Cognizant plans $22 million capex in 2002

Our eFE Bureau in Chennai

Nasdaq-listed Cognizant Technology Solutions will undertake a captial expenditure (capex) of $20-22 million (Rs 96-106 crore) during calendar year 2002. The firm has already committed a capex of $17-20 million (Rs 82-96 crore) in 2001, said Cognizant chief financial officer Gordon Coburn in a conference call on Tuesday. Most of capex would be utilised to set up development centres in India.

The company is setting up a 1,15,000 square feet development centre in Pune which can house 1,000 professionals and is expecting to complete the project by the end of this calendar year.

Another 1,00,000 square feet development centre is being built in Calcutta and would be completed by middle of next year. This facility can also accommodate 1,000 employees. A mega 4,00,000 square feet software development centre will be constructed in Chennai over a three-year period and the construction activity will commence by the year end.

Meanwhile, Cognizant reported a 23 per cent increase in revenues to $45.50 million (Rs 218 crore) for the third quarter ended September 2001. Net income increased 28 per cent to $6.10 million (Rs 29.2 crore).

“Application management services continued to drive revenue as large organisations seek out long-term strategic partners to provide cost-effective and value-added offshore outsourcing,” said chairman and chief executive officer Kumar Mahadeva.

“Although some smaller clients significantly reduced spending on new development, the larger application management clients continued to ramp up spending in the quarter. Key clients have indicated to us that offshore outsourcing is expected to continue to win an increasing share of total IT spending, and therefore, we remain cautiously optimistic about our outlook,” he said.

“We added 12 new clients in the third quarter including UnitedHealthCare, Intermountain Health Care, Fletcher Allen Health Care, Sears, Roebuck and Co, Levi Strauss & Co, and Vauxhall Motors among others,” said Mr Gordon Coburn.

“Revenue from application management increased 39 per cent to contribute 53 per cent of revenue. Of particular strength was our healthcare vertical, whose share increased to 26 per cent of our revenue mix. To meet this and future demand we continued our recruiting efforts increasing our global headcount during the third quarter to 3,950 from 3,580,” he added.

About 3,000 employees are based in India and 70 per cent of the services are delivered from offshore facilities.

On a sequential quarter basis, the third quarter growth was marginal. The company chairman said that delay in customer decision making and ramping up of projects had hurt performance. Cognizant is optimistic about next financial year and expects to touch revenues of $200 million (Rs 960 crore).