Accenture Wins US Navy Deal – Analyst Blog

Technology and management consulting company Accenture Plc. (ACN), has been awarded an indefinite delivery /indefinite quantity (IDIQ) contract by the U.S. Navy. As per the terms of the contract, the technology and consulting major will provide financial management services, expected to support the Navy’s Office of Financial Operations. This will in turn facilitate the process of implementation of the department’s Financial Improvement Program (FIP).

 

The contract has a base ordering period of one year and four one-year renewal options. If all of the four extensions are taken, the total contract value would come to a staggering $181.8 million. The department of Navy believes that Accenture’s involvement will help improve the timeliness, accuracy and reliability of financial information, resulting in better decision making. This apart, Accenture will also provide support to the Navy’s internal audit system.

 

This is the continuation of a series of contract wins that the company has witnessed in recent times. A few days back, Accenture was selected by The University of Michigan for implementing NextGen Michigan, a multi-year university-wide IT transformation effort. The University of Michigan selected ACN for its support towards a comprehensive assessment of information technology at the unit and campus levels.

 

This apart, the company also won a five-year application outsourcing contract from Nordea, a leading banking and financial services group. The company did not disclose the monetary value of the contract, which is expected to generate recurring revenue for the company for the next several years.

 

Recently, Gartner forecasted strong IT spending for 2010. The firm is bullish on the sector and expects a revival across the globe. It has forecasted that spending on technology products and services will reach $3.4 trillion in 2010, or a growth rate of 5.3% from 2009 levels.

 

These deal wins are expected to strengthen the revenues of the company that took a tumble in the second quarter, impacted by the global economic turmoil. The company reported an unexciting second quarter, with EPS of 60 cents missing the Zacks Consensus Estimate of 61 cents and revenue declining by 2.1% compared to the year-ago quarter. This apart, the company witnessed a revenue decline across most of its operating groups.

 

After the year-long recession, most of the tech companies are witnessing a revival in business volumes and investor sentiment and Accenture is no exception. So 2010 is expected to be a sunrise year for this sector, but it will definitely take some time for performance to revert to 2008 levels.

 

We have a Neutral recommendation on ACN shares.