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Cognizant Q4 net dips 1.8%; okays $3.4bn in buybacks,dividends

US-based IT major Cognizant today posted a 1.8 per cent fall in net profit at USD 416 million for the December quarter, while its board okayed a plan to return USD 3.4 billion to shareholders over two years.

Cognizant Q4 net dips 1.8%; okays $3.4bn in buybacks,dividends

Cognizant, which competes with Indian firms like TCS and Infosys, had posted net profit of USD 424 million in the year-ago period. Its revenue stood at USD 3.46 billion, up 7.1 per cent from the year-ago period.

The company recorded out-of-period corrections during the third and fourth quarters (USD 1 million) of 2016 related to certain payments that impacted the bottomline.

During 2016, the company saw its revenue growing 8.6 per cent to USD 13.49 billion, meeting the company's topline forecast of USD 13.47-13.53 billion. Its net profit fell 4.3 per cent to USD 1.55 billion in 2016.

For 2017, Cognizant expects its revenue to be in the range of USD 14.56-14.84 billion, which translates to 7.9-10 per cent growth.

It has given a revenue forecast of USD 3.51-3.55 billion for the January-March 2017 quarter.

Also, Cognizant has entered into a "cooperation agreement" with activist shareholder Elliott Management and appointed three independent directors to its board.

"As we enter 2017, the time is right for us to accelerate the shift to digital services and solutions to meet the growing demands from our clients to transform their business models in the face of the rapid business and technology shifts disrupting their industries," Cognizant Chief Executive Officer Francisco D'Souza said.

To meet this opportunity, Cognizant is evolving its business model to focus on aggressively scaling its digital capabilities, driving efficiencies in core business and launching a robust capital return programme, he added.

Cognizant will aggressively scale its digital capabilities across geographies and industry segments through both organic investments, in areas such as re-skilling and new technology practices, and through acquisitions.

"The company is intensifying its M&A efforts to expand intellectual property, industry expertise, and platform and technology capabilities, by focusing primarily on strategic tuck-in acquisitions," it added.

During the quarter, Cognizant added about 4,400 (net) people, taking the headcount to 2,60,200 employees globally.

The annualised attrition stood at 15.6 per cent during the quarter.

On the issue of possible work visa clampdown in the US, Cognizant President Rajeev Mehta said the company will "continue to build our team in the US and in other geographies around the world where we operate".

About 70-75 per cent of the company's workforce is based in India.

The US constituted 78.4 per cent of Cognizant's December quarter revenue, followed by Europe at 15.5 per cent and Rest of World at 6.1 per cent.

On its USD 3.4 billion capital return plan, Cognizant said it will be funded by current US cash balances, future cash flows from US operations and incremental debt financing.

"We are instituting a robust capital return program that rewards our long-term shareholders. Given our size and scale, our strong cash flow profile, and the confidence we have in our future growth opportunities, we are stepping up our capital return commitment to our shareholders," Cognizant Chief Financial Officer Karen McLoughlin said.

The company finished the December quarter with about USD 5.2 billion in cash and short-term investments.

During the reported quarter, Cognizant added seven strategic customers, taking the total number of strategic clients to 329.


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