Accenture Profits Hurt By Investment Losses During 2Q

Accenture

For the quarter ended Feb. 28, 2002, New York-based Accenture reported income, excluding investment write-offs, of $236 million on sales of $2.91 billion, or 23 cents per share. When taking into account a $212 million loss on investments during the second quarter, however, Accenture reported its actual income was $10.6 million, or 2 cents per share.

That compares with income of $80.9 million, or 20 cents per share, for the same quarter one year ago. Wall Street analysts anticipated income of 21 cents to 24 cents per share, excluding charges, according to First Call/Thomson Financial.

Accenture reported $9.8 million in new bookings during the first half of the year, Accenture CEO Joe Forehand told analysts during a conference call to discuss the results.

"While indicators are positive, the economic recovery is moving very slowly, very unevenly across the different industries and geographic regions," said Forehand. "In addition, we still see no sign of a pickup in IT spending, which is an indicator for our systems integration work."

Pricing, said Forehand, continues to be competitive and has resulted in about a 300 basis point erosion in margin, compared with last year. Aggressive cost management actions, however, have offset the effects of the overall environment, which includes continued delays in spending new client projects.

Accenture, the former Andersen Consulting, which split from Arthur Andersen LLP in August 2000, also reported modest gains as a result of the fallout from the Enron/Andersen debacle and resulting moves by the Big Five to split auditing and consulting business practices.

"While the financial impact has been modest, the entree we have gained with several key companies is important to us in the long term," said Forehand. "But, again, we don't expect a windfall here."

Forehand also highlighted a 3 percent to 5 percent increase in outsourcing business, with outsourcing this year representing between 20 percent and 22 percent of total revenue, up from 17 percent last year.

With regard to the loss on investments, Accenture reported that moving forward the company will discontinue direct venture capital investing and will no longer accept illiquid securities from clients or alliance partners.

Accenture warned in March the company would dump nearly its entire venture and investment portfolio to "reduce volatility in future earnings."

The company said it expects to receive offers that allow it to retain a modest percentage of ownership in the venture and investment portfolio through an ongoing alliance with the buyer. The company has engaged an investment bank and has completed the initial screening of prospective purchasers.

Looking forward, Forehand said he remains comfortable with estimates of 26 cents per share for the third quarter.