Syntel Reports Fourth Quarter and 2005 Financial Results

Highlights
* Year-over-year revenue increase of more than 21% to $226.2M
* Sequential revenue growth of 6.5%, to $62.3M
* Year-end global headcount crossed the 6,000 mark
* 2005 ending cash balance & short term investments of $120.5M

TROY, Mich. - February 13, 2006 - Syntel, Inc. (SYNT), a global information technology services firm, today announced financial results for the fourth quarter and 2005, ended December 31, 2005.

Fourth Quarter 2005 Financial Highlights Syntel's total revenue for the fourth quarter increased 27 percent to $62.3 million, compared to $49.0 million in the prior-year period and 6.5 percent sequentially from $58.5 million in the third quarter of 2005. The Company's gross margin was 40.1 percent in the fourth quarter of 2005, compared to 43.3 percent in the prior-year period and 39.7 percent in the third quarter of 2005. Gross margins during the quarter were favorably impacted by $940,000 related to a reversal of a payroll tax provision.

During the fourth quarter, Syntel's focus area of Applications Outsourcing accounted for 75 percent of total revenue, with e-Business contributing 14 percent, TeamSourcing at 7 percent, and Business Process Outsourcing (BPO) at 4 percent.

The Company's Selling, General and Administrative (SG&A) expenses were 19.9 percent in the fourth quarter of 2005, compared to 21.4 percent in the prior-year period and 18.0 percent in the third quarter of 2005. Expenses during the quarter included a charge of $1.1 million relating to allowances for doubtful accounts.
During the fourth quarter, Syntel repatriated approximately $61 million in earnings of its foreign subsidiary, Syntel Limited, under the American Jobs Creation Act of 2004. The Act provides a special one-time favorable effective tax rate for U.S. Corporations. As a result, the Company incurred a $12.3 million tax expense in the quarter. This had a ($0.30) effect on the earnings per share.

Syntel's income from operations was 20.2 percent in the fourth quarter, compared to 21.9 percent in the prior-year quarter and 21.7 percent in the third quarter. Net loss for the fourth quarter was $98,000, or $0.00 per diluted share, compared to net income of $10.4 million or $0.26 per diluted share in the prior-year period and net income of $11.7 million or $0.29 per diluted share in the third quarter of 2005. Syntel added four new clients and launched 95 engagements during the fourth quarter of 2005. The Company also added two new "Hunting Licenses" or preferred partnership agreements.

2005 Financial Highlights
Revenue for 2005 increased more than 21 percent to $226.2 million, from $186.6 million in 2004. Net income for the year was $30.3 million, or $0.75 per diluted share compared to $41.0 million or $1.01 per diluted share in 2004. The Company's gross margin was 40.3 percent for 2005, compared to 42.6 percent in 2004.

Syntel's global headcount grew 35 percent in 2005 to 6,093, compared to 4,527 at the end of 2004. The Company finished 2005 with cash and short term investments of $120.5 million.

Syntel added 16 new clients in 2005 and launched 452 new engagements. The Company added eight new "Hunting Licenses" or preferred partnership agreements during the year, taking the total to 71 strategic relationships.

Operational Highlights
"In 2005, Syntel reached the 25 years in business milestone and we can't think of a better way to celebrate than by achieving solid performance across the entire organization," said Syntel Chairman and CEO Bharat Desai. "Specifically, our financial performance in 2005 illustrates that Syntel's focus on investments in our People, Infrastructure and New Service Offerings is showing the desired results."

"Syntel continues to invest ahead of the curve in new facilities, adding key domain expertise, and creating new solutions for our clients," said Syntel Chief Operating Officer Keshav Murugesh. "We will continue to partner closely with our Blue Chip clients to help them leverage our global delivery model for even greater gains in their businesses."

2006 Guidance
Based on current visibility levels, the Company expects 2006 revenue in the range of $250-$260 million and EPS between $1.00 to $1.05.

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