News Alert September 30, 2016
Cognizant Technologies (CTSH 46.00) dropped 16% this morning on news that the company is conducting an internal investigation into whether some payments in India violated the U.S. Foreign Corrupt Practices Act. Cognizant’s investigation is in its beginning stages, so the severity and impact on earnings and financial position are unknown at this time.
Cognizant is attempting to be up front and transparent about the situation, but in doing so, the company has alarmed investors more than necessary. The company reported that its board of directors’ audit committee and outside lawyers are focusing on a “small number of company-owned facilities.”
Cognizant also announced that it has appointed a new president, Rajeev Mehta, the former chief executive officer of the company’s IT services division. He replaces Gordon Coburn who resigned earlier this week.
I advise holding your CTSH shares until additional information is revealed. The investigation appears to be much less serious than initial reactions indicate. I recommend holding off new purchases until more details surface.