KPMG Reports 3Q Revenue Down

KPMG Consulting

For the quarter ended March 31, the e-services powerhouse reported income of $23.7 million, or 15 cents per share, on sales of $582.3 million. That compares with income of $29.5 million, or 27 cents per share, on sales of $750.9 million for the same quarter last year.

The results met Wall Street analysts' expectations of 15 cents per share, according to First Call.

Rand Blazer, CEO of KPMG, based here, told analysts during a conference call that the rebound in IT spending simply has not materialized yet.

"We are all seeing the same thing," Blazer said. "The media recently reported about the robust growth of the economy in the first quarter, but in terms of IT spending within the IT sector, it has not materialized to the extent we would like to see it."

Revenue decline during the quarter was principally attributable to the Financial Services and High Technology business units, which have been hit hardest by market declines amid an uncertain economic environment, Blazer said.

Revenue earned by Public Services, the company's largest business unit, was up 8 percent to $250 million for the quarter. Blazer also said project cancellations in two key accounts during the quarter hit the company's bottom line.

KPMG Consulting split last year from Big Five accounting firm KPMG LLP in an initial public offering. Blazer said KPMG Consulting plans to pursue an official name change--sooner rather than later--to eliminate any residual confusion.

"We certainly got out in front of that," Blazer said. "And while the new work during the quarter is pretty small, our pipeline is beginning to get more material, and depending upon what happens with the others, I think most of the promise is in subsequent quarters."

Blazer declined to comment, however, on published reports Tuesday that KPMG Consulting is close to buying Arthur Andersen's U.S. consulting business for more than $250 million.

Blazer said looking forward he expects some sequential growth, and until IT spending really picks up again KPMG will continue to take a disciplined approach to running its business.

"We are going to stick to the script, follow through on the things we've said, be very consistent with out clients, our people and our shareholders," Blazer said.

KPMG Consulting said it expects fourth quarter income of between 14 cents and 17 cents per share.