Accenture CEO: Being Disrupted And Put Out Of Business Is On The Mind Of Every CEO On The Planet

Accenture CEO Pierre Nanterme said the election of Donald Trump will not negatively impact end user investment in digital technologies and business transformation.

"Being disrupted and being put out of business is clearly on the mind of all CEOs on the planet, including the U.S.," Nanterme said during Accenture's earnings call Wednesday. "These driving forces are more significant than any presidential election.

Nanterme said client's technology spend has been increasing as emerging areas such as digital advertising and digital marketplace become part of the addressable market for Dublin, Ireland-based Accenture, No. 2 on the CRN Solution Provider 500. CEOs that don't fundamentally change their operating model to embrace digital technologies risk being put out of business, Nanterme said.

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"We see the rotation of the budget from legacy technology services to digital-related services, and frankly, it's playing in our favor," Nanterme said. "Our rotation to digital, cloud and security has opened up new opportunities for us."

That rotation has been spearheaded by $600 million of acquisitions in the most recent quarter focused on everything from digital consulting and retail expertise, to cybersecurity for the U.S. government and cloud services from leading providers such as WorkDay and ServiceNow, Nanterme said. Accenture plans to spend at least $1 billion this year on acquiring critical capabilities, said CFO David Rowland.

Accenture has put in place a new alliance with Google around industry-specific cloud and mobile solutions to help clients with digital transformation, Nanterme said, and has an improved new platform around Salesforce that caters to financial services, consumer goods and life sciences companies.

"Our clients value our independence as the leading partner of both the established providers and the emerging players," Nanterme said.

Accenture's sales for the quarter ended Nov. 30 climbed to $8.52 billion, up 6.3 percent from $8.01 billion last year. That fell short of Seeking Alpha's revenue projections of $8.59 billion.

Net income jumped 22.4 percent to $1.05 billion, or $1.58 per diluted share, up 22.4 percent from $858.5 million, or $1.28 per share, the year prior. That beat Seeking Alpha's earnings projection of $1.49 per share.

Accenture's stock price fell 3.9 percent in trading Wednesday morning to $119.42 per share. Earnings were announced before the market opened Wednesday.

The business-to-consumer (B2C) digital services space has matured rapidly, Nanterme said, with B2C clients moving from small prototypes or proof-of-concept work to larger transformation projects. The business-to-business (B2B) space is still in an early phase, though, when it comes to the Internet of Things, Nanterme said, with clients prototyping and attempting to find use cases for small glasses, analytics, and drones.

"The maturation will probably come in the next 12 months," Nanterme said.

Accenture's consulting sales grew to $4.59 billion, up 6 percent from $4.35 billion the year prior. Outsourcing sales, meanwhile, climbed to $3.92 billion, up 7 percent from $3.67 billion last year.

Accenture is already seeing a role for outsourcing in a digital world, Nanterme said, with outsourcing opportunities emerging around managed cloud services, managed cybersecurity services, analytics and marketing campaigns driven on behalf of clients. Nanterme said Accenture is the only solution provider in the industry with a multitude of services around envisioning, building and operating IT solutions.

From an industry standpoint, sales for Accenture's products group grew to $2.32 billion, up 17 percent from $1.99 billion the year prior thanks to the rapid adoption of digital, cloud and security. Financial services revenue improved to $1.8 billion, up 4 percent from $1.75 billion due to growth in the European insurance, banking and capital markets, partially offset by banking contraction in North America.

Communications, media and technology sales jumped to $1.69 billion, up 5 percent from $1.6 billion last year thanks to double-digit growth in the media and entertainment space, partially offset by declines in European communications sales. Health and public service revenue climbed $1.5 billion, up 5 percent from $1.42 billion the year prior thanks to balanced growth across all regions.

Resources revenue, meanwhile, fell to $1.19 billion, down 4 percent from $1.25 billion the year prior due to unfavorable macroeconomic environment for energy, chemicals and natural resources in North America.

From a geographic perspective, Accenture's North American sales jumped by $3.98 billion, up 6 percent from $3.76 billion the year prior based on double-digit sales growth in the consumer, retail and travel, life sciences, and media and entertainment verticals.

Accenture's European sales, meanwhile, improved to $2.94 billion, up 2 percent from $2.88 billion the year prior thanks to double-digit local currency sales growth in the United Kingdom, Germany and Switzerland. And in growth markets, Accenture's sales soared to $1.59 billion, up 17 percent from $1.36 billion the year prior due to strong local currency growth in Japan and China.

For the coming quarter, Accenture expects revenue in the range of $8.15 billion to $8.4 billion, missing the Zacks estimate of $8.47 billion. And for Accenture's 2017 fiscal year, which ends Aug. 30, the company expected diluted earnings per share in the range of $5.64 to $5.87, falling short of the Zacks projection of $5.88 per share.