Syntel Reports Third Quarter Financial Results

TROY, Mich. - October 27, 2005 - Syntel, Inc. (SYNT), a global information technology services firm, today announced financial results for the third quarter, ended September 30, 2005.

Syntel's total revenue for the third quarter increased 25.5 percent to $58.5 million, compared to $46.6 million in the prior-year period and 7.0 percent sequentially from $54.7 million in the second quarter of 2005. The Company's gross margin was 39.7 percent in the third quarter of 2005, compared to 42.0 percent in the prior-year period and 40.1 percent in the second quarter of 2005. Gross margins during the current quarter were impacted by an increase in hiring and investments in our services.

During the third quarter, Syntel's focus area of Applications Outsourcing accounted for 75.0 percent of total revenue, with e-Business contributing 13.6 percent, TeamSourcing at 8.1 percent, and Business Process Outsourcing (BPO) at 3.3 percent.

The Company's Selling, General and Administrative (SG&A) expenses were 18.0 percent in the third quarter of 2005, compared to 19.0 percent in the prior-year period and 19.6 percent in the second quarter of 2005. Syntel's income tax rate was a 12.9 percent in the third quarter of 2005, as compared to a negative 3.5 percent in the prior-year period and 18.8 percent in the second quarter of 2005. The company had two one-time items in the third quarter that combined for a $900,000 favorable tax impact. The income tax rate in the third quarter of 2005, without adjusting the one-time items, was 19.7 percent.

Syntel's income from operations was 21.7 percent in the third quarter, compared to 23.0 percent in the prior-year quarter and 20.5 percent in the second quarter. Net income for the third quarter was $11.7 million or $0.29 per diluted share, compared to $11.9 million or $0.29 per diluted share in the prior-year period, and $9.7 million or $0.24 per diluted share in the second quarter of 2005.

"Our solid financial performance in the third quarter is validation that our aggressive investment program in the areas of people, process, infrastructure and new offerings is delivering the desired results," said Syntel CEO Bharat Desai. "We will continue to focus on driving enhanced value for our clients, through the enlightened use of new technology, best-in-class processes and our high quality teams."

Syntel added five new corporate clients in the third quarter, started 87 new engagements, and signed two new "Hunting Licenses" or preferred partnership agreements. Global headcount grew to 5,536 in the third quarter of 2005, compared to 4,920 in the second quarter 2005.

Syntel's financial position remains very strong. The Company ended the quarter with more than $118 million in cash and short-term investments. The Company remains debt free.

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