Accenture plans job cuts

IT services provider Accenture met net revenue expectations and topped earnings forecasts in its second fiscal quarter of 2003 thanks in part to strong growth in its outsourcing business, the company said Monday morning. But weakness in its core consulting business has prompted the company to reduce its workforce by about 1 percent, or about 750 staffers.

Accenture had net revenue of $2.83 billion, meeting consensus expectations of analysts polled by Thomson Financial/First Call, in its 2003 second fiscal quarter, ended Feb. 28, 2003. The company had earnings per share of $0.25, exceeding by one cent analysts’ earnings expectations. Joe Forehand, the company’s chairman and chief executive officer, said in a statement that he was “pleased with Accenture’s solid performance” in the quarter.

However, despite growth in its outsourcing business, weakness in its core consulting business is leading Accenture to cut about 750 employees, or about 1 percent of its 75,000 employees, an Accenture spokesman said Monday. The job cuts started in the second fiscal quarter and are continuing in the current quarter, and are primarily affecting senior level executives in the U.S. and the U.K., he said. This is the first round of layoffs for Accenture during the 2003 fiscal year, the spokesman said.

Net revenue fell 3 percent in U.S. dollars and 9 percent in local currency, compared with 2002’s second fiscal quarter. Earnings per share grew significantly from $0.02 in last year’s second quarter, when the company took $0.21 in investment write-downs.

Accenture defines net revenue as revenue before reimbursement of expenses, such as expenses incurred on behalf of clients that clients later repay, the spokesman said. Total revenue for the quarter was $3.19 billion, compared with total revenue of $3.33 billion in 2002’s second fiscal quarter.

Accenture saw its outsourcing net revenue grow 33 percent to $828 million, and is an area the company continues to target for growth. Meanwhile, the company’s core business, consulting, continued to slide with a 15 percent net revenue drop to $2 billion, following the market’s trend of depressed prices and low demand for consulting.

The company closed the quarter with $4.75 billion in contract bookings, the second-highest total in its history. It ended the quarter with almost $1.7 billion in cash, up by $211 million from 2003’s first fiscal quarter. Free cash flow stood at $533 million for the first six months of the fiscal year, up from $165 million in the same period in fiscal 2002.

In the third fiscal quarter, which ends on May 31, earnings per share should be between $0.24 and $0.26 and net revenue should be between a drop of 2 percent and a rise of 2 percent, compared with 2002’s third fiscal quarter net revenue of $2.98 billion.

The company expects to take an $88 million severance charge in the third fiscal quarter related to the job cuts, which will be offset by payroll savings of $28 million, resulting in a net charge of $60 million, the spokesman said. Accenture expects to save $60 million in payroll costs in the fourth fiscal quarter, the company said in Monday’s statement.

Earnings per share for the full fiscal year should be in the $0.98 to $1.05 range and net revenue growth should be flat or up 2 percent compared with the 2002 fiscal year net revenue of $11.57 billion, the Bermuda-based company said.

The company’s stock (ACN) was up 2.06 percent to $14.35 in midday trading on the New York Stock Exchange. Its 52-week high is 24.66.