Upcoming AWS Coverage on Amdocs Post-Earnings Results, Cognizant Plans to Return $3.4 Billion to Shareholders

LONDON, UK / ACCESSWIRE / February 9, 2017 / Active Wall St. blog coverage looks at the headline from Cognizant Technology Solutions Corp. (NASDAQ: CTSH) as the Company announced on February 08, 2016, that it has reached an understanding with activist investor Paul Singer's hedge fund Elliott Management. Register with us now for your free membership and blog access at:

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One of Cognizant Technology Solutions' competitors within the Business Software & Services space, Amdocs Limited (NASDAQ: DOX), reported its first fiscal quarter ended December 31, 2016, on February 01, 2017. AWS will be initiating a research report on Amdocs in the coming days.

Today, AWS is promoting its blog coverage on CTSH; touching on DOX. Get all of our free blog coverage and more by clicking on the links below:

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Cognizant is a leading IT services Company headquartered in Teaneck, New Jersey. It offers IT, consulting and business process outsourcing services (BPO) to its clients.

Terms of the cooperation agreement

As per terms of the agreement with Elliott Management, Cognizant has agreed to make changes in the composition of its Board of Directors. Cognizant had agreed to induct three new independent directors to its Board, of which, names of the two members will be disclosed before the Company's annual meeting in 2017 and the name of the third director will be disclosed before the Company's annual meeting in 2018. The current three directors of the Board will not stand for re-election.

Cognizant's Board also gave approval to a plan to return $3.4 billion to shareholders over the next two years through share buybacks and dividend. As a part of this plan, Cognizant will start paying quarterly cash dividend of $0.15 per share regularly starting from the second quarter of 2017. It also plans to buyback $1.2 billion worth of shares from the open market in 2017-2018.

The Board will form a separate Financial Policy Committee, which will be responsible for helping the Board in taking decisions related to Cognizant's operating plan and capital allocation policy. The Committee will be comprised of Cognizant's CEO and two directors of the Board. Out of the two directors, one will be an incumbent director with operational experience and the other will be one of the new directors.

Following the signing of the cooperation agreement, Elliott Management has agreed to certain customary standstill provisions and has also given full support to Cognizant's current plan.

Commenting on the new development, Francisco D'Souza, Cognizant's CEO said:

"We are pleased to be working with Elliott and look forward to welcoming new colleagues to the Board. In addition, as part of today's full-year earnings release, we announced a plan to accelerate our shift to digital, expand margin targets and launch a robust new capital return program."

Jesse Cohn, Senior Portfolio Manager at Elliott Management added:

"Cognizant must continue to invest for growth and the digital transition, while further optimizing operations and returning capital to its shareholders. We are large shareholders of Cognizant because we believe the Company has a strong position in the industry and can deliver compelling value to shareholders."

Background

In November 2016, Elliott Management had disclosed ownership of 4% of Cognizant's shares. The market value of the stake is approximately $1.4 billion. Following this disclosure, the hedge fund had put pressure on the Company to make certain changes and take steps to unlock shareholder value. In a 16-page letter dated November 28, 2016, addressed to Cognizant's top management team, Jesse Cohn had outlined an in-depth plan to improve the Company's operational performance, better capital allocation and value creation for its shareholders. Jesse Cohn also sought changes in Cognizant's Board of Directors. Elliott Management was confident that Cognizant could achieve a value of $80 - $90+ per share by the end of 2017, representing an upside of 50-69 % in just over a year. The same was possible if Cognizant followed Elliott Management's suggestions.

Future plans

On February 08, 2017, Cognizant revealed its financial results for the fourth quarter and full year of 2016 and issued guidance for 2017. The Company also revealed its future business strategy wherein it will accelerate the shift to digital services and solutions at the same time helping its clients to adopt digital services and solutions. This will help Cognizant shift from its position of a leader in the IT services sector to a leading provider of digital services and solutions. The Company plans to explore all possibilities to achieve this including scaling up its digital capabilities, re-skilling, and new technology practices as well as acquisitions.

Stock Performance

At the close of trading session on Wednesday, February 08, 2017, Cognizant Technology Solutions' stock price climbed 4.95% to end the day at $56.45. A total volume of 20.66 million shares were exchanged during the session, which was above the 3-month average volume of 6.36 million shares. The Company's share price has gained 3.11% in the past three months. The stock currently has a market cap of $34.22 billion. Additionally, the Company's shares are trading at a PE ratio of 22.08.

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SOURCE: Active Wall Street