Accenture Blows Away Analyst Expectations, Stock Zooms!

As we blogged yesterday, the bar was set high for Accenture (NYSE: ACN), but the firm had no problems surpassing that threshold. Strong financial results for the Q3-2008 (ended May 31, 2008) of net revenues of $6.10 billion, 20% year-over-year increase in U.S. dollars and the highest quarterly net revenues in the company’s history; combined with an record EPS of $0.74, up 36% from Q3-2007 blew away analyst expectations.

Analysts were expecting EPS of 69 cents and revenues of $5.91 billion.

In addition, Accenture forecasted full fiscal year 2008 EPS of $2.63-$2.65 up from previously guidance of $2.55-$2.60. Analysts were forecasting $2.59.

New bookings were $6.77 billion, with record quarterly consulting bookings of $3.98 billion. Operating income grew 27% and operating margin expanded by 70 basis points over Q3-2007.

William D. Green, Accenture’s chairman & CEO, said, “…Solid bookings we achieved demonstrate continued strong global demand for our services, even in markets experiencing difficult economic conditions….We see strong momentum in our business as we look to the rest of the fiscal year, and we remain focused on delivering value for our clients, and in turn, our shareholders.”
We were almost expecting such fabulous results, what with tremendous momentum, excellent global presence and depth, a performance-oriented management team, a get-it-done culture, and extraordinary ability to be simultaneously agile and strong ingrained in Accenture’s DNA.

Investors did not fail to recognize such superior performance. Accenture (NYSE:ACN) shares zoomed 6% on a day that the Dow was down 100 points and stocks in every sector were pushed downwards.

Bill Green also pointed out that Accenture was feeling no impact in terms of cancellations or delays by any of their clients in this weak economy – Remarkable indeed.

Kudos to Accenture - this machine seems unstoppable.

Deloitte's WIN Blog Passes On the Torch

We have blogged before about Deloitte’s Women’s Initiative Network (WIN) blog pioneered by Cathy Benko who went public in January 2007 and wrote heart-warming, insightful, tell-it-like-it-is posts, many times going against the corporate grain. Her veracity and everyday humor added color and perspective to what professional women face at Deloitte and perhaps at other organizations. Most of all she had courage, and wasn’t afraid to say what was on her mind. See
http://bigfouralumni.blogspot.com/2007/01/deloittes-win-blog-goes-public.html#links

In February 2008, the torch has been passed onto Barbara Adachi of Deloitte LLP to carry on….Barbara calls Cathy the “Dorothy traveling down the yellow brick road to success”. Cathy will be missed (though she still posts internally we believe) and we look to Barbara to have her own style but the same courage and honesty we have seen before.

See the new entries at
http://www.deloitte.com/dtt/section_node/0,1042,sid%3D105220,00.html

Kudos to Deloitte for being so public with their internal affairs.

Accenture’s Steady Results Move Stock up 18% in 2008

Accenture (NYSE: ACN) is set to report its third quarter 2008 earnings (March, April, May 2008) tomorrow June 26, 2008 to Wall Street and has scheduled a conference call at 4:30 PM EST (800-288-8968) to discuss these results with investors.

17 sell-side analysts are expecting an EPS of 69 cents for the quarter compared to 54 cents in the same quarter a year ago, a creditable 28% rise. Analysts are also expecting $5.91 Billion sales compared to $5.08 Billion in the same quarter a year ago, an increase of 16%. The mean EPS of 69 cents crept up from only 65 cents 90 days ago, reflecting growing confidence in a higher number. Accenture’s Price to Earnings ratio is 14.8x and its next five years growth rate in EPS is 13.96% (from Yahoo Finance today), leading to a PEG, or Price Earnings to Growth, ratio of 1.06. The analyst mean target for the stock price is $43.75, and the stock is currently trading at $39.20 or 90% of its target value.

ACN stock crested at around $43 in July 2007 and has been range-bound since then, dropping as low as $33 in January 2008, and rebounding strongly to $39 in June 2008. This 18% move is creditable given the general sluggishness in stock markets all over the world.

However, investors are expecting a slowdown in Accenture’s EPS momentum with annual EPS for year ending August 2009 at $2.65 only 3.5% higher than the $2.56 for annual EPS for year ending August 2008, and a large drop from the 30% increase in annual EPS from $1.97 for year ending August 2007. Inevitably the slowdown in global economic growth will catch up even with a strong performer such as Accenture.

Accenture has transformed its business model to increase the share of outsourced services relentlessly over the past few years, investing heavily in technology centers all over the developing world, and hiring strongly outside the US. There has been little news on the company lately, but it has quietly continued to produce consistently good performance. It has been buying up specialized service providers (AddVal, Origin Digital, ATAN, SOPIA etc.) to bolster its offerings.

With a strong business model, little debt, enormous global presence, sharp management and consistent results, ACN is a valuable addition to a long-term portfolio. The story seems solid, we’ll wait and see if tomorrow’s results indicate otherwise.

PwC Study Mainstay for TechCrunch Social Network Valuations

There’s a new blog post today at TechCrunch where Michael Arrington indicates a dollar enterprise value for different social networks based on the recent implied valuations of Facebook ($15 billion), LinkedIn ($1 billion) and Bebo ($850 billion).

The key inputs are the number of users and the average advertising spend per online user per country. Arrington cites a PricewaterhouseCoopers study which he relies heavily for the latter metric. The report does cost $995 though, and available at http://www.pwc.com/images/outlook/TablesandCharts.pdf.

A surprise, the blog finds that MySpace is worth $20 billion, which is higher than Facebook at $15 billion and Bebo is $5 billion and Hi5 is valued at $2 billion.

The report by the Big Four firm provides such insights as:

• "In Canada, the wired Internet advertising market will expand by 19.8 percent compounded annually, from $1.2 billion in 2007 to $3.1 billion in 2012."
• "Brazil and Mexico will account for 85 percent of overall growth in Latin America during the next five years, driven by strongly rising broadband subscriber bases."
• "Wireless network upgrades and mobile TV will lead to accelerated growth in mobile advertising., in Asia-Pac."
  
  In the US for example, PwC estimates that the total 2008 estimated Internet advertising spend is $25.2 billion, which for each of number of people online of 191 million (according to Comscore) gets to an average Internet spend per person of $132.

In the UK, the similar number is $213 per user (highest amongst all countries), indicating that the British market is just that much richer and a British user is most valuable of all internet users in the world. The table for calculating this for all countries is at http://spreadsheets.google.com/pub?key=pSnKg7M-DPfdEvcCrNoiETA

And the actual TechCrunch blog is at
http://www.techcrunch.com/2008/06/23/modeling-the-real-market-value-of-social-networks/

KPMG Finds Corporate Investments Balance to Shift Considerably

A recent KPMG International survey shows that the winds of global corporate investments are going to change in favor of the developed world. This mirrors the shift in the balance of global economic power, that we all know anecdotally, is finally making its impact.

KPMG asked corporate investment strategists from over 300 large multinational companies in 15 major countries where they plan to invest in the next 12 months and in five years’ time. The results showed a move away from investments in the U.S., Japan, Singapore and the UAE, and a large increase in flows to Brazil, Russia, China and India (BRIC):

China is expected to rush past U.S. as the world’s leading recipient of corporate investment in the next five years from 17% now to 24% in 2013-2014. China would then become the most influential country in IT and telecom, industrial products and mining.

On the other hand, India is likely to see the largest growth in its share of overall foreign investment from 8% today to 18% in five years. Based on this, the country should become the world leader for investment in manufacturing.

European countries continue to maintain their attraction for investors, with Britain maintaining a very strong position in financial services.

In contrast, United States’ share of investments is expected to fall by 4% to 23%, just behind China.

The KPMG survey concludes, “They help confirm the rise of the BRIC economies as viable alternative places to invest, taking funds primarily from the U.S. economy. The continued strength of the European economies may come as a surprise to some, but the fact that they hold up so well suggests that we may be developing a roughly equal balance of economic power between the Americas, Europe and Asia Pacific. That would indeed herald the start of an entirely new global economic game.”

More details at…

http://www.kpmg.com/Global/PressRoom/PressReleases/Pages/NewKPMGInternationalsurvey.aspx

http://www.kpmg.com/Global/IssuesAndInsights/ArticlesAndPublications/Pages/GlobalCorporateCapitalFlows.aspx

Big Four Firms Have Top Spots as Desirable Employers

The Universum USA survey of most desirable employers from the perspective of over 40,000 US undergraduates conducted from December 2007-April 2008 puts the Big Four Accounting Firms within the top 20.

According to Businessweek.com, “Ernst & Young, which jumped from No. 12 to No. 4 on the list, was aided by its Internet efforts, says Universum USA CEO Claudia Tattanelli. (The firm launched the first company-sponsored group page on Facebook in 2006.) "They're branding themselves with social networking…trying to communicate to the new generation in a new way," says Tattanelli.”

Clearly, social networking initiatives for E&Y has yielded benefits.

Here are the ranks for all the featured firms:

• Ernst and Young moves up from 12 (in 2007) to 4 (in 2008)
• Deloitte moves up from 17 (in 2007) to 7 (in 2008)
• KPMG moves up from 27 (in 2007) to 16 (in 2008)
• PricewaterhouseCoopers drops from 7 (in 2007) to 10 (in 2008)
• Accenture drops from 60 (in 2007) to 71 (in 2008)

The details are at:

http://bwnt.businessweek.com/interactive_reports/idealemployers_2008/index.asp?sortCol=name&sortOrder=ASC&pageNum=1&resultNum=100



On the US graduate side, the recent Universum IDEAL survey of most desirable employers specifically for the category of Business derived from 44,064 respondents from 184 leading universities and conducted December 2007 to March 2008, provided even better rankings for the Big Four firms:

PwC beat out Google, which was the most desirable employer for US MBAs, E&Y beat Goldman Sachs, Deloitte trumped Apple Computer and KPMG placed ahead of JPMorgan.

Company Percent 2007 Ranking 2007

Pricewaterhouse Coopers 13,55% 1
Google 13,41% 2
Ernst & Young 12,56% 3
Walt Disney 11,33% 4
Goldman Sachs 10,42% 5
Deloitte 9,78% 6
Apple Computer 9,37% 7
KPMG 7,89% 8
JPMorgan Investment Bank 7,85% 9
Merrill Lynch 7,6% 10
Nike 6,8% 11
Morgan Stanley 6,22% 12
Coca-Cola 5,82% 13
Procter & Gamble 5,74% 14
Microsoft 5,65% 15

The full details are at:

http://www.universumglobal.com/getdoc/00bca8cc-5f1f-4c01-a474-03b867a3b912/American-Graduate-Survey

Deloitte Remains Embroiled in Parmalat Saga

Remember Parmalat ? the Italian diary company which plunged into spectacular bankruptcy in 2003 when it collapsed under a huge debt burden of EUR 14 Billion. Since then, the company has restructured and relisted in 2005 in Milan.

But the shareholder lawsuits continue long after these events.

Over the past weekend, the Swiss banks of UBS and Credit Suisse settled with Parmalat to give respectively EUR 184.1 million and EUR 172.5 million. Credit Suisse continues to retain 17.0 million Parmalat shares, about 1.0% of total market capitalization.

Investors liked this settlements, moving Parmalat shares up 8.4%, or EUR 0.14 to EUR 1.77 on Monday in Milan trading.

But all’s not done.

Deminor, a corporate governance consultancy advising a group of 4,000 savers who lost money in the collapse is now suing Parmalat’s former auditors and some banks, including
Deloitte & Touche and Grant Thornton; and Citibank, Bank of America Corp., UBS AG, Intesa Sanpaolo SpA's asset-management unit's Nextra, Morgan Stanley and Deutsche Bank AG.

In February 25, 2007, we had blogged that Deloitte had agreed to settle, but looks like as Parmalat’s auditors, the Big Four firm Deloitte remains embroiled in this saga, many years after its involvement in the company’s audit. This illustrates the long-tail of the liabilities arising from auditing, and the motive for Big Four firms to seek some limitations of financial liabilities from their clients.

February 25, 2007

Deloitte to Pay $130 Million to Parmalat Shortly

We earlier blogged that Deloitte had settled with Parmalat to pay US $149 million for its role in the bankruptcy of the Italian dairy company.

Now we understand it is time to pay....Parmalat SpA says that Deloitte have a few days to come up with the money, and apparently Deloitte will pay $130 million as a first installment.

To this we say...better to settle now and get it out of the way, and link the liability to the current partners than future partners who would have a much looser connection to the audit

Big Four Firms Contribute GBP 100,000 Each to New Center

After much study, The International Centre for Financial Regulation with a goal to "
establish a unique centre of excellence...to understand and explore the contribution
that efficient systems of financial regulation make to global growth, including in
developing economies." is moving fast to be a global influential institution in the city of London, UK.

The ICFR has further aims of "....stimulate debate on these issues (GAAP and IFRS)
and to analyse trends. The ICFR aims to do this by identifying the principles that will
guide the regulatory response to these opportunities and challenges.
aims to promote world class research and education in the field and plans to look at the dynamics of financial stability."

With this noble intention, the ICFR has gathered GBP 2.5 million from the UK government and additional funds from the City of London.

Importantly, Accountancyage.com reports that each of the Big Four firms, Deloitte and Touche, Ernst and Young, KPMG and PwC are adding £100,000 to fund this organization.

Other contributors include Dresdner Kleinwort, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS; banks such as Barclays, HSBC Citigroup and Standard Chartered; and insurers Prudential and Aviva each contributing £100,000 per year for the first three years.

The ICFR has chosen Barbara Ridpath, managing director of Standard & Poor’s in Europe as their new CEO, starting this September.

From the ICFR initial prospectus, we see two examples of where focus and additional study would lead to better accounting standards. In Islamic Finance, the ICFR intends to play a key role by providing technical support to standard setting institutions, undertaking research and providing advice to regulators, and providing tailored regulatory training. In emerging markets in Asia, the ICFR intends to participate in this evolving landscape to satisfy the highly diversified demands of regulatory authorities on best international practices.

There is obvious growing need for consistent international standards both in developed and developing markets, and a well respected body which examines these issues in detail is required to keep the accounting industry in line.