CHENNAI: Cognizant has again upset the tech pecking order, displacing India's trophy tech firm Infosys from the second slot, albeit as expected.
Cognizant was only a third of the size of Infosys in December 2002. TCS continues to retain the top slot. Cognizant also maintained and met its guidance of 20%, which it had set in the previous quarter. In May, the company had downgraded its guidance by 3 percentage points for the first time in four years. The stock was up nearly 12% at $64.67 a share in early trades at the Nasdaq (where it is listed).
Cognizant was only a third of the size of Infosys in December 2002. TCS continues to retain the top slot. Cognizant also maintained and met its guidance of 20%, which it had set in the previous quarter. In May, the company had downgraded its guidance by 3 percentage points for the first time in four years. The stock was up nearly 12% at $64.67 a share in early trades at the Nasdaq (where it is listed).
On Monday, Cognizant posted revenues of $1.795 billion for the June quarter versus $1.752 billion by Infosys. Cognizant managed to go past Infosys by about $43 million in just one quarter. Infosys lost $19 million of its topline in the June quarter and $35 million in the March quarter. Cognizant, founded as the technology captive arm of Dun & Bradstreet Corp (D&B) in 1994 in Chennai in recent years, has displaced several rivals on its onward march. Infosys had retained the second slot for around two decades before losing it to Cognizant on Monday.
"Overtaking of Infosys was widely expected," said Ankita Somani, IT analyst at Angel Broking. "I expect TCS to also post close to 15%. In that sense, 20% growth is pretty strong."
The last two quarters have been particularly weak for Infosys, while, in three of the last four quarters, Cognizant has added more incremental revenue than its peers, followed by TCS. Cognizant added $47.3 million to its March 2012 revenue and $84 million to its June revenue. The gap between Cognizant and Infosys could widen over the next few quarters going by the statements made by the respective CEOs.
"Clients continue to turn to Cognizant to help reinvent their business models in the face of secular industry changes, evolving demographics, and a new stack of social, mobile, analytics, and cloud technologies," said Francisco D'Souza, CEO of Cognizant. "We are well positioned to capitalize on these opportunities due to our unique combination of management consulting and operational capabilities in areas such as large scale program management and change management."
While declaring the results for June quarter, Infosys' Shibulal had said that the global environment had become a big challenge, consumer confidence not just in Europe but even in the US had fallen, and big deals were being cancelled. He said the environment had become so volatile that the company had decided not to issue a guidance for the second quarter.
Gordon Coburn, president of Cognizant, however, said this dim scenario was in fact responsible for clients to opt for more services. "Cognizant once again delivered industry-leading growth despite a challenging macro-economic environment," he said. "This market downturn, as with those before, is serving as a catalyst for clients to embrace a broader range of our services."
Cognizant's quarterly revenue grew by 4.95% on a quarter-on-quarter (QoQ) basis and 20.9% on a year-on-year (YoY) basis. Net profit for the company stood at $251.9 million, up 21.1% compared to $208 million in the previous quarter. "The main problem is Infosys' continued focus on margins while companies like Cognizant are aggressively trying to expand their market share," said an IT analyst with a financial advisory services firm.
"Another positive thing about Cognizant's results is that there is no decline in guidance. The company has also posted a growth of 16% QoQ in its revenues from rest of the world showing its efforts in diversifying its geographical spread of revenue."
Cognizant also repurchased over $358 million of shares during the second quarter, reflecting its strong cash flow.
Edited By Cen Fox Post Team
