Cognizant sees rev growth amid Europe crisis

MUMBAI, INDIA: As the Euro zone crisis deepens and businesses outsource to cut costs amid the uncertainty, Cognizant Technology Solutions expects revenue from Europe to grow significantly, a top executive at the software services company said at the Reuters India Investment Summit.

"We see Europe as a very significant opportunity," Chief Financial Officer Gordon Coburn said.

"Today, Europe is 18 per cent of revenue ... when I look at 4-5 years (ahead), I expect it to be at a significantly higher percentage of revenue," he said.

"The economic difficulty that has occurred there will actually serve to expand the addressable market for services in Europe."

India's No.2 software services exporter and Cognizant's larger rival, Infosys, also said recently it aims to double its revenue share from Europe to 40 per cent of total sales by the end of the 2014 financial year.

Teaneck, New Jersey-based Cognizant is also looking at small tuck-in acquisitions next year to strengthen its position in continental Europe and Asia, the CFO said by telephone.

"We continue to focus on tuck-under acquisitions, which we define as $200 million or less in revenue," Coburn said.

Cognizant has completed two acquisitions this year including CoreLogic Global Services, the India-based captive operations of CoreLogic, and a privately held company.

Founded in 1994, Cognizant has about 75 per cent of its 130,000 employees based in India.

IT SPENDING STABLE

Coburn sees overall IT budgets for 2012 to be flat to slightly up and expects pricing to be up by a little, though not by as much as in 2011.

"The pricing discipline has remained ... and it is headed in a positive direction," Coburn said.

The company has traditionally worked with lower margins than rivals Infosys and Tata Consultancy to gain market share, and has grown 42 per cent in the last year even as other IT services companies grapple with the slowing economy.

But Cognizant, which has a market value of $19.55 billion, still boasts an impressive track record of beating market expectations for eight-straight quarters.

Coburn said healthcare, which contributes about 26 per cent of revenue, and smaller verticals like retail and manufacturing will grow at a faster rate than financial services.

With about half its revenue coming from the financial services segment, the company has been trying to reduce its dependence on any one segment.

Cognizant's shares, which have gained 23 per cent since its year-low in August, were trading mostly unchanged at $65.06 on Nasdaq on Tuesday.