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Cognizant: Targeted Layoffs In 2019, Growth Acceleration in 2020?

Cognizant CEO Brian Humphries

Cognizant Technology Solutions is cutting 7,000 jobs and will also exit a content moderation business that involves 6,000 additional positions, according to The Economic Times.

An additional 5,000 people will lose their current positions but be redeployed into new posts, the report says. The overall impact means about 2 percent of employees will lose their jobs, Cognizant confirmed.

Cognizant 2020 Fit for Growth Plan

Over the next two years, Cognizant will increasingly focus on four growth opportunities: Data, Digital Engineering, Cloud, and IoT. The journey will involve a “variety of enablers that include sales and marketing, talent reskilling, acquisitions, and partnerships. The company is “streamlining its cost structure to partially fund these investments and execute its growth agenda,” Cognizant indicated.

The cost structure optimization should be substantially complete by 2020, triggering total charges of approximately $150 million-200 million primarily related to severance and facility exit costs. The saves run rate will be about  $500 million to 550 million in year 2021, the company said.

Cognizant CFO Karen McLoughlin

In many ways the job cut plan was not a surprise. CEO Brian Humphries provided clues about the headcount cuts during a September 2019 investor event in New York.

Also, chatter about some potential Cognizant layoffs first surfaced in May 2019. And in a July 31 financial statement for Q2, Cognizant CFO Karen McLoughlin hinted that the company’s cost structure was set to evolve.

Despite the staff cut chatter, Cognizant’s business has been performing reasonably well — especially amid the global 2000 shift toward cloud, digital and managed services.

Cognizant Revenues and Evolution

Cognizant’s revenue was $4.25 billion in Q3, up 4.2 percent from the corresponding quarter last year. The figure was about $40 million more than Wall Street was expecting, SeekingAlpha reports.

The company is showing growth progress on multiple fronts. Dig into the latest Q3 results and you’ll find:

  • Communications, Media and Technology revenue grew 14.5% year-over-year.
  • Products and Resources revenue grew 11.9% year-over-year.
  • Healthcare revenue declined 1.2% year-over-year.
  • Financial Services revenue grew 1.9% year-over-year.

The optimization of our cost structure is expected to be substantially complete by the end of 2020 and result in total charges of approximately $150-200 million primarily related to severance and facility exit costs. This is expected to result in an annualized gross savings run rate of approximately $500-550 million in year 2021.

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