Cognizant to cut 7,000 jobs; to exit content moderation business. BSE Sensex today hit all-time high. Yes Bank receives $1.2bn binding investment offer. Share price surges c. 39%. Federal Reserve cuts rate for the third time in 2019.
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Global IT services company, Cognizant Technology today reported 4.19% YoY rise in net profit at $497mn vs $477mn profit last year.
We Would Have to Let You Go: In the post-earnings conference call, the company forecasted full-year 2019 revenue growth between 4.6% and 4.9% from an earlier outlook of growth between 3.9% and 4.9%. To this effect, and to offset a decline in spending by financial companies on its IT services, Cognizant said that it would be laying off 10,000-12,000 mid-to-senior employees from their current roles. It also said that it would reskill and redeploy about 5000 of those impacted by this move. Reuters
The number of employees as of September 30, 2019 stood at approximately 289,900. ET ITeS
More Bad News: Cognizant is also set to exit some of its content moderation business, including that for Facebook, resulting in about 6,000 job cuts. The news comes months after a report by The Verge revealed that moderators at the company's Phoenix site were being diagnosed with post-traumatic stress syndrome after being subjected to a daily onslaught of graphic and disturbing images.
Cognizant had hired thousands of moderators around the world to remove hate speech, terrorism, and other inappropriate content from platforms including Facebook, Google, and Twitter. The Verge
How Does Reliance Do It?: The ongoing economic slowdown has dragged down average industrial growth rates in the country from 12-13% over the past two years to 3-5% today. Yet, amidst the gloomy outlook, one company has managed to stand apart as a gleaming ray of light. Reliance Retail Ltd (RRL) reported its highest-ever revenue and operating profit in the July-September quarter even as Reliance Industries Ltd (RIL) prepares to launch an e-commerce venture to take on the likes of Amazon and Flipkart.
A key to RRL's remarkable resilience has been its emphasis on tapping non-metros in India. Store expansion in small cities and towns has given the company crucial (and lucrative) first-mover advantage in these areas.
As Gaurav Jain, Head of Strategy and Business Development at Reliance Retail, told Livemint: "Stores in tier II, III and IV towns are where customers are getting a first-hand experience of getting into a modern trade shopping environment. Though these are in markets like Sikar (Rajasthan) or Gulbarga (Karnataka), the number of tickets and footfalls and some of the key metrics pretty much match that of a city like Mumbai."
An additional point is that the first-mover advantage means RRL's leases and rents aren't as hefty as they would be in competitive areas, thus lowering costs. Livemint
Content is King: Moving on from retail to another burgeoning vertical of RIL - media. Reliance Jio has disrupted the telecom sector and is already India's largest telecom operator. With the aggressive commercialisation plans for JioFiber - the company's home broadband service - RIL is looking to lay the groundwork for its "triple play strategy". This involves offering consumers voice and data services through smartphones, high-speed home internet, and a host of digital services and content.
Jyoti Deshpande, President - Media and Entertainment at RIL, told Fortune India, “Our mandate is to consolidate the media and entertainment business, grow the sector and use it as a fuel to grow the distribution business multifold.” And to achieve this, RIL will be actively investing in content to expand its reach. Fortune India
Twitter Sweet Symphony: On Wednesday, Twitter was awash with a tweet burst by the company's CEO, Jack Dorsey, when he announced that the platform will stop accepting political advertising globally. Twitter
In his long tweet thread, Dorsey said "A political message earns reach when people decide to follow an account or retweet. Paying for reach removes that decision, forcing highly optimized and targeted political messages on people. We believe this decision should not be compromised by money."
Are You On Your Mark?: Dorsey's announcement comes amidst intense scrutiny of Silicon Valley's treatment of falsehoods and fake news. Recently, Facebook CEO Mark Zuckerberg was taken to task by a US Congressional Committee over his refusal to fact-check political ads on the platform. Committee members said this would proliferate lies and mislead voters, but Zuckerberg argued that a fact-checking process would be open to bias, violate free speech rights, and deny voters the chance to judge for themselves the validity of a politician's claims. Guardian
Twitter's decision now puts the ball in Facebook's court. Zuckerberg reacted to the news by reiterating his company's stance on the matter. He said, "In a democracy, I don't think it's right for private companies to censor politicians or the news," before adding that Facebook would "continue" to evaluate whether it is beneficial to permit political ads. CNN Business
It's A Cut: It was widely expected and it's the third time this year. The Federal Open Market Committee (FOMC) lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75% on Wednesday. The easing comes as US growth numbers decrease and the global economic outlook becomes ever-so-gloomy.
The Fed's decision was received positively by markets. US equities rose, as did Asian equity markets.
Significantly, the Federal Reserve indicated further rate cuts are presently off the table. In its statement, the FOMC removed a key phrase - that it was committed to “act as appropriate to sustain the expansion” - that had been incorporated into official language since June as a way to tease the impending monetary easing. CNBC
In its place was more moderate language. “The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate,” the statement said.
Future decisions, the Fed explained, would depend on future economic numbers, news on trade tensions between US and China, and movement of inflation, which continues to run below the 2% objective.
The Central Bank also indicated that only if inflation goes past the target level will there be a case for a rate hike. This means even if a wholesome trade deal is reached between Washington and Beijing, the rates might not be increased. Such a "lower for longer" stance is particularly good news for emerging market assets - from currencies to equities. Moneycontrol
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