SAN FRANCISCO: Accenture Ltd.'s better-than-expected profit report may be a good sign for the company's bigger competitor, IBM . Accenture, the world's second-largest consulting company after IBM, on Thursday said rebounding demand for consulting services by financial-services businesses helped drive a 25 percent surge in quarterly net income and a 13 percent increase in revenue.
International Business Machines Corp. reports third-quarter results on Oct. 17 and Accenture's comments about increasing demand for services, rather than a fight for existing business, cheered some analysts.
"They were able to achieve their results because prices were stable," said Bob Djurdjevic of Phoenix-based market research company Annex Research. "That means that competitors like IBM aren't giving away the store anymore."
Shares of IBM closed 1 percent higher at $80.50 on the New York Stock Exchange after advancing as high as $81.11. Accenture's stock ended 5.6 percent higher at $26.67. Accenture on Thursday announced its first dividend since going public in 2001.
Demand for technology services and consulting may be recovering after slumping from 2000 to 2004, when businesses reduced spending as stock markets stumbled and profits fell, analysts said. "We're finding leading companies making major investments to improve their competitive edge," Accenture Chief Executive Bill Green said on Thursday. "A lot of what we heard from about an improving environment from Accenture will apply to IBM," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets in San Francisco who covers Accenture but not IBM.
"But Accenture is also benefiting more than many of its competitors from having differentiated capabilities" that help companies improve business results, she said. Shaw noted that services account for only about 55 percent of IBM's revenue and operating profit, and added that the company is in the process of restructuring its services organization.
Analysts on average expect IBM to report a 3.7 percent decline in third-quarter earnings per share before exceptional costs, to $1.13 from $1.17, according to Reuters Estimates. Of 23 analysts who track IBM, nine recommend buying the stock, eight have "outperform" ratings and five have "holds." One advises selling.
IBM Chief Financial Officer Mark Loughridge in July said he was comfortable with the range of analysts' profit forecasts for the second half of 2005. The company beat expectations when it reported second-quarter earnings in July amid a rebound in its services and software businesses.
IBM's Global Services unit, which competes with Accenture in consulting, showed solid growth in revenue and a surge in signings of new contracts in the second quarter. IBM's stock trades at 14.6 times estimated fiscal 2006 earnings per share, compared with Accenture's 15.9.
2 comments:
Post a Comment