Investors were unwinding positions in tech stocks on Thursday after Satyam Computer reported a decline in its Q3 net profit and lowered FY 2002-03 guidance.

Satyam Computer slumped 6.6% to Rs 243 and HCL Technologies dropped 2.2% to Rs 163.90. The latter moved volatile, recovering from the day's low of Rs 152.

In other IT majors, Digital GlobalSoft (down 4.3% to Rs 559.80), Wipro (down 2.4% to Rs 1,480), NIIT (down 6.1% to Rs 151.30) and software bellwether Infosys Technologies (down 1.1% to Rs 4,466), all were reduced.

A host of second line tech stocks were in the red. Subex Sysetms (down 5.1% to Rs 93), Rolta (down 3.8% to Rs 77), PSI Data Systems (down 3.6% to Rs 77), Kale Consultants (down 3.6% to Rs 40.20), Aftek Infosys (down 3.5% to Rs 218), VisualSoft Technologies (down 3.5% to Rs 217), Tata Infotech (down 3.3% to Rs 210.35), i-flex (down 3.3% to Rs 850) and Infotech Enterprises (down 3.1% to Rs 164.50), all were lowered.

Market men say the results of Satyam Computer and HCL Tech reflect that there's pressure on profit margins of software companies. Funds are therefore shifting focus away from IT stocks. There is also cautiousness in the IT sector which derives a majority of its revenues (50-60%) from the US, amid heigtening possibility of a US-Iraq war.

For Q3 ended 31 December 2002, SCSL posted a 2.2% fall in net profit to Rs 116.73 crore (Rs 1.16 billion) from Rs 119.43 crore (Rs 1.19 billion). Net sales jumped 19.8% to Rs 522.26 crore (Rs 5.22 billion) from Rs 435.77 crore (Rs 4.32 billion). Total income went up 16.9% to Rs 521.50 crore (Rs 5.21 billion) from Rs 446 crore (Rs 4.46 billion). The Q3 results are way below expectations.

Satyam said the Q3 results were below the company's own expectations. One prime reason for the revenue being lower than guidance and the downward revision in guidance for FY 2002-03 are lower than anticipated ramp up of revenue from few customers added in the current and previous year. The company also said it was negotiating a very large deal which was to result in a multi million dollar revenue in each of quarters which was suddenly put on hold.

Clearly, the changing nature of customer's IT spending and continued uncertainty in their markets has brought in some unpredictability to forecasts, Satyam said. What is certain, however, is that the thrust on offshoring continues to be high, presenting opportunities for long term sustainable partnerships and growth.

Satyam has revised downwards the revenue and EPS guidance for the current financial year to Rs 2,010-2,020 crore (Rs 20.1-20.2 billion) and Rs 14.57–Rs 14.66, respectively.

Just before commencement of trades, HCL Technologies announced second quarter ended 31 December 2002 results that showed a 34.6% fall in net profit to Rs 80.59 crore compared to Rs 123.22 crore (Rs 1.23 billion) in the corresponding period of the previous year. Revenues increased 16.6% to Rs 467.93 crore (Rs 4.67 billion) from Rs 401.26 crore (Rs 4.01 billion).