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Cognizant’s Q3CY11 revenue at USD 1.6bn, up 7.3% Q‐o‐Q in organic terms, was
higher by 2% over its guidance. It stated that there is no slowdown in decision making
and that clients are shifting most cost containment initiatives towards global delivery
(read offshore/low cost destinations) and deploying the consequent cost savings on
discretionary projects (consulting/data analytics). It expects 2012 budgets to remain
stable with an upward bias and is confident that clients will take up more offshoring
initiatives. Despite the bullish commentary it guided to organic revenue growth of
just 2.8% Q‐o‐Q for Q4CY12. The tier‐1 Indian IT companies provided similar
commentaries with TCS indicating that 2012 budgets would remain stable. Overall,
Cognizant is seeing a robust growth in Infrastructure Management Services, BPO and
CRM/Analytics. We prefer TCS due to its diversified portfolio and positioning as a
primary offshore vendor and HCLT due to its strong IMS and restructured platform
BPO offering.
• Revenue at USD 1.6 bn grew 32% Y-o-Y with EBITDA margins stable at 20.2% and
net income at USD 227mn, ahead of Street expectations and growing at 12% Y-o-Y.
• Revenue growth of 11% Q-o-Q in its Healthcare business which contributes 26% to
revenue. BFSI grew 7% Q-o-Q contributing 41% to revenue and Manufacturing and
Retail grew 5% Q-o-Q, contributing 20%.
• North America business, accounting for 78% of revenue, grew 8% Q-o-Q while
Europe grew 5% Q-o-Q, contributing 18% to revenue.
• It saw a slowdown in Europe but stated that most CIOs in European client
organizations indicated that they would defend their 2012 budgets and continue to
take up discretionary projects out of savings from shifting routine work offshore.
• Seeing a good demand for Infrastructure Management Services, high-end BPO,
Analytics and Customer relationship management.
• The guidance indicates 2.8% Q-o-Q growth in organic revenues which is the lowest
Q-o-Q growth in the last seven quarters.
• It saw price increase of 4%-5% Y-o-Y mainly due to successful price re-negotiations
in 2010. It expects pricing to remain stable in CY12.
• It derives only 31% revenues from fixed price projects compared to at least 40% for
the tier-1 Indian IT companies. This is surprising as we believe clients are
compelling vendors to improve efficiency by shifting to fixed price models.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cognizant’s Q3CY11 revenue at USD 1.6bn, up 7.3% Q‐o‐Q in organic terms, was
higher by 2% over its guidance. It stated that there is no slowdown in decision making
and that clients are shifting most cost containment initiatives towards global delivery
(read offshore/low cost destinations) and deploying the consequent cost savings on
discretionary projects (consulting/data analytics). It expects 2012 budgets to remain
stable with an upward bias and is confident that clients will take up more offshoring
initiatives. Despite the bullish commentary it guided to organic revenue growth of
just 2.8% Q‐o‐Q for Q4CY12. The tier‐1 Indian IT companies provided similar
commentaries with TCS indicating that 2012 budgets would remain stable. Overall,
Cognizant is seeing a robust growth in Infrastructure Management Services, BPO and
CRM/Analytics. We prefer TCS due to its diversified portfolio and positioning as a
primary offshore vendor and HCLT due to its strong IMS and restructured platform
BPO offering.
• Revenue at USD 1.6 bn grew 32% Y-o-Y with EBITDA margins stable at 20.2% and
net income at USD 227mn, ahead of Street expectations and growing at 12% Y-o-Y.
• Revenue growth of 11% Q-o-Q in its Healthcare business which contributes 26% to
revenue. BFSI grew 7% Q-o-Q contributing 41% to revenue and Manufacturing and
Retail grew 5% Q-o-Q, contributing 20%.
• North America business, accounting for 78% of revenue, grew 8% Q-o-Q while
Europe grew 5% Q-o-Q, contributing 18% to revenue.
• It saw a slowdown in Europe but stated that most CIOs in European client
organizations indicated that they would defend their 2012 budgets and continue to
take up discretionary projects out of savings from shifting routine work offshore.
• Seeing a good demand for Infrastructure Management Services, high-end BPO,
Analytics and Customer relationship management.
• The guidance indicates 2.8% Q-o-Q growth in organic revenues which is the lowest
Q-o-Q growth in the last seven quarters.
• It saw price increase of 4%-5% Y-o-Y mainly due to successful price re-negotiations
in 2010. It expects pricing to remain stable in CY12.
• It derives only 31% revenues from fixed price projects compared to at least 40% for
the tier-1 Indian IT companies. This is surprising as we believe clients are
compelling vendors to improve efficiency by shifting to fixed price models.
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