Key takeaways from Cognizants Q1 Earnings call:

In the first quarter, we exceeded our internal forecast, generating $460.3 million in revenue, which represents an increase of 61% from the first quarter of 2006.

We also increased our number of active clients by 25 in the quarter, including five of which are consider strategic. Meaning, these clients have the potential to generate between $5 million and $40 million or more in annual revenue for Cognizant over the long term.

We increased our headcounts by close to 12% sequentially with a net addition of approximately 4,600 employees around the world.During the quarter, our annualized employee attrition declined to 15% from 17% in Q4.

As we look forward to the rest of 2007 based on our strong demand pipeline, we've increased our revenue guidance for the full year by $30 million to $2.07 billion.

our strong performance continues to be driven by the strategic investments we've made in the business over the last several quarters. Specifically, we continued to expand and globalize our business and invest in attracting and retaining the best talent around the world, deepen our technology expertise and horizontal lines of service ahead of the curve, cultivate market leading domain expertise in each of the industry segments we serve, and build a strong brand for Cognizant.

Our five strategic clients during the quarter are sand industries, banking and financial services, healthcare and retail and geographies with key strategic wins in the United Kingdom and US, and our pipeline of business across the company is strong. We have also been benefiting from a trend towards the unbundling of large deals in the global IT services market. Customers increasingly up for unbundled deals with the goal of selecting best-of-breed service providers based on their particular expertise across service areas ranging from application outsourcing and IT consulting to infrastructure management and business process outsourcing.This trend plays to the strength of our business model compounding the value of our investments both in our vertical industry expertise and the expanding range of our horizontal service offerings.

Our financial services vertical, which include our banking, insurance and transaction processing practices, our practice areas grew 7% sequentially from a strong fourth quarter and 58% year-over-year. Performance in the vertical was driven by growth both from many of our larger banking and financial services' customers and also from our well-diversified portfolio of BFSI customers at various stages of offshore adoption across our key geographic markets.

Our first quarter results were also driven by growth across key horizontal service offerings including ERP testing, IT infrastructure services and BPO.ERP is an area in which our strategic investments have been driving significant growth over the last several quarters. As we have said in the past, we enjoyed a strong relationship with SAP and had cultivated a deep knowledge of the next generation NetWeaver platform, at our NetWeaver Test Center.

Since we acquired AMS Solutions last year, we have seen significant demand for our IT infrastructure services offering, particularly our integrated onshore/offshore Network Operation Center, which went live during the first quarter in response to strong demand from our clients for a truly global infrastructure management delivery model.

Business process outsourcing is another service area, where we saw substantial growth in the first quarter. Today, we are seeing robust BPO activity across a broad spectrum of sectors demonstrating how we have coupled Cognizant's market leadership across our industry vertical businesses with our vertically focused BPO service offerings to drive new revenue opportunity for the company.We have grown BPO strengths to approximately 1,200 associates, including doctors, lawyers, statisticians, chartered accountants and MBAs through a BPO strategy focused on integrating our custom offshore process, support model with technology and domain expertise.

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Prashanth Rai