Shares of Cognizant Technnology Solutions (CTSH) rose over 8% in morning trading after Elliott Management sent a letter to the company outlining a three-part value-enhancement plan.

LETTER TO COGNIZANT'S BOARD: Elliott Management, which manages funds that collectively beneficially own more than 4% of the common stock and equivalents of Cognizant, said it sent a letter to Cognizant's board outlining a three-part plan to enhance value. Elliott also asked for a meeting with Cognizant's board to share further thoughts. Cognizant could achieve a value of $80-$90+ per share by the end of 2017 by implementing the plan, according to the letter, representing upside of 50%-69% in just over a year.

ELLIOTT RECOMMENDS SPECIFIC ACTIONS: In the letter to the company's board, Elliott said Cognizant has maintained its margin target over the past two decades despite growing significantly in size. The "lack" of operating leverage "masks inefficiency while impairing the company's flexibility to make sound investments," Elliot said. Elliott is also calling on Cognizant to implement a $2.5B share repurchase to be completed over the first half of fiscal 2017 as well as "immediately" institute a long-term capital return program, including dividends and ongoing share repurchases. The hedge fund is also seeking a board shakeup, saying it would "welcome" directors with "new experiences, skills and perspectives." Elliott also said that the value-enhancement plan provides "ample firepower" for continued acquisitions.

WHAT'S NOTABLE: In August, Cognizant, citing macroeconomic headwinds, cut the high end of its fiscal 2016 revenue forecast to $13.47B-$13.53B from $13.47B-$13.6B. A month later, Cognizant said it was conducting an internal investigation into whether certain payments relating to facilities in India were made improperly and in possible violation of the U.S. Foreign Corrupt Practices Act. The company also announced the resignation of its president, Gordon Coburn, and appointed Rajeev Mehta as the new president. Following the news of the probe, Citi downgraded the stock to Neutral from Buy, with analyst Ashwin Shirvaikar saying that while he believes the company is making "appropriate" investments for long-term success despite near-term challenges and acknowledges the attractive valuation, he said the stock is likely "uninvestable" to investors due to near-term factors like the investigation.

PRICE ACTION: Cognizant is up 8.3% to $57.67 in late morning trading.