Cognizant set to grow at slower clip in 2013

CHENNAI | MUMBAI: Cognizant Technology Solutions ended 2012 with a whimper, and said this year will not be as good as the last, indication that the outsourcer’s surge of momentum may be nearing an end.

The New Jersey-based company, which set the growth pace for the industry in 2012, said it expects sales to increase by 17% this year and by 2.7% sequentially in the three months to March 31.

Its revenue projection of $2 billion (Rs 10,500 crore) for the quarter means that it will grow at the same rate as Infosys , regarded as an industry laggard . Cognizant, most of whose 1.5 lakh employees are based in India, expects revenue of $8.6 billion in 2013. “As we look to 2013, it is clear that secular industry shifts, new technology architectures, virtual business models and changing demographics are forcing clients to re-examine how they operate,” Chief Executive Francisco D’Souza said.

Cognizant closed its fourth quarter with $1.95 billion in revenues, representing a 3% sequential growth, and a marginal growth in net profit to $279 million on the back of growth in all industry segments, including financial services and healthcare.

Cognizant’s slowing momentum may be more to do with the company itself than an indicator of demand for software services. The most upbeat assessments have been from top-ranked TCS and HCL Technologies while Wipro and Infosys have been more cautious . While demand growth is predicted to be very slight in 2013, the industry is characterised by fierce price competition, technological change involving cloud, data analytics and mobility, as well as a shift in business models away from labour-intensive growth.

The National Association of Software and Services Companies expects growth for the year to March 2013 to be at least 11%. Senior executives of the software industry are meeting in Mumbai next week when the growth projection for fiscal 2014 will be unveiled.

The company closed 2012 with $7.35 billion in revenues, placing it neckto-neck with Infosys, which has given a guidance a $7.4 billion for its financial year ending March 2013. Cognizant’s fiscal year ends in December. For the full year, Cognizant had a net income of $1 billion, compared to $884 million in 2011.

Analysts said Cognizant’s revenue guidance of at least $8.6 billion or 17% growth for 2013 was not exciting but no cause for worry either. The guidance includes anticipated acquisition revenue of $90 million from its purchase of the Hamburg-headquartered C1 Group in December last.