The Hindu Business Line : Cognizant buys US firm for $19 m

COGNIZANT Technology Solutions, a provider of IT services, today said that it has acquired the assets of Fathom Solutions, a Chicago-based consulting company, for $19 million in cash and stock in initial consideration, plus contingent consideration of up to $16 million payable in cash two years from closing.

Fathom provides solutions to the telecom and financial services industries. Two-thirds of its revenues come from the telecom arena. Details of its revenues were not immediately available.

A statement from Cognizant said that Fathom is a privately held consulting company founded in 1999 by former Accenture executives.

It added that Fathom has a track record of high customer retention, with repeat business accounting for over 90 per cent of revenues in the past two years.

According to the communiqué, "Fathom's clients include major industry players in telecommunications and financial services, and the company also enjoys low attrition amongst a staff of 120 employees."

So far, the financial services industry has contributed a big chunk to Cognizant's revenues.

For the quarter ended December 2004, services to that sector accounted for 50 per cent of revenues.

Retail manufacturing and logistics accounted for 19 per cent while healthcare contributed 20 per cent with information services pitching in with six per cent.

The acquisition is significant in the context of other players in the industry tapping telecom as a cash cow.

For instance, Infosys, which announced results last week, saw 18.5 per cent of revenues coming from the telecom vertical for the year ended March 2005 compared to 16.6 per cent in the previous year.

Mr Lakshmi Narayanan, President and CEO of Cognizant, was quoted as saying: "Fathom's consulting expertise will help Cognizant build partnerships with telecommunications services customers. In addition, Fathom's IT strategy capabilities will provide Cognizant with the opportunity to engage earlier in a customer's decision cycle."

Fathom is the biggest acquisition that Cognizant has made yet. Earlier, Cognizant had acquired the American Express account from Silverline Technologies for approximately $10 million.

Other acquisitions like Infopulse in The Netherlands, Ygyan in Pune, and ACES in the US have all been for considerations of under $5 million each.

Cognizant has labelled all the acquisitions it has made so far as "tuck-under" acquisitions - in other words, small and manageable.

"We consider the Fathom acquisition too to be a tuck-under acquisition that is consistent with our acquisition strategy. We will continue to look for companies to acquire that are of a manageable size and meet our acquisition criteria," said Mr Lakshmi Narayanan.

A spokesperson for the company said that the company had no plans to relocate any Fathom employees.

"We expect to retain a presence in downtown Chicago for the Fathom operations."

Mr Jeff Lee, CEO and co-founder of Fathom, will join Cognizant as Managing Director of Telecom Services for North America, he added.

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