Cognizant will cut costs, focus on hiring freshers

CHENNAI/BENGALURU: Cognizant Technology Solutions’ revenue in the quarter ended March rose by 3.5% in constant currency, better than TCS and Wipro, but lower than HCL and Infosys. Revenue stood at $4.2 billion, including a $23 million headwind from their decision to exit content related services.
Net income was $367 million, 17% down from $441 million in the year-ago quarter. Digital revenue as a percentage of total revenue was about 41% and grew by 19% year-over-year
The company indicated that it expects the upcoming quarter to be sluggish because of the impact of Covid-19. It said there will also be an impact of $50 million to $70 million on account of the Maze ransomware attack last month. It expects the operating margin to fall below 16-17% in 2020.
CTS plans to deal with the increased uncertainty by, among other things, cutting costs. It will “significantly decrease ... costs including corporate overhead, travel, marketing, relocations, and non-commercial lateral hires.”
CEO Brian Humphries, however, noted several positives for the company. He said the company has low exposure to sectors that have been hit the most by the pandemic – travel & hospitality, retail, auto, energy, and media & entertainment. On the contrary, it has a big exposure to healthcare and lifesciences, which are already spending more on IT and technology.
“We had the best quarter in healthcare in a year, with booking growing more than 100% year-on-year. We are doing a lot of work with pharma clients around the world, helping them come up with vaccines and accelerate solutions to Covid-19,” he said.
First quarter total contracts awarded, he said, grew over 30% year-over-year – the company’s best quarterly performance since 2017.
Humphries also said he expects the US to recover faster than other markets, and the company’s high exposure to that market – much higher than for most peers – would stand it in good stead.
The company said it would continue to invest in enhancing its digital skills. It also said: “We will continue to build out our commercial team and correct the employee pyramid by onboarding approximately 20,000 entry-level hires.”