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Accenture Beats Expectations, Adjusts Strategy

Posted on Friday, Jun 27th 2008

Accenture (ACN) reported their Q3 earnings yesterday, and they don’t seem to be finding current economic conditions a challenge.

Revenues of $6.1 billion exceeded analysts’ expectations of $5.9 billion and were up 20% over the year. Both the Consulting and Outsourcing segments grew by 20% over the year to contribute $3.7 billion and $2.4 billion, respectively, to revenues. Revenues from America grew 17%, from EMEA 23% and from Asia Pacific 19%.

EPS of $0.76, substantially higher than market expectations of $0.69, was 40% higher over last year.

During the quarter Accenture repurchased 13.1 million shares for $484 million at an average price of $37.05.

Accenture’s Q4 revenue outlook is $5.9-$6.1 billion, and they raised their full-year EPS outlook to $2.63-$2.65.

Accenture is no longer a traditional outsourcing company and has developed solutions to fight the increasing cost structure inefficiencies in India. As the American economy faces challenges and labor arbitrage loses its sheen, Accenture has started investing in technology initiatives as a way to reduce costs.

In Systems Integration, they have invested in building a global team that can use industry-leading SAP and Oracle skills to meet the demand for ERP implementations. Their technology labs are developing offerings that use next generation communication and collaboration software tools.

Accenture is also growing through tactical acquisitions. In Japan, they acquired Sopia Corp, an IT solutions company specializing in Oracle systems integration. They strengthened their logistics offerings by acquiring California-based AddVal Technology, a provider of end-to-end services to shipment, freight and cargo companies. They also announced the acquisition of Belo Horizonte, a Brazilian company that provides IT and automation solutions. SaaS, however, remains an avenue they need to explore.

To reduce dependence on the struggling American economy, they have expanded in other geographies. Their Korean operations are growing at 30% and the Chinese operations at 40%. Accenture clearly realizes the importance of establishing a strong presence in emerging markets.

The stock rose 2.1 percent to $39.68 in after-hours trading and dropped to close at $38.85.

ACN 1yr

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