Cognizant Tech may post lower growth in 2013

Written by fe Bureau | Bangalore | Updated: Dec 6 2012, 09:38am hrs
Cognizant Technology, the US-headquartered IT services company, has indicated that it may record an annual growth of 16% in 2013, which is lower than the projected 20% rise in 2012, according to a filing with the US Securities and Exchange Commission (SEC) on the firms top executives stock option compensation.

Cognizants 8-K filing with the US SEC on the stock option targets for the top executives for 2013 states: 100% of the performance units, which are awarded shall vest upon the companys achievement of 2013 revenue of $8,515,000,000 ($8.5 billion).

This indicates that the company would achieve a revenue growth of 16% compared with 2012. For 2012, Cognizant has guided to an annual revenue of at least $7.34 billion, up at least 20% compared with 2011.

The indication given by Cognizant would have a bearing on the Indian IT industry as it gives a kind of preview on the likely demand for technology services in 2013. Already, Nasscom, the apex industry body, has revised the growth lower to at least 11% from the earlier 11-14% for the 2013 fiscal.

Reacting to these developments, the BSE IT index dropped by 69.72 points on Wednesday recording a decline of 1.19% while the broader Sensex rose marginally by 0.30%.

The rapid growth of Cognizant into the top league of multi-billion dollar IT services firms with the ability to outperform the market even in a downcast environment has made it one of the star performers along with Tata Consultancy Services (TCS).

JP Morgan in its note following the announcement by Cognizant said, IT industry demand is likely stable and not falling off by any means. The usual suspects such as Cognizant, TCS, Accenture and HCLT (selectively in infra-management) are likely continuing to win market-share as has been the case.

Today, Cognizant is the only IT company that provides for both quarterly and annual guidance. For the third quarter of 2012 calendar year, the company reported a 18.2% yearly rise in revenue to touch $1.8 billion. The company, during 2012 had revised its guidance lower from 23% to 20%. In contrast, Infosys has discontinued the practice of giving quarterly guidance and has retained only the annual number. For 2013 fiscal, it has said that it would record a growth rate of at least 5%.

The year 2013 is likely to witness even more intense competition among the top five IT companies TCS, Infosys, Wipro, Cognizant and HCL.