Accenture Loses in Consulting, Gains In Outsourcing

by CXOtoday News Desk    Mar 28, 2014


Accenture has warned that weakness in its consulting business has not only hit second-quarter results but has also resulted in an 8% decline of its shares. However, the consulting firm benefited from improvement in its outsourcing business.

The consulting business, which accounts to more than half of the company’s revenue, has fallen in the six of the last seven quarters as customers cut discretionary spending and stiff competition puts pressure on contract prices, says a Reuters report, which further stated that the technology major raised its full-year profit forecast and the lower end of its revenue forecast. But it said revenue in the consulting business would be flat or grow in the low-single digits in the year ending August 31.

The company reported record high consulting bookings of $4.6 billion but Chief Financial Officer David Rowland said on a conference call with analysts that pricing pressure was eating into revenue growth, said the report. Consulting revenue fell 1% in U.S. dollar terms and payroll costs rose, leading to a lower-than-expected profit for the quarter ended February 28.

The consulting company, which competes globally for contracts with technology giants like IBM and Hewlett-Packard, has mostly posted earnings growth for more than two years and has seen strong revenue growth in its outsourcing business, mentioned an article posted in Wall Street Journal.

Evercore analyst David Togut said Accenture’s track record of managing costs and the strong bookings numbers bode well for growth in 2015. “Multiple times since its 2001 IPO Accenture has successfully managed cost pressures. Superior bookings growth, high book-to-bill ratios and a strong track record of managing expenses reinforces our conviction in ACN’s earnings growth prospects,” Togut told Reuters.

Accenture, has been recently chosen as the lead contractor for the Obamacare enrollment website, said it expected to post strong growth in its health and public service business in the second half of the year.