year-over-year margins and earnings were impacted by currency fluctuations, wage increases, and costs associated with investments in hiring and infrastructure, among other factors.

During 2011, Syntel spent $38.2 million in CAPEX, largely in support of campus infrastructure, paid $10 million in dividends ($0.24 per share), and finished the year with cash and short-term investments of $320.4 million. The Company added 26 new clients during the year and ended 2011 with 19,484 employees globally.

Operational Highlights

"I am very pleased with our business performance in 2011 as Syntel successfully delivered on our operational and financial goals during the year," said Syntel CEO and President Prashant Ranade. "Year-over-year revenue growth of nearly 21% in 2011 was strong and broad-based; thus, we are confident that we have the right leadership team, market position, offerings, and go-to-market approach to continue to grow in 2012, despite prevailing economic uncertainties."

"Our long-term focus drives our ongoing investments in people, services and infrastructure," said Ranade. "We expect to derive considerable value over time from these investments to support the vision we have articulated for our company. Macroeconomic headwinds remain, but we see opportunities for growth ahead as we look to expand relationships within our Global 2000 customer base, as well as cultivate new relationships with clients exploring multi-sourcing and looking for additional opportunities to reduce costs."

"The combination of our size, capabilities and culture will serve us well as we help our clients meet their internal operational goals in the current environment."

2012 Guidance

Based on current visibility levels and an exchange rate assumption of 49.25 Indian rupees to the dollar, the Company currently expects 2012 revenue of $720 to $750 million and EPS in the range of $3.10 to $3.35.