UPDATE 1-India's Tata Consultancy Q1 net up; sees uncertainty

* Apr-June net profit up 22 percent to 15.20 billion rupees

* Business, pricing environments remain tough

* Staff levels fall in qtr for first time ever (Adds details)

MUMBAI, July 17 - Tata Consultancy Services Ltd <TCS.BO> beat forecasts with a 22 percent rise in quarterly profit, but said the business environment remained weak and there was pressure on fees due to the global economic downturn. India's top software services firm by sales saw a healthy deal pipeline, although its overseas customers were looking for lower prices as they worked to shore up their businesses,

"The environment continues to be weak. We need to watch the situation very carefully on the ground," Chief Executive S. Ramadorai, who will retire later this year after 13 years at the helm, told reporters.

"We are expecting some shocks along the way and that's why the caution and watchfulness."

TCS and local rivals Infosys Technologies <INFY.BO> and Wipro <WIPR.BO> also face competition from big players such as IBM <IBM.N>, Accenture <ACN.N> and Hewlett-Packard <HPQ.N> who have raided their home turf and are winning contracts.

"Pricing... this year will not go up. We will be happy if we can contain it in the way we want to contain," Chief Operating Officer N. Chandrasekaran, who will become chief executive in October, said.

The company in April forecast a lower single digit decline in pricing for the fiscal year that ends in March 2010.

IBM <IBM.N> on Thursday posted stronger-than-expected quarterly earnings and sharply raised its full-year earnings forecast as it benefits from focusing more on higher-margin businesses in software and services. [ID:nN16369660]

Infosys last week marginally raised its full-year forecasts after beating estimates with a 17 percent rise in quarterly profit, but warned of a challenging global environment. [ID:nBOM468675]

STAFF DECREASE

TCS, part of the Tata Group that spans commodities autos and services businesses, said net profit in April-June rose to 15.20 billion rupees ($312 million) from 12.44 billion rupees reported a year ago, under U.S. accounting rules.

A Reuters poll of brokerages had forecast a net profit of 12.73 billion rupees for the firm, which counts Citigroup <C.N>, General Electric <GE.N>, General Motors, Lloyds TSB <LLOY.L>, and French insurer AXA SA <AXAF.PA> among its main clients.

Powered by an army of low-cost, English-speaking workers, India's outsourcing sector provides services ranging from managing complex computer networks and call centres to software coding to maintaining technology operations.

Many clients of India's outsourcing sector, which had so far chalked up impressive rates of growth, are struggling in tough economic conditions or are tackling severe cost cuts, leaving them little room to boost technology spending.

Chief Financial Officer S. Mahalingam said Tata Consultancy was able to boost its profit margins by 113 basis points in the June quarter over January-March by cutting costs and sending more jobs from overseas to cheaper facilities in India.

The company, which has frozen wages for this year, said its staff strength fell by 2,119 in the quarter to 141,642, the first quarterly drop for the company which had been hiring staff by the thousands.

Ahead of the announcement, shares in Tata Consultancy, which provides services such as consulting, system integration and back-office outsourcing, ended up 3.1 percent at 433.60 rupees in a Mumbai market <.BSESN> that rose 3.5 percent. ($1=48.7 rupees)