Shares of outsourcing, off-shoring, and consulting firm Cognizant Technology Solutions (CTSH) are up $1.91, or 2.5%, at $78.18 this afternoon following better-than-expected Q4 profit this morning and an outlook for this year’s profit higher as well.
Later in the morning, Cognizant’s president, Gordon Coburn, was kind enough to sit down with me to spend some time talking about the things he and the company are working on. First off, in terms of shareholder returns, Coburn, who was formerly CFO for a number of years, pointed out that the company spent more than $480 million in share repurchases last year, capping $866 million in repurchases out of the existing $1 billion repurchase plan.
Buying sped up last year in Q2, Coburn notes, when the company felt its shares were too cheap.
Regarding a dividend, Coburn thinks not, at least for the moment. “The way we create value for shareholders is by having higher revenue growth that leads the industry with stable margins.” He points to efforts to deploy cash for that purpose, such as the $400 million in capital investments the company will spend this year.
Coburn runs through the points of pride, such as adding 19,000 employees last year, and having the industry’s lowest attrition rate, at about 7%, and other things such as days of sales going down during 2012.
His outlook for 17% revenue growth this year, higher than he expects for the industry at large, is based in part on new initiatives known under the rubric “SMAC,” which stands for social, mobile, analytics, and cloud, a short-hand for all the buzz-terms currently in circulation. The company is focused on more and more consulting projects that allow it to show companies how to re-tool for things such as letting an insurance rep write a policy from their iPad. That’s already being done today, but to do it right requires things like fixing back-office systems that handle policy pricing, risk assessment, and actuarial work.
Cognizant had been investing in technology to make systems more SMAC-like for years, and is now finding the opportunity to actually sell it as a project to customers. Although it’s too soon for SMAC to make a material contributor to revenue — traditional IT infrastructure is still 75% of revenue — the company is doing SMAC work for 60% of clients, and it is the main area of focus at the moment for chief executive Francisco D’Souza.
An interesting aside, Coburn, himself a tech gadget freak to some degree, is evangelical about Cisco Systems‘s (CSCO) “telepresence” video conferencing, which he uses on his iPad and his laptop. Travel at Cognizant is down by a third since they started using telepresence, he pointed out, saving the company $23 million annually in travel costs. “And productivity is actually way up because people don’t step on each others’ toes” when they can see one another on video, rather than in a traditional telephone teleconference. Cognizant has installed three telepresence rooms, or “suites,” but a lot of the work just gets done on mobile devices, he says.
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