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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Cognizant Technology Solutions Corporation    CTSH

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

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H-1 Billion Overhaul Pressures Outsourcing Firms and Their U.S. Clients

10/08/2020 | 05:45am EST

By Angus Loten

The Trump administration's overhaul of the H-1B visa program for highly skilled foreign tech workers will pressure the business model of companies that make low-cost tech workers from India and elsewhere available in the U.S.

The visas are especially prized by technology firms and information-technology departments at a range of corporations.

The restrictions, announced Tuesday, require U.S. employers to pay H-1B workers higher wages, narrow the types of credentials needed for foreign job applicants to qualify and shorten the length of visas for certain contract workers.

Trump administration officials said the changes were necessary to protect American workers, whom the administration believes are being undercut by foreign workers on H-1B visas who are paid lower wages to perform similar jobs.

Demand for the visas is high. U.S. employers last year filed a total of 201,011 applications for H-1B visas, up from 190,098 in 2018, according to U.S. Citizenship and Immigration Services. In both years, the maximum number of visas was capped at 65,000, along with 20,000 set aside for highly qualified applicants with advanced degrees in science, engineering and IT, among other fields. The caps remain the same for the current fiscal year.

German industrial company Robert Bosch GmbH said it uses the H-1B visa program for its U.S. operations. The company said it is "still evaluating the full impact of the latest changes," adding, "liberties such as the free movement of vetted people across borders is an integral part of creating a stable business environment."

While some corporations hire H-1B visa holders directly, others tap their labor through business services companies such as Accenture PLC, Cognizant Technology Solutions Corp. and Infosys Ltd. These business services firms will be directly affected by the revisions in the visa program, industry experts say.

Accenture and Infosys declined to comment. Cognizant didn't respond to a request for comment.

Outsourcing companies arbitrage the labor price between companies in India, the Philippines and other places with the cost of labor in the U.S., according to Brian Kropp, chief of research for consultant Gartner Inc.'s human resources practice. They are able to offer a relatively similar service at a more efficient cost, according to Mr. Kropp.

"This harms those organizations' abilities to arbitrage labor costs. There will be net fewer projects. And the projects that get done will be at a higher price," he said. "It's a drag on business." Lower-end projects such as routine software updates might be dropped, or executed by artificial intelligence agents instead of human labor, he said.

More profitable projects, such as "the next generation of technology, the next big AI model," will still make economic sense for outsourcing companies, Mr. Kropp said.

Access to a larger pool of skilled tech workers has helped U.S. firms drive innovation and growth, said Rob Atkinson, president of the Information Technology and Innovation Foundation. The board of the Washington-based tech policy think tank includes representatives from Amazon.com Inc., Microsoft Corp. and other large tech firms. "Trump to me is taking a sledgehammer to an issue that needs a scalpel," he said.

"Access to foreign talent is critical for the recovery and growth of all sectors of the U.S. economy," said Alvina Antar, chief information officer at cloud identity-management company Okta Inc.

Charlie Giancarlo, chief executive of Pure Storage Inc., which sells systems for storing corporate data, said workers on H-1B visas are a crucial part of the company's team. "Without their contributions, the American tech sector would not be at the cutting edge of innovation," he said.

Steve Yale-Loehr, a Cornell University Law School professor who specializes in immigration law, said companies might opt to avoid the costs associated with more frequent visa renewals or higher wages by establishing offices in other countries such as Canada, to access overseas tech talent.

"As the immigration regime in the United States over the last 3 1/2 years has gotten more restrictive, more companies are thinking about offshoring some positions, or research or manufacturing plants," Mr. Yale-Loehr said.

--Sara Castellanos, Jared Council and Steven Rosenbush contributed to this article.

Write to Angus Loten at angus.loten@wsj.com

(END) Dow Jones Newswires

10-08-20 0544ET

Stocks mentioned in the article
ChangeLast1st jan.
ACCENTURE PLC 1.13% 246.2 Delayed Quote.15.61%
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION 1.71% 77.2 Delayed Quote.22.38%
GARTNER INC 0.03% 152.61 Delayed Quote.-1.00%
INFOSYS LIMITED 3.31% 1139.85 Delayed Quote.55.90%
MICROSOFT CORPORATION -0.13% 210.11 Delayed Quote.33.41%
OKTA, INC. -2.07% 227.83 Delayed Quote.101.66%
PURE STORAGE, INC. 4.40% 19.69 Delayed Quote.10.23%
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Financials (USD)
Sales 2020 16 712 M - -
Net income 2020 1 542 M - -
Net cash 2020 1 815 M - -
P/E ratio 2020 26,8x
Yield 2020 1,12%
Capitalization 41 274 M 41 274 M -
EV / Sales 2020 2,36x
EV / Sales 2021 2,20x
Nbr of Employees 283 100
Free-Float 99,0%
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Cognizant Technology Solutions Corporation Technical Analysis Chart | CTSH | US1924461023 | MarketScreener
Technical analysis trends COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
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Income Statement Evolution
Consensus
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Mean consensus HOLD
Number of Analysts 29
Average target price 75,85 $
Last Close Price 77,20 $
Spread / Highest target 16,6%
Spread / Average Target -1,75%
Spread / Lowest Target -35,2%
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Managers
NameTitle
Brian J. Humphries Chief Executive Officer & Director
Michael Patsalos-Fox Chairman
Srinivasan Veeraraghavachary Chief Operating Officer
Jan Siegmund Chief Financial Officer
Gregory Lawrence Hyttenrauch President-Cognizant Digital Systems & Technology
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