Cognizant Technology Shakes Up Board Under Activist Pressure
February 08 2017 - 8:34AM
Dow Jones News
By Imani Moise
Cognizant Technology Solutions Corp., under pressure from
activist investor Elliott Management Corp., said Wednesday it would
replace three members of its board.
The IT operations company will focus on expanding margin targets
and launch a new capital return program to address the concerns of
shareholders.
Shares rose 4% to $55.95 premarket, offsetting setting a 4%
decline in the stock so far this year.
In the past, Elliott, which held a 4% stake in the company as of
November, has griped that Cognizant has maintained a margin target
of 19% to 20% for nearly two decades despite the company's growth.
Revenue at Cognizant rose 8.6% to $13.49 billion last year from
$886 million about a decade earlier.
Under the terms of the agreement filed with the Securities and
Exchange Commission, Elliott agreed to standstill provisions
capping its stake at below 5%, preventing a hostile takeover.
Moving into the new year, Cognizant said it would accelerate its
shift to digital services and solutions to meet growing demand from
clients. Like other companies that have traditionally relied on
outsourcing, Cognizant has been pressured by businesses' shift
toward the cloud, in which software and IT services are accessed
over the internet from third-party providers.
For the full fiscal year, the company expects adjusted earnings
of at least $3.63 per share on $14.56 billion to $14.84 billion in
revenue. Analysts polled by Thomson Reuters are expecting $3.64 per
share on $14.76 billion in revenue.
Cognizant also reported fourth-quarter results Wednesday,
posting a profit of $416 million, or 68 cents a share, down from
$424 million, or 69 cents, a year earlier. On an adjusted basis,
the company earned 87 cents per share compared with 80 cents in the
year-ago quarter. Revenue grew 7.1% to $3.46 billion.
Analysts polled by Thomson Reuters had forecast earnings of 86
cents on $3.49 billion in revenue.
Write to Imani Moise at imani.moise@wsj.com
(END) Dow Jones Newswires
February 08, 2017 08:19 ET (13:19 GMT)
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