Wipro beats Cognizant in market cap

BENGALURU: Wipro has gone past Cognizant in market capitalisation and is now the fourth most valuable IT services firm globally after Accenture, TCS and Infosys, signalling renewed investor confidence in the Bengaluru-based company nearly a year after its new CEO Thierry Delaporte took over.
Wipro’s ADR rose 2.4% to $7.4 apiece on the NYSE, giving the company a market cap of $38.1 billion. Cognizant was up 1.2% at $71.5 in morning trade on the Nasdaq, with a market cap of $37.7 billion.
Cognizant has had a tepid revenue growth for the past two years. It’s a rare turn of events as the New York-based company strode past Wipro in terms of revenue a decade ago, and is still way ahead on that count. Cognizant’s revenue for the 2020 fiscal was $16.5 billion, more than double that of Wipro, which ended its fiscal on March 31 with $8.1 billion.

Wipro has shown signs of turnaround under Delaporte, who has redefined its service lines for better focus and trimmed some senior management. The company won its largest deal ever from German retailer Metro and has built a healthy pipeline of digital deals. Under the previous CEOs Abidali Neemuchwala and TK Kurien, Wipro's growth was sluggish, with bets on sectors like energy and healthcare going awry due to macroeconomic conditions and change in policies in the US. Wipro’s shares have risen 127% since Delaporte came on board.
Ray Wang, CEO of Constellation Research, said Wipro is just in the beginning of its turnaround plan. “Cognizant on the other hand is trailing behind, as a very well run TCS and Infosys along with Wipro are now distancing themselves from the pack. The challenge is what we call decision velocity. The team that can chase deals more aggressively, deliver on time and within budget, and adjust staffing levels more accurately wins. What gives organisations the advantage is when they can deliver on decision velocity,” he said.
Cognizant, after years of scorching growth, has slowed down considerably. The slowdown started towards the end of the previous CEO Francisco D'Souza's tenure, and has not improved much under CEO Brian Humphries. While it has spent about $1.5 billion in the last two years on acquisitions, the impact on the topline is stunted. Its profit for the full year fell 24% to $1.4 billion, while Wipro’s was up 11% to $1.4 billion. Operating margin languish at 12.7% in comparison to Wipro’s which is up at 20.3%. The company’s shares have gone up by about 16% in the last two years.
Cognizant has been faltering on several fronts, including its ability to retain key leaders and employees across levels.
“Commercial opportunities were forgone due to an inability to source talent,” Humphries said in a post earnings conference call with analysts. For the quarter ended March, the company had an attrition rate of 21% compared to 12% of Wipro.
Hansa Iyengar, analyst at London-based IT advisory Omdia, said Wipro seems to have found its footing after a long time. It has made a couple of very large acquisitions in the last 12 months – Ampion and Capco – both of which have significantly boosted its digital capabilities. “Cognizant, on the other hand, has lost its startup culture and fire that kept it going at top speed for over a decade. It has been replaced by a slow-moving organisation with layers of ‘fat’ around the middle management that prevents it from being nimble. Changes are being made to shed this flab, but it is a time-consuming process and bringing back the cultural aspects that made a difference is an uphill task,” she said.