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Accenture CEO: We've Moved Half Our Business To Digital, Cloud and Security In Just Four Years

Michael Novinson
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Accenture CEO Pierre Nanterme said landing bigger cloud, digital and security projects has enabled the company to rotate half of its $35 billion business to emerging technologies in just four years.

"It's a very big and very important milestone for us at Accenture," Nanterme told Wall Street analysts Thursday during the company's earnings call. "We will properly celebrate in Boston with a very nice glass of Coca-Cola."

The Dublin, Ireland-based company, No. 2 on the 2017 CRN Solution Provider 500, said its work around digital, cloud and security started with prototyping work and programs focused on strategy and consulting.

[RELATED: Accenture Investing $900M To Retrain 200,000 Employees In Next-Generation Technology]

But as the market has grown, Nanterme said Accenture has gone from doing smaller prototypes to executing large projects that go beyond strategy and consulting to encompass the company's technology and operations practices. As recently as last quarter, Accenture had been estimating that digital, cloud, and security work accounted for approximately 40 percent of its overall revenue.

"We're seeing more, bigger deals, which is the sign of a market maturing," Nanterme said.

Going forward, Nanterme said Accenture wants to build up more capabilities around artificial intelligence, blockchain, immersive reality and quantum computing. And by 2020, Nanterme said Accenture expects to be deriving the vast majority of its revenue from emerging technologies.

"In probably four years, we've rotated 50 percent of the business of a company of $35 billion to the new," Nanterme said. "That's what has been achieved, and we're not going to stop there."

Accenture's sales for the quarter ended May 31 climbed to $8.87 billion, up 5.1 percent from $8.43 billion last year. That edged out Seeking Alpha's revenue projection of $8.83 billion.

Net income fell to $692.5 million, or $1.05 per diluted share, down 24.3 percent from $939.8 million, or $1.41 per diluted share, last year. Excluding the impact of a pension settlement charge, Accenture's net income came in at $1.02 billion, or $1.52 per share, which was in line with Seeking Alpha's estimate.

Accenture's stock price fell $6.47, or 5.09 percent, in trading Thursday morning to $120.64 per share. Earnings were announced before the market opened.

Accenture had been expecting that the Trump administration would launch critical reforms in the health-care, tax, trade and infrastructure spaces in a relatively rapid time frame, Nanterme said. But reforms in those spaces haven't yet been announced or executed upon, according to Nanterme.

"The business is still positive, but we're waiting for these reforms to happen before investing," Nanterme said. "I'm looking at it with my French glasses, and I would encourage the U.S. to accelerate their reform."

That's in marked contrast to Europe, where Nanterme said less uncertainty exists due to the expected re-election of Andrzej Duda in Poland and Angela Merkel in Germany. The election of Emmanuel Macron in France has also been celebrated, Nanterme said, since he's solidly pro-business and has eased worries that the European Union will disappear.

As far as the United Kingdom is concerned, Nanterme said the market has adjusted to the reality of Brexit, although it's still not clear whether it will be a hard or soft split. And little uncertainty exists in China, according to Nanterme, where President Xi Jinping is driving a five-year reform program.

As a result, Nanterme said the U.S. is the main place where Accenture is waiting for reforms to happen.

"At some point, the logjam will break and work will be initiated," said David Rowland, Accenture's chief financial officer. "And we'll be right there in the game when that happens."

Accenture's consulting sales grew to $4.82 billion, up 4 percent from $4.62 billion last year. Outsourcing sales, meanwhile, climbed to $4.05 billion, up 6 percent from $3.81 billion last year.

From an industry standpoint, sales for Accenture's product group grew to $2.43 billion, up 13 percent from $2.16 billion last year thanks to strength in the consumer goods, retail and travel services segments. Financial services revenue improved to $1.87 billion, up 3 percent from $1.8 billion last year due to strength in banking and capital markets, as well as gains in Europe and the growth markets.

Communications, media and technology sales jumped to $1.75 billion, up 3 percent from $1.71 billion last year as strength around software and platform sales offset continued contraction in Europe. Health and public service revenue inched ahead to $1.55 billion, up 1 percent from $1.54 billion last year due to slower-than-expected decision-making in North America stemming from uncertainty around health-care legislation.

Resources revenue, meanwhile, climbed to $1.25 billion, up 2 percent from $1.22 billion as strength around chemicals, natural resources and utilities more than offset continued challenges in the energy sector.

From a geographic standpoint, Accenture's North American sales jumped to $4.12 billion, up 3 percent from $4.02 billion last year due to increased uncertainty in the market around health-care legislation and state and federal budgets.

Accenture's European sales, meanwhile, improved to $3.04 billion, up 3 percent from $2.95 billion last year thanks to double-digit local currency growth in the United Kingdom, Germany and France. And in growth markets, Accenture's sales soared to $1.7 billion, up 16 percent from $1.47 billion last year due to double-digit local currency growth in Japan, Australia and Singapore.

For the coming quarter, Accenture expects revenue in the range of $8.85 billion to $9.1 billion, as compared with the Seeking Alpha estimate of $8.93 billion.

And for Accenture's 2017 fiscal year, which ends Aug. 30, the company expects non-GAAP earnings per share in the range of $5.84 to $5.91, adjusted upward from last quarter's projection of $5.70 to $5.87 per share. Analysts had been projecting earnings of $5.86 per share.

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