Cognizant’s TriZetto acquisition
Previously in the series, we discussed Cognizant’s (CTSH) performance in 3Q15. This is the third quarter that the company increased the guidance for full-year fiscal 2015. Let’s look at the factors that played a substantial role in achieving this growth.
In 2014, Cognizant acquired TriZetto—a healthcare IT service provider—for $2.7 billion. At the time of acquisition, both of the companies stated that they expect ~$1.5 billion worth of revenue synergies to happen over the next five years.
According to the HfS Blueprint 2015 report, and as the above graph shows, Cognizant appeared in the “Winner’s Circle.” It was ahead of its peers Accenture (ACN) and EXL in the healthcare space. Wipro (WIT), Dell, and HCL were in the “High Performers” category.
Acquiring TriZetto boosted the healthcare segment’s growth. It’s the second-highest contributor to the company’s overall revenue after the Financial Services segment. Healthcare contributed ~30% towards the overall revenue.
What segment grew the most?
Cognizant’s Financial Services segment is its biggest business. It contributed ~40% towards its overall revenue in 3Q15. It grew 18.6% on a YoY (year-over-year) basis to $1.3 billion in 3Q15. Cognizant’s Healthcare segment grew more than 43.3% to $939.2 million in 3Q15 due to TriZetto. It expanded the company’s offerings in the healthcare space. Cognizant’s Manufacturing, Retail, and Logistics segment grew 13.7% to $606.2 million.
North America contributed maximum growth
Since 2010, Cognizant has made 16 acquisitions, primarily to hone its domain expertise and expand geographically. Although two-thirds of Cognizant’s employees are based in India (EPI), it’s North America that contributed ~79% towards the company’s overall revenue in 3Q15. Cognizant reported growth in all of its geographies. North America and the rest of the world reported 26.7% and 31% growth, respectively.
Healthy growth was posted by the company’s key healthcare vertical as well as North America. These were the key factors that impacted Cognizant’s revenue growth in 3Q15.
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