Cognizant gives muted revenue guidance for 2019; appoints new CEO

IT services major Cognizant, which completed 25 years of its operations late last month, on Wednesday announced a major reshuffle in the senior management, with the appointment of Brian Humphries as its new chief executive officer (CEO), succeeding co-founder and current CEO, Francisco D’Souza. Humphries, who is currently CEO of Vodafone Business, will take up this new role effective from April 1, 2019.
 
To facilitate the current leadership transition, D’Souza, who is heading the firm since 2007, will serve as executive vice-chairman till June 30 of this year and then remain on the Nasdaq-listed company’s board as vice-chairman.
 
In the same breath, the US-based IT firm also announced the exit of its President Rajeev Mehta, who will step down from the role from April 1, 2019, and thereafter act as advisor to the new CEO till May 1. Mehta, who is with the company since 1997, was largely seen as the next CEO of the firm.
 
Humphries’ appointment ends the era of founders, who have driven the company for the last 25 years. At a time when the IT services industry is going through major transition, the new CEO’s stint with technology majors like Dell and Hewlett-Packard is likely to put him in a good stead to drive future growth. With such a well-laid out leadership succession plan, Cognizant has shown maturity in passing on the mantle to the next-generation leaders.

 
However, the current reshuffle comes at a time when Cognizant has given muted revenue guidance for this calendar year, with marginal rise in growth outlook. The Teaneck, New Jersey-based company is expecting its revenue to grow in the range of 7-9 per cent in constant currency terms in 2019, compared to 8.5 per cent reported in 2018.
 

Cognizant, which follows the January-December financial cycle, posted $16.13 billion of revenue, up 8.9 per cent year-on-year (YoY) in dollar terms and 8.5 per cent in constant currency terms for the 2018 fiscal year.
 
Its net profit for the entire financial year stood at $2.10 billion, a growth of 40 per cent over the same period of the previous year. “Cognizant executed well in 2018, diversifying its revenue base and client roster, and investing to build distinctive leadership in six advanced digital capabilities,” said D’Souza, vice-chairman and CEO of Cognizant.
 
For the quarter ended December 2018, Cognizant’s net profit was at $648 million, compared to a loss of $18 million reported in December 2017. Sequentially, net profit of the firm grew by around 36 per cent. Revenues during the quarter were at $4.13 billion, a rise of 7.9 per cent YoY and 1.22 per cent in sequential terms. Analysts polled by Bloomberg had expected Cognizant to report revenue of $4.11 billion and profit of $566.6 million.
 
While its key vertical, financial services, constituting 35.1 per cent of its fourth quarter revenue, grew at 1.7 per cent, the health care vertical witnessed a 6.8 per cent rise in the December quarter. Its communications, media and technology vertical showed a growth of 18.4 per cent during this period.