Cognizant Technology Solutions Corp. (CTSH:US), the U.S.-based provider of consulting and outsourcing, is weighing acquisitions in France and Germany as Europe’s debt crisis creates more demand for services that lower costs.
“We’re doubling down on our investment in Europe,” President Gordon Coburn said in an interview, without disclosing a specific spending plan. “We’re seeing the weak economy in Europe serve as a catalyst for our services.”
Technology companies including billionaire Carlos Slim’s America Movil SAB are seeking assets in Europe, where the economic slump has lowered valuations and spurred mergers and acquisitions. Teaneck, New Jersey-based Cognizant, which is already established in the U.K. and Switzerland, is expanding in other countries to have a head start over rivals when the region returns to economic stability.
“Europe is very attractive to us if we can find the right valuations,” Chief Financial Officer Karen McLoughlin said in an interview. “In Germany and France, we’re not as strong as we’d like to be.”
Cognizant, which had $2.3 billion in cash and short-term investments and little debt as of June 30, is gaining revenue as its clients look for savings by outsourcing tasks to India and other lower-cost nations, McLoughlin said. The company raised its full-year forecast on Aug. 6 after second-quarter profit beat analyst estimates.
Cognizant rose the most in almost four years in New York on Aug. 6, gaining 11 percent to $64.21. The shares, down less than 1 percent this year, have 25 buy recommendations, three holds and one sell in a Bloomberg survey (CTSH:US) of 29 analysts.
While the ideal target would be a company with $80 million to $100 million in annual revenue, Cognizant would be prepared to acquire one with as much as $200 million in sales, McLoughlin said. Cognizant, which pursues acquisitions that help add technology, diversify or expand in a new region, will also look to grow in Japan and South America in the next five years, Coburn said.
The company forecast profit of at least $3.38 a share this year, up from an earlier forecast of at least $3.36. It maintained its full-year sales projection of at least $7.34 billion.
Cognizant has also been building an emerging-technologies business focused on data analysis and mobile solutions. The company’s addressable market doubled in the last three years as clients sought help outsourcing and managing infrastructure, Coburn said.
“With many customers where we thought the relationship had matured, we’re seeing they need to tackle new kinds of problems,” Coburn said. “They are looking to us to outsource a larger list of services.”
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