Knowledge Partners

 Economic Laws Practice       Avalon Consulting

 Technloogy Holdings   

December 25, 2003

Kumar Mahadeva's exit from Cognizant and heavy stock sales raises eyebrows

The retirement announcement of Cognizant Technology SolutionsÂ’ Chairman & CEO Kumar Mahadeva has caught stock market analysts and industry players (including Cognizant employees) by surprise, according to reports in Business Standard and Economic Times

"The Indian software services industry is intrigued if not downright puzzled by the abrupt exit of Cognizant's founder, chairman and CEO, Kumar Mahadeva," the ET report said. According to the ET report, Mahadeva had sold around $57.6 million worth of stock options and individual holdings from March 2000 till December 3, 2003.

"Analysis of how the New Jersey-based Mahadeva has been consistently selling his stock in the market would reveal that it is a carefully managed exit. In the last six months, Mahadeva sold a whopping $25 million of his stock, filings with US Securities and Exchange Commission show," the BS report said. "Although Mahadeva is known to de-risk his stock holding in Cognizant by selling a reasonable number of shares every quarter, the last two quarters saw some unusually high volumes. He sold about $25 million (roughly Rs.110 crore) worth of shares-about $15 million in the September-ended quarter and another $10 million in the (current) quarter till date," BS said. The BS report added that Mahadeva's remaining $50 million in Cognizant stock options is an indication of his faith in the abilities of managers who are to succeed him. The report did not mention whether the Mahadeva's remaining options were vested.