Weak cues force Cognizant to lower revenue outlook
SOURCE: LiveMint
DATE: August 1st, 2008
Mohit Soapbox:
Cognizant is not immune to the industry wide slowdown and delay in projects and decision making. We see that with a # of our clients in the sourcing advisory stream who have all the good intention to do the right thing - optimize, outsource and save money. The reality though is that the decision making process is extended - mostly related to fear, senior leadership focus on survival and short term survival strategies ( corporate and self) are all pushing the decision making process down the chain. On newer projects with a requirement of investment dollars a strong offshoring case is even harder. In a number of corporates outsourcing at some point is a strategic agenda and thus the focus by the entire food chain to make it work.
ARTICLE
US-based software services vendor Cognizant Technology Solutions Corp. cut its 2008 revenue outlook by 5% due to weak macroeconomic conditions, although it exceeded own forecast for the June quarter by posting 26% growth in net income and 33% rise in revenues.The Nasdaq listed firm, which delivers a bulk of its services from India, registered a net income of $103.9 million (Rs440.5 crore) on revenues of $685.4 million for the quarter ended June as compared with a net income of $82.3 million on revenues of $516.5 million in the year-ago quarter.
Due to the continued deterioration in the macroeconomic environment and sagging consumer and business confidence, we are adopting a more conservative stance for the remainder of the year,” president and CEO of Cognizant, Francisco D’Souza, said in a statement.For September quarter, Cognizant expects revenues to grow 5.5% to $723 million. For the full year revenues are projected to grow to $2.81 billion, down from the earlier forecast of $2.95 billion. Cognizant expects to earn profit of at least $1.44 a share, down from the earlier forecast of $1.50 a share.
Shares of Cognizant ended lower at $28.07 on Nasdaq on Thursday.
India-based rivals of Cognizant, such as Tata Consultancy Services Ltd and Infosys Technologies Ltd, reported slower growth for the June quarter and are cautiously optimistic about their outlook as customers in the US, the largest IT services market, prune or remain undecided on their spending plans for deploying new technology applications.
Cognizant anticipates slower growth in the healthcare segment, as one of its top five clients is expected to “scale back spending significantly in Q3 and Q4 as a result of business pressure, they are currently facing,” D’Souza told post-earnings analysts call. Healthcare, which contributes to a fourth of company’s revenues, grew slower at 3% in June quarter, as customers pulled back plans for their spending due to the economic environment and also the tremendous pressure facing that industry, resulting from drug safety, government and regulatory issues.
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