By Rishika Sadam
(Reuters) - IT services provider Cognizant Technology Solutions (NASDAQ:CTSH) Corp agreed to appoint three new directors and return $3.4 billion to shareholders, bowing to pressure from activist investor Elliott Management.
Elliott disclosed a more than 4 percent stake in Cognizant in November and had urged the company to consider shaking up its board as one of several steps to boost shareholder value.
Cognizant's shares were up about 3 percent at $55.50 in premarket trading on Wednesday.
Cognizant said its board has approved a plan to return $3.4 billion to shareholders over the next two years through share buybacks and dividend.
Elliott and Cognizant would nominate one director each before the company's annual meeting in June, Cognizant said.
Cognizant will also appoint another new director before its 2018 annual meeting, subject to Elliott's consent.
Elliott, which is known to squeeze value out of companies it considers to be undervalued, said in November that Cognizant can achieve a value of $80–$90+ per share by the end of this year, representing an upside of 50-69 percent in just over a year.
As of Tuesday's close, Cognizant had a market cap of $32.63 billion.
Elliott had in November urged that Cognizant should consider a $2.5 billion share buyback, acquisitions and initiate a dividend, among other measures to boost its shares.
Cognizant, which is in the process of beefing up its digital services, said on Wednesday that the company is also intensifying its M&A efforts.
The company expects to start the repurchase of $1.5 billion worth of shares in the first quarter, initiate a cash dividend of 15 cents per share in the second quarter and repurchase $1.2 billion worth of shares during 2017 and 2018.
The company also forecast first-quarter revenue between $3.51 billion-$3.55 billion. Analysts on average were expecting revenue of $3.49 billion, according to Thomson Reuters I/B/E/S.
Cognizant expects adjusted profit for the first quarter to be at least 83 cents below estimates of 86 cents.
The company's net income fell to $416 million, or 68 cents per share, in the fourth quarter ended Dec. 31, from $424 million, or 69 cents per share, a year earlier.
Excluding items, the company earned 87 cents per share. Total revenue rose about 7 percent to $3.46 billion.
Analysts on an average had expected a profit of 86 cents per share and revenue of $3.49 billion for the fourth quarter, according to Thomson Reuters I/B/E/S.