Trump’s Visa Changes Seen Boosting Canada’s CGI Over Indian Foesby
CEO views policy shift as ‘tailwind,’ not cost increase
CGI says it’s well positioned for Trumps’s focus on defense
Changes from the Trump administration on work visas will be a boost to Canadian information technology provider CGI Group Inc., a major U.S. government contractor that briefly gained notoriety a few years ago for its role in the Obamacare rollout.
The Montreal-based company, which employs more than 11,000 people south of the border, said it’s less exposed than most rivals to the expected overhaul of the visa program in the works because it’s been hiring locally for years.
“There’s no expectation of any increased cost there -- in fact it’s probably a tailwind,” Chief Executive Officer George Schindler said on a conference call to discuss quarterly earnings on Wednesday. “It plays right into our model.”
CGI shares rose 1.6 percent to C$63.55 at 11:39 a.m. Wednesday in Toronto. That almost made up for the stock’s losses since the Nov. 8 election.
President Donald Trump suspended visa issuance in seven majority-Muslim countries last week, and his team is drafting an executive order aimed at overhauling the work-visa programs, which technology companies depend on to hire tens of thousands of employees every year.
According to Myvisajobs.com, which compiles data on applications for H-1B visas, Indian rivals Infosys Ltd., Tata Consultancy Services Ltd. and Wipro Ltd., France’s Cap Gemini SA, and International Business Machines Corp. are the top sponsors. CGI is far behind, having obtained about 485 visas last year, compared with more than 25,000 for Infosys, according to the website. More than 97 percent of CGI employees in the U.S. work there without a visa, according to Schindler.
Part of the reason is that CGI went for what it describes as an “onshore delivery model,’’ which includes six centers located outside of metropolitan areas, offering cheaper services while being on American soil. The U.S. is CGI’s biggest market, with contracts from the federal government representing about 14 percent of total revenue.
“CGI’s strong onshore presence in the U.S. should position it well to remain a strong contender for new business with the new administration’s drive to push for more work for U.S. citizens and potentially fewer foreign-worker visas,” Maher Yaghi, an analyst at Desjardins Capital Markets, said in a note Wednesday. He advises buying the shares.
To be sure, CGI also uses offshore workers. “Our model is primarily to have in-country resources, complemented by both onshore, in-country delivery centers as well as offshore,” Schindler said. “We always had a balanced, blended model.”
The 40-year-old company has clearance to bid on dozens of U.S. government contracts. Three years ago, it lost the contract to run the Obamacare website after a botched introduction that led to partisan sniping. Now the company stands to benefit from Trump’s priorities on defense and intelligence, Schindler said.
CGI has also tried to diversify its sources of income in the U.S. On Wednesday, the company reported a small decrease in revenue to C$2.7 billion ($2.1 billion) in the quarter ended Dec. 31, in line with analysts’ predictions, as demand from France and Asia helped pick up slack in the Nordic region and for contracts from local governments in the U.S.