News Column

Cognizant cuts its outlook, shares fall 12.6%

August 7, 2014

By Kathleen Lynn, The Record (Hackensack, N.J.)

Aug. 07--Shares of information technology company Cognizant Technology Solutions Corp. of Teaneck dropped 12.6 percent Wednesday after the company cut its revenue outlook for 2014, saying several large clients had slowed their technology spending.

Cognizant now expects 2014 revenue to rise by "at least" 14 percent, down from the 16.5 percent it predicted earlier this year. A 14 percent increase would be the slowest annual rise in revenue in the company's history, though it would still top $1.2 billion.

Cognizant shares declined $6.31 to close at $43.67 Wednesday in Nasdaq Stock Market trading.

Despite the lowered outlook, the company reported that revenue rose 16.5 percent to $2.52 billion in the second quarter, which ended June 30. Cognizant added about 8,800 jobs in the quarter, bringing total employment to about 187,000. Cognizant employs about 600 people in Teaneck and 3,300 elsewhere in New Jersey, at a company office in Somerset and at clients' offices in the state.

Karen McLoughlin, Cognizant's chief financial officer, said the company lowered its outlook because "a handful" of large clients in North America and the United Kingdom had recently changed leadership, and the new leaders are evaluating their companies' spending on information technology.

"Clearly we're disappointed that we had to take down our full-year outlook," McLoughlin said. "But from our perspective, the market continues to be very strong. We think there are a lot of great opportunities for us in the marketplace."

Cognizant also announced that it had signed a letter of intent with Health Net Inc., a California managed-care organization, that is expected to lead to a seven-year, $2.7 billion contract. That would be the largest contract in the company's 20-year history, according to company President Gordon Coburn.

McLoughlin said that spending by Cognizant's health care clients has eased somewhat since last year, when health insurers were scrambling to comply with the Affordable Care Act, but the company expects tech spending in health care to grow over the long term.


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Source: Record (Hackensack, NJ)

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