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1 Comment
Credit-Suisse Smiles on Data Processors Accenture, Cognizant; Frowns on EDS, Affiliated
ACN's recent signings have been far more heavily concentrated in IT (Capital Intensive) deals, which will seriously squeeze margins and put a sleeper hold on future mega deal pursuits. They can't afford to sign many more deals like they've been signing, and access to capital in the current environment will hamper growth in the low-lying fruit of IT-heavy deals.
As for EDS, he apparently hasn't bothered to understand what's been going on behind the numbers. EDS has made some huge investments in its own infrastructure and built out its global delivery capacity, over the last several years. Free cash flow was constricted as a result, but it is now in position to digest a much higher rate of new contract signings over the next decade. With its strategic partnerships, EDS has trumped IBM by standardizing other outsourcers' "custom" solutions.
I agree that Cognizant is a formidable contender in some regards, but no matter what happens to the Rupee or wages in India, the economic impact will affect all major players in this field, since all have built up a sizeable presence there. I personally believe the price/wage gap between India and the west will continue to close quickly, eventually eliminating much of the benefit of off-shoring to India. Other places (i.e., China, Vietnam, the former Soviet Bloc countries) will become the future low-cost providers. It is too early to tell which of the major outsourcing firms will be able to catch the bouncing ball, but I seriously doubt that a cash-strapped ACN will be able to keep up with the leaner -- and much more experienced -- EDS.
Time will tell... but as far as investments are concerned, picking the two most expensive stock valuations (who are not industry leaders) is a recipe for financial ruin. Do your own due diligence, and never take advice from a bozo like this guy.