Summary
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING INFORMATION SET FORTH IN "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE RESULTS DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS AND FROM THE RESULTS HISTORICALLY EXPERIENCED. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." REFERENCES IN THIS PROSPECTUS TO THE "COMMON STOCK" SHALL INCLUDE BOTH THE COMPANY'S CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "CLASS A COMMON STOCK"), AND THE COMPANY'S CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "CLASS B COMMON STOCK"). SEE "DESCRIPTION OF CAPITAL STOCK." THE COMPANY Cognizant Technology Solutions Corporation ("CTS" or the "Company") delivers high-quality, cost-effective, full life cycle solutions to complex software development and maintenance problems through the use of a seamless on-site and offshore project team. These solutions include application development and maintenance services, Year 2000 and Eurocurrency compliance services, testing and quality assurance services and re-hosting and re-engineering services. CTS provides world-class service to its customers through an integrated business model that combines a technical and account management team located on-site at the customer location and six development centers located in India.
Many companies today face increasing customer demands to improve service levels, lower costs and shorten time to market. At the same time, the pace of technology evolution has accelerated and companies are increasingly adopting emerging technologies in order to remain competitive. Although these emerging technologies offer the promise of faster, more functional and more flexible IT systems, their implementation presents major challenges and requires a large number of highly skilled individuals trained in many diverse technologies and architectures. Excess global demand for qualified IT professionals both to develop and implement new IT solutions and to maintain legacy systems has led some IT service providers to attempt to access the large talent pool in certain developing countries. However, although the use of offshore IT personnel can offer faster delivery of IT solutions, more flexible scheduling and lower costs, it also presents a number of challenges. The offshore implementation of software services requires highly developed project management skills to design, develop and deploy high-quality solutions in a timely and cost-effective manner. In addition, IT service providers must have the methodologies, processes and communications capabilities to successfully integrate offshore workforces with on-site personnel. Finally, service providers utilizing offshore workforces must continually recruit and manage their workforces to deliver solutions using emerging technologies.
To facilitate the cost-effective, on-time delivery of high-quality software development and maintenance solutions integrating on-site and offshore teams, the Company has recruited and trained approximately 1,000 programmers in India and put in place a well-developed facilities, technology and communications infrastructure. By basing its technical operations in India, the Company has access to a large pool of skilled, English-speaking IT professionals with which to service customers on a cost basis significantly lower than in developed countries. The Company has developed proprietary methodologies encapsulated in its QVIEW software engineering process to define and implement projects from the design, development and deployment stages through to ongoing application maintenance. The Company has also placed significant emphasis on recruiting and training its large workforce of highly-skilled professionals to ensure that they are versed in the Company's processes and methodologies. The Company's technical professionals have project experience and expertise across multiple architectures and technologies, including emerging technologies such as data warehousing, Internet/intranet applications and object-oriented development. The Company's extensive facilities, technology and communications infrastructure enables the seamless integration of its on-site and offshore workforces, allowing for rapid completion of projects, off-peak utilization of customers' technological resources and real-time access to project information.
The Company's objective is to be a leading provider of full life cycle software development and maintenance solutions utilizing an on-site and offshore model by pursuing several key strategies. The Company seeks to develop long-term strategic relationships with customers and business partners and to leverage these relationships into additional project opportunities. The Company has a team dedicated to developing new service offerings in emerging technologies and also collaborates with its customers to develop such offerings. The Company is committed to improving and enhancing its proprietary QVIEW software engineering process and other methodologies and toolsets. As the Company expands its customer base, it plans to open additional sales and marketing offices worldwide to enable it to sell to and support existing and prospective customers. Finally, the Company believes that opportunities exist in the fragmented IT services market to expand its business through strategic acquisitions to enable it to expand its geographic presence, enter new technology areas or expand capacity.
The Company markets and sells its services directly through its professional staff, senior management and direct sales personnel operating out of its New York City headquarters and its regional offices, as well as through independent sales agents. Historically, the Company has provided services principally to affiliated companies and has only recently begun to provide services to third-party customers. During 1997, the Company provided services to a total of 27 customers, including ACNielsen Corporation ("ACNielsen"), Aetna Life Insurance Company of Canada ("Aetna Canada"), CSC Consulting, Inc. ("CSC Consulting"), Cognizant, Douglas County, Nebraska, The Dun & Bradstreet Corporation, First Data Investor Services Group, Inc., GEAC Computer Systems, Inc. ("GEAC"), Manugistics, Inc., Northwest Airlines, Inc., Pacific Exchange, Inc. (the "Pacific Exchange"), Pilot Software, Inc. ("Pilot Software") and SQM, Inc. ("SQM").
The Company began its software development and maintenance services business in early 1994 as an in-house technology development center for The Dun & Bradstreet Corporation and its operating units. These operating units principally included A.C. Nielsen Company, Dun & Bradstreet Information Services, Dun & Bradstreet Software, Erisco, Inc. ("Erisco"), IMS International, Inc. ("IMS"), NCH Promotional Services, Inc., Nielsen Media Research, Inc. ("Nielsen Media Research"), The Reuben H. Donnelley Corporation ("RHDonnelley"), Pilot Software and Sales Technologies, Inc. ("Sales Technologies"), plus a majority interest in Gartner Group, Inc. ("Gartner Group"). In November 1996, the Company, ERISCO, IMS, Nielsen Media Research, Pilot Software, Sales Technologies and certain other entities, plus a majority interest in Gartner Group, were spun-off from The Dun & Bradstreet Corporation to form Cognizant, the parent of the Company. At that time, ACNielsen was separately spun-off from The Dun & Bradstreet Corporation and Dun & Bradstreet Software was sold to GEAC. In 1997, Cognizant sold Pilot Software to a third party. Also in 1997, the Company purchased the 24.0% minority interest in its Indian subsidiary from a third party resulting in such subsidiary becoming a wholly owned subsidiary of the Company. During 1996, the Company made a strategic decision to attract customers that were not affiliated with Cognizant or any of the former affiliates of The Dun & Bradstreet Corporation, and the Company has pursued this strategy along with continuing to service its existing customers. THE OFFERING Class A Common Stock Offered by the Company.......... 2,500,000 shares Class A Common Stock Offered by Cognizant............ 417,000 shares Common Stock to be Outstanding after the Offering(1): Class A Common Stock............................... 3,030,750 shares Class B Common Stock............................... 6,083,000 shares Total.......................................... 9,113,750 shares Use of Proceeds...................................... To repay intercompany balance owed to Cognizant, for capital expenditures and for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market Symbol............... CTSH (1) Excludes as of the date of this Prospectus (i) 520,325 shares of Class A Common Stock issuable upon the exercise of outstanding stock options granted under the Amended and Restated Cognizant Technology Solutions Key Employees' Stock Option Plan (the "Employee Option Plan") at a weighted average exercise price of $3.85 per share, (ii) 47,450 shares of Class A Common Stock issuable upon exercise of options granted under the Employee Option Plan effective upon the consummation of this offering to certain employees at an exercise price equal to the initial public offering price, (iii) 49,500 shares of Class A Common Stock issuable upon the exercise of outstanding stock options granted under the Amended and Restated Cognizant Technology Solutions Non-Employee Directors' Stock Option Plan (the "Directors' Option Plan") at a weighted average exercise price of $11.23 per share (assuming an exercise price of $12.00 for options which become effective at the time of this offering), (iv) 130,975 and 22,000 shares of Class A Common Stock reserved for future issuance pursuant to the Employee Option Plan and the Directors' Option Plan, respectively, and (v) 48,750 shares of Class A Common Stock issuable upon the exercise of outstanding options granted to Wijeyaraj Mahadeva, the Company's Chairman and Chief Executive Officer, at an exercise price of $6.92 per share. See "Capitalization," "Management--Stock Option Plans" and "Principal and Selling Stockholders."
SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)