* Q3 adj EPS $0.69 vs est $0.60
* Q3 rev up 10 pct sequentially
* Ups FY EPS to at least $2.50
* Shares down 3 percent
* Sees shift in geographical, industry business mix
(Adds CFO, analyst comment; conference call; Graphic; updates
By S. John Tilak
BANGALORE, Nov 1 Cognizant Technology Solutions
Corp (CTSH.O) trailed its main rivals even as it posted a
second straight quarter of double-digit sequential revenue
growth, knocking its shares down 3 percent.
But Chief Financial Officer Gordon Coburn predicted
Cognizant, whose clients include 3M (MMM.N) and Harris Corp
(HRS.N), would outpace the market -- main rivals include
Infosys Technologies (INFY.BO) and Tata Consultancy Services
(TCS.BO) -- this year.
"We are taking market share," he told Reuters. "If you look
at our full-year growth expectations, it's clearly
substantially higher than anyone else in the industry."
The IT services provider, which has beaten profit estimates
for seven straight quarters, raised its 2010 outlook for a
third time on strong demand from clients and technology
spending on financial services.
It now expects full-year revenue growth of at least 39
Infosys is expected to grow 24-25 percent in dollar terms
for the year to end-March, while TCS, the largest Indian IT
services player, gives no outlook.
Cognizant shares, which hit a life high of $68.87 last week
ahead of the third-quarter numbers, edged higher on the
results, but later traded down 3 percent at a near 6-week low
in more than double normal volumes.
"Investors were disappointed as they were expecting a
blockbuster quarter," Signal Hill analyst Mayank Tandon said.
Cognizant earnings Graphic: r.reuters.com/mud33q
The company's 10.1 percent sequential revenue growth beat
market estimates, but just trailed Infosys' 10.2 percent and
was well short of TCS's 12 percent.
The market had become used to New Jersey-based Cognizant --
the majority of whose employees and development centers are
based in India -- growing faster than, and taking market share
from, its India-based rivals.
"Cognizant and the industry at large are now transitioning
into a period where the (post-recession) pent-up boost will be
less pronounced," said Sanford C. Bernstein analyst Rod
While Cognizant's strong third quarter indicated a rebound
in technology spending on financial services -- its biggest
market, contributing about 43 percent of revenue -- was holding
firm, Coburn sees diversification in both geography, towards
Asia and Europe, and industries.
"I would expect a shift more towards international
operations," he said. About 78 percent of third-quarter revenue
came from North America.
And he said revenue from retail and manufacturing and
information and media would grow faster than the company
average, making it less reliant on financial services sector.
STRONG FULL YEAR
Cognizant expects 2010 earnings of at least $2.50 per
share, excluding items. It had earlier forecast earnings of
$2.42 per share, excluding items, on revenue growth of at least
Third-quarter net income rose to $203.7 million, or 66
cents a share, from $136.6 million, or 45 cents a share, a year
ago. Excluding items, earnings were 69 cents a share.
Revenue was $1.22 billion, up 10 percent sequentially and
up 43 percent year-over-year.
Analysts had expected earnings of 60 cents a share,
excluding exceptionals, on revenue of $1.18 billion, according
to Thomson Reuters I/B/E/S.
The stock, valued at $19.6 billion, has gained 22 percent
since record second-quarter results in August, outperforming a
5 percent rise in the broader S&P 500 index .SPX.
(Reporting by S. John Tilak; Editing by Roshni Menon)