Bond, Thanks for the report. Before I used to kind of tend to ignore analyst reports. But in the last 6-10 months, I have begun to appreciate analyst reports. Their prediction may prove to be wrong, but whenever I read (BBRS, ML, Multex...) I tend to agree with them...
Oh well, when is Desai going to show 30-40% sequential revenue growth? which should be easy given the industry scenario... The reason CATP/CHRZ etc were up on Friday...
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NEW YORK -(Dow Jones)- Computer services companies generally had
solid results in the seasonally slow fourth quarter but analysts aren't
expecting blowout results.
The final quarter of 1998 was marked by volatile stock prices in the sector, as the broader market's declines spurred concerns that computer services' clients would cut 1999 technology budgets.
In addition, stock-price declines caused investors to believe that
some of the computer services companies wouldn't be able to maintain
their growth because so much of it is dependent on acquisitions.
Despite the stock drops, most of the companies in the sector said
they experienced strong demand for services in the fourth quarter,
according to SBC Warburg Dillon Read LLC analyst Moshe Katri.
Installing networks, implementing enterprise resource planning, or
ERP, software, and integrating computers and software to allow companies to conduct commerce and communicate over the Internet were key growth areas.
In the fall, analysts believed companies would cut their 1999
technology budgets, but now they believe that most corporations' tech
budgets will stay on par with 1998's spending levels or increase
slightly.
BT Alex. Brown Inc. analyst Ed Caso said he anticipates that the
slowest rate of growth in technology spending will be among large banks
and brokerage firms that have suffered credit and trading losses during the market's tumult.
Year 2000 services, which fueled strong growth at Keane Inc. (KEA)
and Computer Horizons Corp. (CHRZ) this quarter, took a back seat to
other areas. Year 2000 revenue is said to have peaked at both companies
in the third quarter.
BT Alex. Brown's Caso estimates year 2000 services will come in at
$100 million, or 34.5% of Keane's fourth quarter revenue, which he
estimates at $290 million, or 38 cents a share. In the year-ago period, Keane earned 20 cents on revenue of $207.6 million.
Computer Horizon's year 2000 services, like Keane's, are also a
shrinking portion of overall revenue. Caso said he expects year 2000
services to account for $37 million, or 25% of Computer Horizon's
overall revenue of $145 million.
While many computer services stocks hit 52-week lows during the
fourth quarter, the impact on Ciber Inc. (CBR) was acute in that it
idled the company's acquisition activity, most of which has been stock
transactions.
Adams Harkness & Hill analyst Kevin Yen estimated Ciber earned 23
cents in the quarter on revenue of $174.8 million, 60% of which came
from staffing. In the year-ago quarter - which is Ciber's second fiscal quarter - the company earned 16 cents, excluding three cents of merger costs, on revenue of $141.7 million.
For Cambridge Technology Partners Inc. (CATP) - one of the biggest
third-quarter disappointments - the fourth quarter was a transition
period. Cambridge reorganized its former North American rapid
application development unit, RAD, to focus on eight key services areas.
Weakness in the RAD unit had led to below-expectation third-quarter
revenue growth.
Merrill Lynch & Co. analyst Richard Park said he expects Cambridge
Technology will post earnings of 25 cents on revenue of $162 million. In
the year-ago quarter, the company earned 18 cents, excluding eight cents
of business combination costs, on revenue of $128.8 million.
At Electronic Data Systems Corp., the appointment of former Cable &
Wireless PLC (CWP) Chief Executive Richard Brown as EDS' chairman and
chief executive during the quarter was viewed as a sign that the company
was embarking on a bold turnaround effort. Brown, who replaces retiring
Chairman Les Alberthal and starts Jan. 15, has a reputation for
revitalizing companies.
Merrill Lynch & Co. analyst Stephen McClellan said he expects EDS
will report earnings of 52 cents in its fourth quarter on revenue of
$4.65 billion. The estimate excludes a two-cent charge for the severance
package of Vice Chairman Gary Fernandes. In the year-ago period, EDS
earned 62 cents on revenue of $4.23 billion.
Computer Sciences Corp. (CSC) scored a multibillion contract during
the December quarter - its third fiscal period - with the Internal
Revenue Service. Analysts expect Computer Sciences to get $2 billion to
$3 billion from the 15-year contract, which involves modernizing the
IRS' computers.
The contract was Computer Sciences' first significant win since 1997
when the company won a $3 billion contract with DuPont Co. (DD),
according to Warburg Dillon Read's Katri. He said the IRS contract
reinforces earnings estimates for the fiscal year ending March 2000. The
contract also re-establishes CSC as a leading contender for global
outsourcing awards, he said.
BT Alex. Brown analyst Caso estimated Computer Horizons earned 38
cents in the fourth quarter. In the year-ago period, the company earned
28 cents, excluding a three cent non-recurring charge, on revenue of
$99.6 million.
Copyright (c) 1999 Dow Jones & Company, Inc.
All Rights Reserved.
Just my 2 cents...
DB |
