Accenture Earnings Rise Thanks to European Downturn

By Michael Foster, Big4.com Blogger

In a sign that demand for technology consulting is not subsiding, Big4 firm Accenture announced its quarterly profits rose nearly 10 per cent last quarter to $689.2 million.

The firm also reported that its revenue for the quarter had grown by 6.5%, even though the company took a hit on foreign exchange charges. In total, the firm received $7.2 billion in revenues for the third quarter, up 6.5% from the same quarter a year ago.

The firm’s strong results surprised some analysts, who had previously worried that a protracted slowdown in Europe would negatively impact Accenture, which depends heavily on the continent for its income. In total, about 40 per cent of the firm’s revenue comes from Europe.

However, the strong results from Accenture might also suggest that the European crisis is producing some winners even as it forces other firms to struggle, At a conference call, CEO Pierre Nanterme said that cost-cutting firms were turning to outsourcing as a way to save money. The crisis, he said, offers “very strong and positive growth in outsourcing. What we’ve seen is some moderation of our growth in consulting.”

David Grossman, analyst for Stifel Nicolaus & Co., agrees. “In a weakening economic environment, clients look to outsourcing to lower costs and create variable cost structures and cut discretionary spending on traditional consulting/systems integration,” he said in a client note on Accenture’s results. “Global diversified players like ACN and IBM Services typically fare better on a relative basis in these environments than the large offshore players,” he said, giving a buy recommendation on Accenture’s shares.

Shares in the firm were up 5% in intraday trading on Friday.