As per the reports coming in, the IT major, Cognizant has spent $49 million to pay for the employees it has let go and $29 million to retain key employees in the December quarter, as it restructures its business.
How Did This Happen?
On Thursday, the tech-services provider Cognizant posted higher than expected revenue in its fourth quarter ended December 31.
According to analysts, the New-Jersey headquartered company reported a 3.8% year-on-year growth in revenue at $4.28 billion, compared to $4.23 billion expected.
Further, the Net profit in the quarter was down 39% at $395 million, compared to $648 million in the year-ago period.
The company has forecast 2-4% growth in constant currency terms for 2020, as it continues its restructuring process.
This forecast also includes the impact of a negative 110 basis points due to the company’s exit from certain content services businesses.
The company had guided for revenue growth of 5.1%, but managed to achieve 5.2% in constant currency terms, at $16.8 billion, for 2019.
What Does Cognizant Say About This Development?
While talking in this regard, CEO Brian Humphries said“We feel pleased (that we beat the top end of our guidance) but we always want to do better,”.
While talking to analysts in a post-earnings call, Humphries said the company would look to enter 2020 with a two-pronged strategy to expose Cognizant to faster-growing market categories.
He added “The first element is to protect and optimize our core business while scaling internationally. The second part is to invest to compete and win in four key digital battlegrounds: data, digital engineering, cloud and IoT.”
What Are The Highlights Of December Quarter?
As per the reports, Cognizant has spent $49 million in severance pay for the employees it has let go and $29 million to retain key employees in the December quarter, as it restructures its business.
Cognizant is taking a slew of steps to invest and boost growth under CEO Brian Humphries.
The Teaneck, New Jersey-headquartered company said it would cut as many as 7,000 jobs and exit some parts of its content moderation operations, impacting a further 6,000 employees, in October.
This move was focused on slash costs and focus on key businesses.
As its restructuring program got underway, Cognizant’s attrition spiked and several senior leaders left.
After that, the company then put in place a retention program, targeted at the director level.
By the end of December, for three months, Cognizant incurred $4 million in employee separation costs under its realignment program and an additional $45 million in separation costs under its ‘Fit for Growth’ plan.
Also, In the meantime, the company incurred $27 million in retention costs under the realignment program and an additional $2 million in retention costs under the ‘Fit for Growth’ program.
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