Accenture Ltd. (ACN)

All Comments on ACN

  • 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
  • commenter
    Dayanand
    Jun 26 02:00 PM
    My Website
    The Truth Behind Accenture’s High Return on Equity [view article]
    1. Can you please make an estimate about interest income. This would add up to the numerator.

    2. The cash that wouldnt have been used to buy back shares would add up to the book value increasing the denominator.

    It would be interesting to see how the numerator and denominator now compare.     Reply
  • commenter
    Ciba Gator
    Jun 26 01:05 PM
    The Truth Behind Accenture’s High Return on Equity [view article]
    Dan,
    In the interests of my sanity I will not harp on about how you have mangled the share count/class structure of ACN's shares. I will just say that when calculating your ROE figure, you have to reduce equity by the value of the minority interest equity value when using the lower share count. That aside....

    If I understand the conclusion of your analysis correctly (please correct me if I am wrong), you are saying that if Accenture had not bought back any shares since 2004 (thereby increasing treasury shares and reducing equity), then their ROE would be lower. Is that right? Two thoughts:

    1) You neglected to add back interest income on the substantial amount of cash used to buy back shares. If you are making the assumption that treasury shares should remain at 6 million, then you have to assume that the cash used to buy those 30 million net shares would be throwing off substantial interest income, which would boost ROE.

    2) OF COURSE if the company lets cash sit in a bank account its ROE will be lower than if it gives that cash back to shareholders. Classic capital allocation decision--maximize returns on capital. If they could take that cash and invest it in business operations or investments that would be accretive to ROE, then they would not buy back shares. But since the company does not need cash to run its operations, they give it back to shareholders.

    A little too much analysis to come to a very basic answer.     Reply
  • commenter
    Daniel Hood
    Jun 26 05:37 AM
    Jim Cramer's Mad Money Lightning Round Picks, 6/22/07 [view article]
    He is working for me Reply
  • commenter
    Daniel Hood
    Jun 26 05:36 AM
    Jim Cramer's Mad Money Lightning Round Picks, 6/22/07 [view article]
    for me Reply
  • commenter
    domnitei
    Jun 25 11:14 AM
    Jim Cramer's Mad Money Lightning Round Picks, 6/22/07 [view article]
    Jim Cramer recommended on June 21st to sell FSLR but the stock is now 7.6% after his recommendation. On June 22nd, he did not mention a single word although FSLR was up $4 after his sell recommendation.
    Whose side is he working for ?     Reply
  • commenter
    Dayanand
    Jun 20 07:12 PM
    My Website
    Why is Accenture's Market Cap Less Than Infosys'? [view article]
    Hi Ciba,
    Please dont get furious, I guess it is for people to decide if my posts are worth there time.Even if you would have written great praises about my analysis that would not mean anything to my readers.

    Because I guess they are smart enough to figure out what makes sense, in fact they might find your remarks about Yahoo finance really amusing because most of my readers are directed from the financial blogs section of Yahoo Finance which I guess they find informative.

    Thanks a lot for your time on writing about my blog.
    Dan.     Reply
  • commenter
    Ciba Gator
    Jun 20 05:14 PM
    Why is Accenture's Market Cap Less Than Infosys'? [view article]
    Dude, you've got your picture on the top of this posting and your name attached to each article. It's your reputation, not mine. If you're trying to say that your advice and insights are worthless because seekingalpha is free, then I guess that we shouldn't waste our time reading what you write. I only posted because you seem to put up a lot of information about this sector and I thought that you actually cared about informing and educating.

    Garbage In Garbage Out. I'm disappointed.     Reply
  • commenter
    Dayanand
    Jun 20 05:09 PM
    My Website
    Why is Accenture's Market Cap Less Than Infosys'? [view article]
    so if Accenture IR does not care then why are we arguing about???.....Well if I apply your freebie theory then seekingalpha is also FREE so you get what you pay for....HA HA HA Reply
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