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Case Details

Case Code: FINC139
Case Length: 11 Pages 
Period: 2000-2018   
Pub Date: 2018
Teaching Note: Available
Price:Rs.300
Organization : Cognizant Technologies Solutions
Industry : Information Technology
Countries : India
Themes: Share buyback/Repurchase
Case Studies  
Business Strategy
Marketing
Finance
Human Resource Management
IT and Systems
Operations
Economics
Leadership & Entrepreneurship

Cognizant-Share Buyback

 

ABSTRACT

 
On November 28, 2016, American investment management firm Elliot Management Corporation (Elliot) sent a letter to the management board of American Multinational IT Services Provider Cognizant Technology Solution (CTS) expressing concern over the stock performance of CTS. The stock was observed to be underperforming against its peers and standard industry indices like S&P 500 Index, etc. The analysts’ team at Elliot headed by Jesse Cohn (Jesse) found that the lack of a standard reinvestment policy and the use of age-old operational strategies were not rendering any benefits to the shareholders and were the primary reason for underperformance of the stock. Jesse believed that a suitable operational strategy aimed at improving the operational margins and standard capital allocation policy would not only provide the desired benefits to the shareholders, but also help CTS retain its position in the ever changing IT sector at the global level. The present case study provides information about the stock performance and operational performance of CTS, and the steps initiated by the company to improve its market standing. It provides the scope to discuss whether the measures initiated will provide the desired results to the organization and ultimately benefit the shareholders.
 
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Issues

The case is structured to achieve the following teaching objectives:
  • To understand the factors that would have an impact on shareholders’ return and stock performance
  • To evaluate the impact of operational performance and capital allocation policy on shareholders’ returns
  • To analyze the impact of share buyback and dividend payments on the stock performance
Contents
INTRODUCTION
BACKGROUND
JESSE’S OBSERVATIONS
UNEARTHING BASIC CAUSES
COMPARISON WITH PEERS
CAUSE OF CONCERN
CAPITAL ALLOCATION POLICY
ACTIONABLE STEPS
THE INITIATIVES
MARKET VIEW
CUTTING OPERATING COSTS
INITIATING SHARE BUYBACK
EXHIBITS

Keywords

Cognizant Technologies Solutions; Elliot Management Corporation; Accelerated Repurchase; Value Enhancement Plan; Operating margins; Revenue Growth; Competitors; Market Value; Stock performance; Share buyback

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