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Accenture Enhancing Services Through Acquisitions

Posted on Thursday, Jul 4th 2013

According to a report by GIA, the global IT consulting market is projected to be worth $255 billion by the year 2015. Over the past several years, the economic recession had hurt the industry and growth had slowed. The analyst expects the market to pick up soon. Meanwhile, current depressed conditions in the European region continued to hurt the industry. Global IT consulting giant, Accenture (NYSE: ACN), suffered setbacks and its financial performance and outlook fell short of market expectations.

Accenture’s Financials
Accenture’s Q3 revenues were flat over the year at $7.20 billion, significantly short of the market’s projected revenues of $7.47 billion. EPS grew 11% over the year to $1.14 and managed to surpass the market’s projections of $1.13 for the quarter.

By operating segments, the Health & Public Services segment grew 5% over the year. Revenues from Financial Services and Products grew 9% and 1% respectively. However, this growth was offset by a 5% decline in Communications, Media & Technology and Resources.

Accenture missed analyst expectations of revenues due to the continued decline in consulting revenues. Over the year, revenues from the consulting segment fell 2% to $3.9 billion. Outsourcing revenues continued to grow and increased 4% over the year to $3.3 billion.

By region, revenues from the Americas grew 7% over the year, while revenues from EMEA and Asia Pacific regions fell 4% and 5%, respectively.

Among operating metrics, utilization remained flat over the quarter at 87%. The quarter’s attrition of 12% was higher than previous quarter’s 11%, but managed to register a decline over the previous year’s attrition of 13%.

For the current quarter, Accenture projected revenues of $6.7 billion-$7 billion. It did not give projections for earnings, but analysts expect the company to report $1.08 earnings per share for the quarter on revenues of $7.38 billion. Accenture expects to end the year with revenue growth of 3%-4% with EPS of $4.18-$4.22. The market was looking for EPS of $4.28.

Accenture’s Acquisitions
During the quarter, Accenture made several acquisitions to expand its market reach. Last month, it announced the acquisition of Fjord, a service design consultancy. London-based Fjord was founded in 2001 and specializes in design capabilities that are delivered across multiple platforms to enhance end customer engagement. Its customer list includes names such as the BBC, Citibank, Harvard Medical School, Nokia, and PayPal. Accenture plans to leverage these capabilities to expand its digital and marketing capabilities to offer distinctive customer experiences. It plans to integrate Fjord’s skills with Accenture Interactive to enhance services catering to business strategy, data analytics, technology and marketing. Terms of the deal were not disclosed.

As part of the digital marketing expansion efforts, it also acquired Acquity Group, the second largest independent digital marketing company in the U.S., for $316 million. Acquity provides strategy, digital marketing, and technical services to organizations to help improve end customer brand experiences and e-commerce performance. Acquity had reported revenues of $141 million for the previous year.

Earlier in the quarter, Accenture also announced the acquisition of ChangeTrack Research, a provider of analytics-based tools and services for change management. ChangeTrack Research’s offerings include an analytics tool that collects data on resources and processes associated with a change program to benchmark progress and deploy predictive analytic algorithms to identify where corrective action is needed. The acquisition will improve Accenture’s existing offerings that focus on delivering organizational transformations.

Accenture’s stock touched a 52-week high of $84.22 last month. But the disappointing results have sent the stock falling to $72.68, with a market capitalization of $49.57 billion.

 

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