Ladies and gentlemen, thank you for standing by. And welcome to the Cognizant Technology Solutions Fourth Quarter and Year-End 2008 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the conference over to David Nelson, Vice President of Investor Relations at Cognizant. Please go ahead, sir.

Thank you and good morning, everyone. By now you should have received a copy of the company's quarter four and year-end 2008 earnings release. If you have not a copy is available on our website cognizant.com. The speakers we have on today's call are Francisco D'Souza, President and Chief Executive Officer; and Gordon Coburn, Chief Financial and Operating Officer of Cognizant Technology Solutions. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. I would now like to turn the call over to Francisco D'Souza. Francisco, please go ahead.

Thanks David. And good morning, everyone. Thank you for joining Gordon and me today for Cognizant's fourth quarter and full year 2008 earnings call. I would like to start my comments with an overview of our results and then I'll discuss why Cognizant has continued to demonstrate industry leading growth. I will also talk about our view of the current economic environment and how we are responding in order to emerge in a strong position. And finally, I'll discuss our guidance for the quarter and the full year of 2009. We are pleased to report strong revenue growth this quarter, which exceeded our guidance despite the turbulent economic environment and the currency headwinds. In the fourth quarter we generated $753 million in revenue, versus our previous guidance of at least $746.7 million. This is an increase of 2.5% versus the third quarter of 2008, and 26% over the fourth quarter of 2007. Revenue for the full year was in excess of $2.8 billion or 32% over the prior year. Our continued industry leading growth during the year validates the resilience of our business model and our strategy. Fundamental to our strategy is the ongoing commitment to invest for growth in the business. Our 2008 results reflect the effectiveness of this approach of reinvestment. During the full year of 2008, a number of key areas in which we have been investing showed significant growth and are well poised for continued growth as we go into 2009. Specifically service offerings, like IT infrastructure services, and business and knowledge process outsourcing as well as geographies like Europe and Asia, which have been key areas of focused investment, grew well in 2008 and are poised for additional growth. I will cover some of these growth areas in more details in a moment. The strategy…

Thank you, Francisco. And good morning to everyone. I would like to provide some additional information on our 2008 results, and then discuss our financial expectations for the first quarter as well as full year of 2009. Revenue for the fourth quarter exceeded our current guidance due to better than anticipated performance by several of our segments. Quarterly revenue grew 2.5% sequentially and 26% year-over-year. Full year revenue was up 32%. Our fourth quarter GAAP and non-GAAP diluted EPS includes the negative impact of $0.03 in non-operating foreign exchange currency losses. This I will discuss later in more detail. As a reminder, our most recent guidance for the fourth quarter and full year 2008, had specifically excluded any such losses during the fourth quarter. During the fourth quarter, our financial services segment, which includes our practices in insurance, banking and transaction processing grew by almost $55 million year-over-year and represented 45% of revenue for the quarter. Healthcare grew over $44 million and represented 25% of revenues. Retail manufacturing and logistics grew by almost $37 million, representing approximately 16% of revenues for the quarter. The remaining 13% of our revenues came primarily from other service oriented industries of communications, media and new technology, which grew by almost $17 million, compared to Q4 of 2007. For the full year 2008, financial services grew 28%, healthcare grew 36%, retail manufacturing logistics grew 38% and our other segment grew 29%. For the quarter application management represented 55% of revenues and application development was 45%. On a quarterly sequential basis, application management grew 5.5% and development declined by almost 1%. We believe this trend is reflective of the overall macroeconomic environment, whereby customers are reducing discretionary spend in areas like development, while increasing the amounts of application management that they outsource in order to reduce…

Thank you. (Operator Instructions). Your first question comes from the line of Ed Caso with Wachovia.

Good morning. Two quick questions, I know you didn't do anything against the new $50 million, authorization, but was there any money left to buyback stock in the fourth quarter.

The original $200 million authorization had expired at the beginning of the quarter, and we penetrated new authorization late in the quarter. So we had a window of like two days, where we could have washed it very end of the quarter before black out.

The other question is can you talk a little bit about what you're doing from a credit risk perspective, have you added resources, do you have watch list? And may be talk about your reserving policy.

Sure. We've not added resources, clearly we are watching much more carefully, two buckets in particular, one is small clients, and then the second is larger clients, that have had some economic challenges obviously we had a couple of bankruptcies last year. In our bad debt reserve, it includes a sort of discrete... just the amount for potential future bankruptcies. So we've taken a conservative approach and we're also watching very carefully and obviously the fact that DSO improved is testament that we are being fairly aggressive and making sure that we collect the amounts future as fairly quickly.

Thank you.

Thank you. Your next question comes from the line of George Price at Stifel Nicolaus. George Price - Stifel Nicolaus & Company, Inc.: Hi. Thanks very much. Nice numbers could end the week on that now even if it is the Friday, the 13th.

Yes, we're very worried about doing this on Friday, the 13th. George Price - Stifel Nicolaus & Company, Inc.: Okay, I can imagine in this market. I wondered, one question wanted just see if we can get a little bit of color may be on your assumptions around volume in the guidance that is behind the guidance on volumes, pricing, currency, you will to have currency for the quarter, but may be how you're thinking of it as you go through the year, utilization, hiring and head count that sort of thing, if you can give us a little granularity on to what's behind the guidance, that will be great.

Sure. Let me talk about a couple and then Francisco will have the others. Currency, as I mentioned, yes have been just stated where it is right now, we have $4 million headwind for Q1, that's built into to the numbers. Any foreign exchange gains or losses below the line, the non-operating stuff, the guidance assumes zero. So rather than try to project that volatility, that number will be what it is. But, we've not assumed any... for operating income we've not assumed any further movements on the currency from where it is today. As we mentioned, a good... we said $350 million of hedges, which hedged the portion of our India based rupee expenses, which should take some of the volatility out on the expense side but obviously there's still if the European countries move this say their exposure opportunity on the revenue side. On hiring, we stopped giving guidance a while ago on that. The big chunk of hiring that will happen in the first half of the year is the students who graduated last year. As we discussed on our prior calls, we are honoring all those offers. However, we did push and started to take back. So a lot of them starting this year and since last year and a good chunk of those starts will be in the second quarter. And then the lateral hire, which is probably can turn on and off quickly, that will depend on revenue and especially in this market, there is a very robust ability to do lateral hiring if we needed. But we are not projecting what that hire will be till we understand where revenue eventually settles down. So when you think about utilization throughout the year on a full year basis, I would expect it to go up some more, but if you look at utilization including trainee's jobs and lumpiness, because we have a big improvement that is coming in the second quarter. Franc, do you want to talk a little bit... I think you talked earlier a little bit about pricing that, I don't know if you want to mention anymore on that?

Yes, I'd just reiterate what I said during my comments on pricing. During the fourth quarter, in constant currency terms, pricing remained flat in Q3. We are seeing some softness in pricing and... but we're making every effort to maintain pricing and to offset any declines in pricing through some creative means working with clients around, volumes and incentive brokerage for volumes, additional values, those kinds of things. As we look forward, a big part of what happens with pricing is going to depend on the competitive environment. So we're watching that very carefully. As we built into the guidance, we still think that we've got the leverage that we can hold to meet our... to provide margins on a non-GAAP basis within our target range. So it is one... pricing is one of the variables out there, but we think we've built it into the range of possibilities within our guidance. George Price - Stifel Nicolaus & Company, Inc.: If I could kind of push on that though. I mean, what, in at least 10%. I mean, what's the, what kind of magnitude are you assuming that's got to be a pricing assumption in there, can you share something on that with us?

Yes, we're assuming in the at least 10% that there is a very small if any decline in pricing. So we are assuming that there might be some pricing pressure, but on an average across the book of business, that will be relatively small. George Price - Stifel Nicolaus & Company, Inc.: And, do you think... do you feel given the environment and where we stand at this point in the cycle that, that's conservative enough?

I think so, yes. I think based on what we're seeing, like I said, we are seeing some pricing pressures. So I don't want to say that we're not, but we think across the book of business that we can manage it to a very modest level and we've build that into our guidance. George Price - Stifel Nicolaus & Company, Inc.: Okay. If I could ask one more on healthcare, on a vertical basis you talked about BFSI in pretty good detail. But I wanted to may be get a sense on healthcare, you had some pressure towards the end of last year on the payer side, does that seem to be over and done with, have you seen the worse there, what do you think about that vertical kind of going forward and is there anything in what's happening in the stimulus discussions that you guys might ultimately see some benefit with? Thank you.

On the stimulus side, a lot of those dollars are going towards the providers in the hospitals and so forth. So we may pick up some benefit from stimulus but we aren't generally excited about that. When we look at 2008, the place where we've built in significant weakness is in the financial services segment, particularly in Q1. Q1 financial services will be down maturely, outside of that we don't expect any other segments to have any mature declines. So the big headwind is financial services, when you look at from a segment standpoint. George Price - Stifel Nicolaus & Company, Inc.: Great. Thank you.

Your next question comes from the line of Julio Quinteros with Goldman Sachs.

Hi, guys. Just trying to go back to just one or two quick comments just to reconcile a couple of the things you are just saying. First of all with the pricing commentary that you just made for fiscal, it almost feels like you've given yourself really no room if pricing would come down relative to here at least about 10% revenue guidance, can you just walk us through what you meant by that, because it almost sounded like you weren't assuming too much there, may be it's just a more factor of how pricing trends it's across the entire portfolio but just want to make sure I understand that.

I think, that's the key thing Julio, when you look at across the whole portfolio, you would see a virtue being material, you're not just seeing very widespread pricing pressure, and we're not seeing widespread are there cases of softness yes, but it's not, not widespread to the level where it's material.

Okay. And then, one of your--

And as Francisco said we've built some assumptions into our guidance for softness so, yes we think we have about great level from what we're seeing.

The other thing that I should say but worth stating exclusively is that as we though about our 10%, we've built a level of conservatism into the 10% forecast just because of the economic uncertainty out there. So within the 10%, obviously, from an operating level, or from an operating standpoint, we're pushing the group, the teams, and we think that there is an opportunity to do more than that. But obviously, we're not ready to commit to that as yet. Some of that will be through additional volume growth some of it may be impacted by pricing. But we think that there is enough of a cushion there and that we feel comfortable with the 10% number.

So this room for things go wrong you've built in that, which in this economic environment, yes just seems to go.

That's right. And then the guidance also does include this acquisition, but it sound like there was only 30 employees, is that right?

Yes, it's that's all.

Okay, got it. And then I'm just thinking about the some of your clients on VSSI side, and TARP exposure taking, having taken some TARP money there, what are you guys hearing there in terms of political pressure to do anything about using offshore, anything you can talk but to that extent, any sort of political sort of how that you might have on some of the bank lines that have TARP exposure using offshore abundance?

Yes, obviously, we need to keep an eye on it, based on what's in the legislation right now. It would not impact us where there are some ideas kicked around, there was more with the banks directly employing reasonable holders. We need to keep an eye on it, but at this point, we have seen, I think legislation that directly impacts us.

And nothing from your clients that as you were incrementally that this could be probably down the road?

Our clients need to be competitive on a global pipeline, and so they need to have a cost structure where they are going to be able to compete with banks around the world. I think everyone is wise enough to realize that no one can adjust with them officially and inflate the cost structure. So we've not seen any change in behavior from our customers?

Got it, okay. And then finally, just thinking about the ERP environment specifically, obviously with the acquisition you guys have and today, it sounds like Oracle is a still a focus and I'm assuming SAP is still a pretty big focus for you. Talk a little bit about the ERP environment, what you guys are seeing there, and when can we expect to see projects really comeback on the ERP side, what type of activity around development work around should we expect to see and when we expect to see that?

I'll start by saying that our ERP business is not directly tied to ... only a portion of our ERP business is related to implementation of new systems or new licenses that clients buy. A lot of our ERP revenue is maintenance of existing systems, of existing ERP systems or upgrades of existing installation. So that portion of the business I would say remains robust given the economic environment, obviously we're seeing the impact of the broad economy even on that sector. But I don't think that, that segment of the ERP businesses is exposed more or it impacted more by the economic environment. In terms of the portion of our business, which is a relatively small portion of our overall ERP business that's related to a new license sales or new implementations of systems, they are clearly... we're seeing a little bit of a slowdown some lumpiness in that sector of the business. But frankly, even there what we're seeing is that as the clients push to consolidate systems and as clients push to rationalize their footprint and focus more on total cost of ownership. Very often that involves bringing in a new system a new ERP system to take out a number of all legacy applications. And so we're still seeing reasonable growth in that part of the business and reasonable activity in that part of the business. But I think that there, we are somewhat tied to the new license revenues from these firms. So that is like I said that's the relatively smaller piece of our overall ERP business, so as a whole the ERP business is fine.

And just a close up on just the last question, for me just something you are, as you are talking as kind of bringing to my mind just the question of, even within your apps maintenance work, I think your apps maintenance work is roughly 50-50 mix, the apps maintenance work that you guys have, what percentage of that is recurring, if you kind were to sort of think about it from that perspective, so it sounds like just it based on what you are saying it sound like a majority of you are out saying this is going to end up being recurring, but just trying to get a sense for whether there is any risk on just sort of push back on, any work on the AM side?

You have to think about recurring in couple of different ways, there is... we generally don't tend to have long-term contracts for perhaps, even perhaps maintenance work. However, most of the work that we do on app maintenance is not really discretionary from a client standpoint. So it is de facto recurring in that unless the client somehow is going to shutdown the system or decommission the system or stop that line of business. They have to keep the systems up and running and so we tend to be the logical provider to that. Now, what we saw in the, in particular in financial services, and what we're seeing in the first quarter is that some apps are actually being decommissioned, where particularly in merger situations where you've got duplicate systems, clients are decommissioning one of the duplicate system. And if we are happen to be maintaining that it creates an impact on our revenue. But that sort of a one-time thing that happens during an M&A situation and often times even in those scenarios, we can benefit a little bit because there is often work to be done to merge the two systems together to migrate data and so on and so forth. So there is the temporary project to do that. So in general, apps maintenance is recurring from an operational standpoint, the one caveat to that is in M&A situation there, there can be situations, the systems actually get decommissioned.

Okay, all right. Good luck, guys.

Thanks.

Your next question comes from the line of Rod Bourgeois with Bernstein.

Yes, guys. I wanted to ask a little bit about the assumptions in your volume growth guidance. And I know it may be difficult to answer this. But you can give us any insight, how much buffer is in your guidance to account for potential project cancellations and spending cut types of prices that could occur as some clients may get financial distract over the next year. Can you give us as an idea of how much buffer you're putting into your guidance to account for those scenarios?

We are not specifically quantifying it. But as Francisco mentioned, the goals for the field have are materially above the at least 10% guidance precise. I think you're right Rod, there will be surprises. So we've based in our guidance that there will be negative surprises.

All right, got it. And so, your people internally are on the hook for something that's at least in the surprises are not going to be an excuse. I mean, that's a number you guys have to meet internally to hit your incentives?

To hit the incentives, we would have to deliver something more than 10%, yes.

All right, good. And then on the pricing front, and we've talked about the effective pricing on revenues I think you guys have addressed that. But, on the margin front, can you give us an idea and I know this is tough to answer because the reality is, when rate per hour changes, you can creatively change the contract structure to mitigate the effect on margins. But, can you give us an idea of how much price decline we'd have to occur for you to no longer be able to meet the low end of your margin target range, just to give people an idea of how bad pricing need to be for it to really affect your margin target.

I don't want to say the specific numbers. But, the answer is, it would have to be significant, just remember from a price you have already heard us it has to be across a lot of customers. So if you have couple of customers where you have some softness, it's not going move the needle a whole lot. And also remember, we have and continued to heavily over invest in the business. So we still have the functional levers that we can pull. So things would have to get pretty bad on pricing for us to be outside of our 19% to 20% range.

That being in the 10% range or being in 5% range?

As I quantified it, it's specifically about... it would have to be immaterial, a fundamental change in the industry and certainly not the kind of thing that we or I believe others currently think today.

You must be competing against six or seven competitors, so you need several of those guys to really get desperate with pricing to have a big affect is that the way to look at it?

Yes, and even within that, we would need to see two or three of them who we see most often to become irrational on pricing and what I have said I think they're smart enough to really that's not a prudent thing to do.

You've not seen not yet even in the financial services vertical or people would become consistently irrational?

I would say very specifically not from a vendor standpoint or financial services or clients looking for ways to be more efficient as Francisco mentioned, which causes some softness that you tried to offset by reducing their cost, by moving more offshore et cetera, et cetera. Clearly there is some softness in financial services, but I would not characterize it as irrational.

Got it, all right, great. And then one of the thing on the margin front, you exceeded your margin target range for '09 and you were clearly helped by the rupee and some cost disciplines, in 2008 you are able to do that? In 2009, as you look forward, is your implied margin guidance at the lower end of the target range to account for the potential to put some pricing pressure or you just doing your normal conservatives in the margin that you are assuming with your EPS guidance for '09?

No, I think it's real that I would not expect just unless revenue growth is a lot above what we are expecting, because the bigger issue I have is revenue growth as far as, I still want to invest in the long-term opportunities. So, I think it's less driven by prices, more driven by revenue growth most likely be slower than it was in 2008. But we don't want to make short-term investment decisions. So to be very clear our guidance assumes 19.5%, I would strongly encourage people not to be above that.

All right--

On GAAP basis.

Okay. The slower revenue growth affects you because you need to invest to grow as you move into the next year, but also, is there a less kind of G&A leverage and benefit along those lines, what benefit from pressure hiring and all of those factors that have helped you in the past, is that the other part of it?

There is some of that, if you think about 2008, we took utilization up significantly, you will tick it up some more in 2009, that is specially with growth being a little bit slower and commitment to honor in the 2008 offers that we made. You don't get the same whole year jump in utilization. And as Francisco mentioned, where companies really can differentiate themselves is in tough times still making long-term decisions and we're going to do that. We're not going to make short-term decisions.

Great, thanks guys.

Your next question comes from the line of, Ashwin Shirvaikar with Citigroup.

Ashwin, this will be the last call just because we've starting to run overtime. But now please go ahead.

Sure. Well, good quarter and overall guidance seems just what investor has expected. So, congratulations. I wanted to ask you about specifics within the BFSI practice. Can you remind us what is the split-off banking insurance and transaction processing? And, will you see different trends within that split?

Sure. The core... the insurance is about 15 of the 45 points, and the other 30 is a combination of course core financial services plus transaction processing. When I... let me focus on what you want, when I look at Q1, the weakness that's driving the sequential decline is in that core financial. So essentially that's 30% of revenue. The insurance for Q1 looks fine.

Okay. And, in situations, where you have agreed with clients for sort of higher volume in return for a lower price is there any kind of a volume commitment that they'll give you, X volume in 2Q and they will hire in 3Q and so on, so you can actually bank on that?

Let's talk about spending down this volumes, and this is nothing new. We're more than happy if someone wants to dramatically increase their volume, given the price that reflects the efficiencies that we can gain from a higher volume. Now, I can plan it one or two ways, Ashwin. It could be either of the two scenarios, it can be what set out that do whatever revenue you want, and as you get bigger, you will get a lower price because we will share the efficiencies we can gain, or it can be we'll commit up front and therefore they can get that benefits and price of the efficiencies day one. But, the fundamental change happening in the market of large customers are consolidated towards fewer vendors and is a wider range of services occurring. And those two things together translate with their to be the opportunity for much larger relationships. And, quite honestly the larger the relationship, the more efficiencies we have and we're more than happy to share those efficiencies. That's ... we wanted to do what's right for the customer.

Okay. That's what I was looking for. Thank you.

Thank you. Presenters, I return the conference to you for closing remark.

Thank you very much. So, thanks to every one for joining us today. Let me just conclude by saying that we are pleased with our financial and operating performance during the fourth quarter and full year of 2008. We maintained industry leading growth. We exceeded our guidance, our latest guidance, despite the current economic environment. We think as Gordon said that we have a tremendous opportunity ahead of us to maintain a position of leadership. So, what we are doing is we are managing the business prudently. We are making important investments in our strategic initiatives. We've got good confidence in our ability to execute on the unique opportunity in front of us in 2009. Our plan is to continue to grow, to assume a leadership stance, to stay the course with our growth strategy and our business model, and to be well positioned to be one of the significant winners when the economy recovers. We look forward to talking to you again next quarter. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.