Annex Bulletin 2006-37                               September 28, 2006

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IT SERVICES

Updated 9/29/06, 7:30AM PDT

Analysis of Accenture's Fourth Quarter Fiscal 2006 Results

Emphatic Year-end Accents

Strong Earnings Accompany Fifth Consecutive Year of Record Revenues

SCOTTSDALE, Sep 28 - Accenture ended its fiscal year 2006 by putting emphatic accents on its turnaround that started over years ago (see "Accenture: Burning the Track," Mar 2004 and the chart).  The company earned $346 million in the quarter that ended Aug 31, or 56 cents a share, up from $229 million, or 38 cents a share in the same period in 2005.  On an organic basis, Accenture earned 39 cents a share, up 22% from 32 cents in the fourth quarter last year, and a little higher than the Wall Street consensus.

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Earlier in the day, the Accenture stock received a boost from the news that the company had successfully negotiated its way out of the U.K.'s National Health Service (NHS) money-losing megadeal.  Accenture shares closed up nearly eight points in advance of the earnings release.  The company said it lost $339 million in revenue from the financial impact of that agreement.  Yet it still managed to grow the fourth quarter revenue by 1% to $4 billion, also a little higher than the Wall Street expectations.  It was the fifth consecutive year of record revenues.

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Reusable Assets & IBM "Products" Announcement

Asked how the termination of the NHS deal would affect the reusable assets that Accenture has been developing, especially in the health care sector, Green said, "any assets we own and used on NHS are ours and we keep. We can deploy anything we used or built there anywhere.

As for IBM's latest move toward "services in a box," or "service products," as Big Blue calls them, Green said that Accenture is "very focused on reusable assets and has been for years."  

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Business Segment Analysis

Asia/Pacific, financial services and resources were the Accenture "heroes" of the fourth quarter, each increasing in double digits.  The Americas region has a respectable 6% jump, but European revenues declined due to the cancellation of the NHS contract.

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Record New Bookings

Accenture's new bookings performance stands right up there with its outstanding cash flow results.  In the current fiscal year, the company closed more than $20 billion of new business, setting a new annual record, ahead of its guidance.

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Outlook

Looking ahead to its first fiscal quarter, Accenture said revenue would range from $4.45 billion to $4.65 billion, bracketing the analysts' consensus of $4.55 billion. The company did not immediately offer any EPS estimate for the first quarter, but Wall Street expects 42 cents.

For the full fiscal year 2007, we expect Accenture to generate $18.5 billion in revenues, up 11% over the just-reported results, and $1.07 in net profit, about 10% higher than the fiscal 2006 total.

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Volume XXII, Annex Newsflash 2006-37
September 28, 2006

Bob Djurdjevic, Editor
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