“Restructuring laid the path for M&As, cloud offerings: Cognizant CEO - Economic Times” plus 1 more

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“Restructuring laid the path for M&As, cloud offerings: Cognizant CEO - Economic Times” plus 1 more

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Restructuring laid the path for M&As, cloud offerings: Cognizant CEO - Economic Times

Posted: 10 May 2020 07:30 AM PDT

Cognizant CEO Brian Humphries says the restructuring done last year has helped the company lay the path for M&As and a better standing in the cloud technology market, despite a difficult business climate this year due to Covid-19. Edited excerpts of an interview with ET.

How have last year's restructuring initiatives helped this year, given the outlook of a tough economic climate?
We had done a tremendous amount of work last year, which has given us somewhat of a six-pack as we go into 2020. We are bearing the fruits now. We determined our strategy around data and analytics, cloud, digital engineering and IoT and because we have refined the strategy, we have been able to execute an M&A roadmap against that strategy. That's one of the reasons we have so much momentum in the cloud. On top of that, we have made decisions last year to differentiate between cost versus an investment and as a consequence of that you see progress in Q1 in terms of best quarterly booking since 2017.

Because of our 'fit for growth' initiative, we now have the capability to invest more in our business while other companies may be struggling. We have committed to continue to bill out 500 commercial people, we have committed to continue to hire 20,000 college campus hires. We have also committed to develop our digital skills.

You seem confident that with the current trend of companies modernizing their core infrastructure and undertaking cloud migration work, you are well placed. How does this translate to deals, large and small?
With regards to cloud, we have made tremendous progress there in the last two years. Our strength in the cloud is evident for everyone to see and be recognised by competition. We have a lot of confidence if we are up against TCS, HCL or DXC or Infy, we really feel as though our momentum is with us.

What we have found actually is that the pipeline for larger deals, which are $5 million and above, has been quite robust. We also see lots of opportunities around captives etc. In cloud, we acquired three Salesforce platform partner (related) companies in the last four months. We had our best contract signings this quarter since 2017.

Has cloud adoption hastened after the onset of the Covid-19 pandemic? How are you capitalising on the same?
The short answer is yes. Clients are in a very uncertain world at this time and they are looking for ways to ensure agility, flexibility and obviously security considerations are paramount as well and move much more towards the utility model. The cloud affords people that capability. Companies like Salesforce, Workday, SAP and Servicenow are the ones we will align behind. But we have also tripled our headcount on Amazon, on Microsoft and indeed on Google Cloud platform this year. Its a very deliberate strategy.

The strategy that we outlined last year is really resonating - we talked about data and analytics, cloud, digital engineering and IOT and the market is moving towards us.

What is the kind of discretionary work that is being delayed by clients?
It's in all shapes and sizes but essentially work that is less likely to give a short-term payback tends to be pushed out. Major transformation programmes can be perhaps put on hold and other change requests that are nice to have but don't have an immediate payback. But it differs from client to client, we still see not just 33% growth in TCV (total contract value) in the first quarter but in the month of April, the first month of the second quarter, we still see strong momentum in healthcare, in financial services and other portions of the company.

Do you foresee legal challenges from clients who could have potentially lost confidential information in the Maze ransomware attack?
To be clear nobody is impervious to a cyber security attack. What differentiates the company is the manner in which you deal with it. We feel very pleased with the professionalism and maturity and the client centricity as we dealt with throughout this event over a two week period. We found that we have tremendous amounts of solidarity amongst our clients. It's a regrettable situation, it was not something we did foresee earlier this year and we dealt with it as best as we could.

The impact on this would be primarily felt in the second quarter, $50-70 million of revenue and margin impact but it will be largely only in the second quarter. We will have some additional costs in Q3 and Q4 but that will be much more around continuing to strengthen our security environment.

Alphabet reports $41.2 billion in Q1 2020 revenue: Google Cloud up 52%, YouTube up 33%, and Other Bets down 21% - VentureBeat

Posted: 04 May 2020 11:58 AM PDT

Google parent company Alphabet today reported earnings for its first fiscal quarter of 2020, including revenue of $41.2 billion, net income of $6.8 billion, and earnings per share of $9.87 (compared to revenue of $36.3 billion, net income of $8.3 billion, and earnings per share of $11.90 in Q1 2019). At $33.8 billion, Google advertising made up 82% of Alphabet's total revenue for the quarter. Given the global pandemic's impact on advertising, many are poring over Alphabet's numbers to see how bad the damage is — but as this quarter ended in March, it only shows a glimpse at what's to come.

Analysts had expected Alphabet to earn $40.3 billion in revenue and report earnings per share of $10.38. The company thus beat on revenues but missed on earnings per share. Its stock was down 3% in regular trading and up 7% in after-hours trading. This is some good news for the first full quarter that Sundar Pichai is leading both Alphabet and Google as CEO.

"Given the depth of the challenges so many are facing, it's a huge privilege to be able to help at this time," Pichai said in a statement. "People are relying on Google's services more than ever, and we've marshaled our resources and product development in this urgent moment."

Slowdown in Q1, more to come in Q2

While Alphabet's Q1 2020 revenues were up 13% versus last year, CFO Ruth Porat warned the quarter ended on a low note. "Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues," she said. Traffic acquisition costs were up 8.6% to $7.45 billion.

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On the earnings call, Pichai said the "significant and sudden" hit to advertising in March "correlated to the locations and sectors impacted by the virus and related shutdown orders." Porat said the company anticipates that the second quarter "will be a difficult one" for its advertising business. But she noted that it would be "premature to comment on timing, given all the variable here."

Alphabet also grew its headcount by 19% to 123,048 employees in Q1 2020. The company is slowing down hiring, however, so the number will be another one to watch this year.

Google Cloud

Google's cloud division is facing an uphill battle against market leaders Amazon Web Services (AWS) and Microsoft Azure. The division includes revenue from Google Cloud Platform, as well as G Suite, making the comparison with other public cloud providers difficult. Google has consistently said that GCP growth tends to be higher than the cloud division overall, meaning G Suite's growth is lower. But there is some good news for G Suite — Google Meet, the company's Zoom competitor, is growing quickly.

"Last week, we surpassed a significant milestone," Pichai said on the earnings call. "We are now adding roughly 3 million new users each day and have seen a 30-fold increase in usage since January. There are now over 100 million daily Meet meeting participants."

Google Cloud revenues in Q1 2020 hit $2.78 billion, up 52% from $1.83 billion in Q1 2019. That's a big jump, but we don't know how it compares to previous quarters, as Alphabet only began breaking out Google Cloud in the previous quarter. We thus have only one other data point: Google Cloud revenue was up 53% in Q4 2019.

YouTube

Alphabet also only started breaking out YouTube as a separate line item in its earnings last quarter. YouTube ads brought in $4.04 billion in Q1 2020, up 33% from $3.03 billion in Q1 2019.

It's worth noting that Alphabet also counts other non-advertising revenue for YouTube, which isn't included in this figure. The company hides that revenue in the "Google other" line item, which this quarter was $4.4 billion. That segment includes hardware sales for devices such as Chromebooks, Pixel phones, and Nest products (like smart speakers).

Other Bets

Unlike the way it handles Google Cloud and YouTube, Alphabet has been breaking out its Other Bets for years. The losses always outweigh the gains because, well, these are moonshots after all.

Other Bets did worse in Q1 2020 than in Q1 2019. Revenue was down 21% to $135 million in Q1 2020, while losses were up 29% to $1.1 billion. Since becoming the head of Alphabet and Google, Pichai was expected to be under a lot of pressure to clean up Other Bets. Given the current economic climate, that pressure will likely only increase this year.

Other Bets encompass the other companies under the Alphabet umbrella, including Calico, CapitalG, DeepMind, GV, Google Fiber, Jigsaw, Loon, Makani, Sidewalk Labs, Verily, Waymo, Wing, and X. As always, the line item leaves us with more questions than answers. Other Bets shows how much Alphabet is investing in its crazy research projects, but we still have no idea how much the individual projects (self-driving cars, internet balloons, anti-aging labs) cost to run, or whether any single one of them is profitable (unlikely).

Google Cloudes

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