Cognizant to outperform Infy, Wipro?

BANGALORE, INDIA:  Information technology services provider Cognizant Technology Solutions CorP lowered its full-year forecast for the first time in nearly four years, citing weak demand from financial services clients in North America.

The company echoed sentiments expressed by its India-based rivals like Infosys Ltd and Wipro Ltd as they battle lower discretionary spending by clients especially in the financial services segment.

However, analysts believe Cognizant will continue to outperform rivals and beat its full-year targets.

Morningstar Inc analyst Swami Shanmugasundaram sees the company continuing to outperform Infosys and Wipro.

"Infosys is walking out of some of the client contracts because it wasn't willing to compromise, which should help Cognizant because its margins are lower," he said.

Bernstein Research analyst Rod Bourgeois said Cognizant added some extra conservatism to its revised 2012 forecast to deter risk of needing to revise forecast again.

The outlook has essentially been "de-risked" as the company is assuming less discretionary spending by its clients, he said. "I wouldn't be surprised if they come back and beat it (their outlook) at the end of the year.... They tend to be very conservative, like Infosys used to be in the past," he said.

Shares of the company fell as much as 20 percent - their sharpest fall in more than four years - to $55.70. The stock was among the top percentage losers on the Nasdaq.

Cognizant said it expects its banking and pharmaceutical sectors to remain sluggish for the rest of the year.

"The rate of acceleration is not as strong as we would have anticipated and that's particularly true in financial services and the pharmaceutical industry," President Gordon Coburn told Reuters.

The banking sector - which brings in a quarter of Cognizant's revenue - was flat in the first quarter for the company, hurt by softness among top North American clients.