Accenture Ltd. (ACN)

All Comments on ACN

  • commenter
    Dayanand
    Jul 04 02:58 PM
    My Website
    The Truth Behind Accenture’s High Return on Equity [view article]
    Ciba,
    So what do u think about the retirement obligations, it is stated in Non Current liabilities section of the balance sheet. It has decreased from 753mn to 492 mn. But is still a big percentage compared to the book value of $1.89bn.

    I tried to find an explanation in the footnote-10 as to how Accenture calculates its retirement obligations, but could not match the figure of $492mn. Let me know if you can figure out how they calculate the retirement obligations.

    Thanks,
    Dayanand.     Reply
  • commenter
    Ciba Gator
    Jun 28 01:00 AM
    The Truth Behind Accenture’s High Return on Equity [view article]
    You might want to examine ROI as a better alternative to ROE.

    "Debt" hasn't really increased at all--liabilities have increased (as have assets).     Reply
  • commenter
    Ciba Gator
    Jun 28 12:41 AM
    The Truth Behind Accenture’s High Return on Equity [view article]
    Many have that much or more. Try IBM, for instance. Reply
  • commenter
    Dayanand
    Jun 27 10:09 PM
    My Website
    Indian Outsourcing Stocks: Beware The Stronger Rupee [view article]
    Thomas,
    Being in IT consulting industry I can exactly understand your point. You know what is the biggest USP of ACN stock......it is that even though they are the world's biggest outsourcing company, outsourcing is less than 50% of its total revenue.Becausue its consulting revenues is more than that of outsourcing.

    2006 figures
    Consulting revenues - $9.89 bn
    outsourcing revenues -$6.75bn

    So for any investor that wants to invest in outsourcing business and also want to play safe....there is just one stock.....u know what I am talking about...     Reply
  • commenter
    Dayanand
    Jun 27 09:36 PM
    My Website
    The Truth Behind Accenture’s High Return on Equity [view article]
    After your reading your comment again....I thought of one point.....I guess the investor would also be interested to know as to how the money was returned.

    For instance. If Accenture borrows $100mn and buys back its shares then actually its book value would be reduced by $200mn. Because it would also have an additional debt of $100mn.

    So ROE of Accenture would increase by 10% because its book value now is $2bn - 200 mn. So just by changing its debt to equity ratio a company can increase its ROE.....

    In fact this point can really be intersting if we consider the way Accenture's debt has changed over the years.

    2002 10-K balance sheet
    Current Liabilities : $3,327,062
    Non current Liabilities :$1,193,864
    ----------------------...
    TOTAL :$4,520,926
    ----------------------...

    2006 10-k balance sheet
    Current Liabilities : $5,816,482
    Non current liabilities : $839,465
    ----------------------...
    TOTAL : $6,655,947
    ----------------------...

    Accenture's liabilities have almost increased by $2bn , on top of this they have bought back shares and returned money to investors.     Reply
  • commenter
    Dayanand
    Jun 27 08:49 PM
    My Website
    The Truth Behind Accenture’s High Return on Equity [view article]
    OK I might have been a little more aggressive about the 10% return on marketable securities....I guess 5% would be more realistic....

    returning to our main discussion point of relationship between ROE and treasury shares. I tried hard to find a company that had an amount of $860 mn in treasury shares.

    Do you know of any company that has this much amount in treasury shares?     Reply
  • commenter
    Thomas
    Victor
    Jun 27 06:32 PM
    Indian Outsourcing Stocks: Beware The Stronger Rupee [view article]
    Eric,

    Dayanand is correct, no way that CTSH is not going to be impacted by rising Indian wages. The key thing is where is the army of the software developers located?

    My pick now is ACN.

    All of my meagre investment money is in INFY and WIT. Otherwise I would now buy Accenture (ACN). Look at it's P/E ratio. I'm an Indian with a US MBA and currently working in a large California IT shop. I have experience of both the top US mgmt consultants and offshore software companies INFY, HCL & Covansys. Our company has sporadically offshored to those three.

    ACN is located at the top of the food chain in this situation. They already have the established elite top level US consultants. Their problem is to rapidly establish a high quality software factory in India, luring away stars from INFY, TCS etc. plus recruiting from campuses.

    That seems easier for ACN to do than for, say INFY, to establish a Mgmt Consulting presence in the US, and EU. Similar to Mittal and Tata making deals with Arcelor and Corus who are higher up in the food chain maybe the Indian companies should buy out ACN

    Thomas     Reply
  • commenter
    RAJAT BHATIA
    Jun 27 12:01 PM
    Indian Outsourcing Stocks: Beware The Stronger Rupee [view article]
    It is not just the Rupee appreciation that is going to impact Indian outsourcing firms.

    There are other issues too:

    1. Rising wages and salaries in India
    2. Severe shortage of skilled talent
    3. High staff turnover
    4. Competition from the other countries notably - Philippines, some parts of Eastern Europe
    5. Rising cost of office space
    6. Lack of infrastructure - you need to see the mess that Bangalore airport is. Others are no better either.
    7. Last but not the least - growing political pressure in the USA especially from a Demorcat controlled congress     Reply
  • commenter
    sacsharma
    Jun 27 11:26 AM
    Indian Outsourcing Stocks: Beware The Stronger Rupee [view article]
    And also one has to take into account rising salaries in Indian IT sector. I personally know how Accenture had to increase salary of many of its employees because of higher attrition rates.
    Come to Bangalore and you will find how Indian IT employee is the king these days! In some domains, Indian IT salaries stand at only half the corresponding US salaries.
    The only way out for IT companies might be to move up the value chain. The plain vanilla cost arbitrage might not work out that effectively.     Reply
  • commenter
    Dayanand
    Jun 27 09:32 AM
    My Website
    Indian Outsourcing Stocks: Beware The Stronger Rupee [view article]
    Hi Eric,
    Good point on strengthening of rupee. I feel even Cognizant will be equally impacted with this because even it has most of their employees in India who are paid in Indian rupees.

    And as well all know Cognizant's maximum revenue comes in Dollars. So as rupee strengthens their revenue remains the same but the costs increase, becuase they have to spend more dollars to convest to rupees to pay their employees.

    Following is a simple example :

    Let us say Cognizant has a project where they are expecting $1mn revenues each quarter. 40 people are working in India in this project.Avg pay for an employee in this project is Rs25,000 / month which is Rs 75,000 / quarter.

    Therefore net pay for 40 people = Rs3mn / quarter.

    If for first quarter 1USD = Rs 45.00 then the employee cost for that project for that quarter = $66,666 (Rs 3 mn / 45)

    If in the second quarter 1USD = Rs40.00 then the employee cost for the project that quarter = $75,000

    This is an increase in $8,344 which is a whopping 12% increase.

    CONCLUSION : The impact of gain in rupee is not dependent as to where the company is headquarterd instead it depends on its headcount in India. In fact I dont see how Accenture wont be impacted because it is projecting to have around 50,000 people in India by the end of this year.

    Thanks,
    Dayanand
    visit me @ annualreportanalysis.b...     Reply
  • commenter
    Ciba Gator
    Jun 26 06:10 PM
    The Truth Behind Accenture’s High Return on Equity [view article]
    Interesting angle, but I disagree with your conclusion that "from an investor's point of view both have achieved the same result."

    From an investor's point of view, Accenture has returned $100 million of capital to them. They can then reinvest that elsewhere. If the investor can get 15% returns on an alternate investment, then they are better off. Second, Accenture cannot (would not) invest in marketable securities that return 10% -- they must invest in high quality (safe principal) instruments. Accenture is not an investment company and has no business trying to obtain high yields from marketable securities.

    Bottom line: Investors are very sensitive to ROE because they want companies to produce high returns on the equity that has been entrusted to them. By returning capital to shareholders via buyback and still earning the same net income (as you state above), Accenture will earn a higher ROE, which (and this is the Important Conclusion) will be VIEWED AS MORE VALUABLE BY INVESTORS than if the company earned income on marketable securities.     Reply
  • commenter
    Dayanand
    Jun 26 06:00 PM
    My Website
    The Truth Behind Accenture’s High Return on Equity [view article]
    Sharebuybacks are neither irrelevant nor unusual. In fact they are very much relevant and we saw how it increased the ROE. My bottomline is as follows:

    1. Let us say you are comparing Accenture with a company 'X'.

    2. At the beginning of the year both have book value of $2bn. Accenture buys its own shares for $100 mn. And Company 'X' invests $100 mn in marketable securities.

    3. Let us say by the end of the year the marketable securities and Accenture's stock appreciate by 10%.

    So as far as an investor's point of view both have achieved the same result. But the ROE of Accenture is more than company 'X' because its book value has been reduced by 100 mn.

    For calculating the ROE it is assumed that both have same net income.     Reply
  • commenter
    Ciba Gator
    Jun 26 03:54 PM
    The Truth Behind Accenture’s High Return on Equity [view article]
    I agree with your revised math.

    I have no idea why you are suggesting that investors look at the lower ROE figure when comparing Accenture's ROE to other companies. Are you saying that the share buybacks are irrelevant or unusual in nature?     Reply
  • commenter
    Dayanand
    Jun 26 03:45 PM
    My Website
    The Truth Behind Accenture’s High Return on Equity [view article]
    Thanks for your calculations.....
    so if Accenture would not have bought back the shares then the new figures would be as follows:

    Net income $973 mn + 25 mn = $998 mn
    Income before minority interest = $1,430 mn + 25 mn = $1,455 mn
    Book value = $1,890 mn + 725 mn = $2,615 mn (adding $725 mn cash to the book value).

    Therefore the new ROEs are

    ROE (calculated for net income) = ($998 mn / $2,615 mn) = 38.16%
    ROE (calculated for net income before minority interest) = ($1,455 mn / $2,615 mn) = 55.64%

    I guess these are quite close to the figures I calculated in my analysis i.e. 37% and 53%.

    Do I still need to answer the question if Accenture's ROE would be lower if they didnt buy back stock.....the figures are in front of you .....38% and 55% (if they did not buy back shares) compared to the present figures of 51% and 75%.

    But my bottomline was not to prove this point, it was just to make aware to the investors that if they are comparing Accenture's ROE with some other company's ROE then they should make sure they take a closer look at the structure of the book values of both the companies.     Reply
  • commenter
    Ciba Gator
    Jun 26 02:16 PM
    The Truth Behind Accenture’s High Return on Equity [view article]
    Best guess is that the reduction in Paid in capital would be a good approximation for cash spent, or $943 million. 4% interest rate? That leads to $38 million in income or call it $25 million after taxes.

    You already grossed up the denominator -- that was the $725 million you calculated and added back to book value. So you need to add the approx $25 million to the numerator to complete your analysis.

    That boosts ROE by 1%.

    You never answered the question--is your conclusion from your analysis that Accenture's ROE would be lower if they didn't buy back stock?     Reply

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