Cognizant Technology Solutions has overtaken Wipro's IT Services arm for the first time in the June quarter to become the number three software exporter from India. While Tata Consultancy Service is number one, Infosys is in the second place.

Cognizant, for the June 2011 quarter, reported revenue of $1.485 billion compared with Wipro's IT services' arm revenue of $1.407 billion — a difference of $78 million.

Cognizant reported a 21 per cent increase in net profit to $208 million ($172.2 million) on revenue of $1.485 billion ($1.105 billion) in the second quarter of 2011.

Net headcount addition for the June quarter exceeded 7,100 to end with global employees at 1,18,300. Attrition was 15.2 per cent. This includes all departures, including BPO and employees in the training programme.

Mr Francisco D'Souza, President and CEO, Cognizant, said, “We continue to see stronger than anticipated demand for our increasing range of services across industries. Over this past year, we have seen clients seeking our services not just to drive operational efficiencies but also to transform their businesses to adapt to next generation technologies and to a new generation of born digital workers and consumers.”

Guidance

For the third quarter, Cognizant has said the anticipated revenue will be at least $1.57 billion. For fiscal 2011, revenue is expected to be at least $6.06 billion, up 32 per cent compared with 2010, the release says.

The guidance includes the anticipated four-month impact of the recently announced definitive agreement under which Cognizant will acquire CoreLogic Global Services Private Ltd, the India-based captive operations of CoreLogic.

In addition, cash flows during the quarter allowed Cognizant to increase its cash and short-term investment balances to around $2.27 billion while expanding its share repurchase programme. It repurchased over $96 million of shares during the quarter, he said.

Growth trajectory

According to Mr Nikhil Rajpal, Partner, Everest Group, Cognizant has been on a higher growth trajectory than Wipro (and most of its peers) for a while and this [the quarterly results] is a natural culmination of that. This is a reiteration of the fact that Cognizant's strategy is working.

The differentiation largely comes from Cognizant's higher investment in sales and building relationships with clients. Cognizant puts more people on-shore, more people per account and has a more forward centric way of operating than others. This also shows up in the higher SG&A per cent in the industry, he said.

Customer Base

Mr Gordon Coburn, Chief Financial and Operating Officer, discussing the financial results with analysts, said Cognizant had a gross addition of 76 new customers and closed the June quarter with 721 active customers. During the quarter, the number of accounts that the company considers to be ‘strategic' (providing revenue of over $5 million) increased by six. This brings its total number of strategic clients to 179.

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