Sales Up, Profits Down At ACS

Dallas-based outsourcer reports mixed results for second quarter.
Technology outsourcer Affiliated Computer Services on Thursday reported mixed results for its second quarter.

Sales during the period increased 7% year over year to $1.6 billion, but net income slumped 7.5% to $75.5 million. Earnings per share declined 5%, to 77 cents.

Wall Street analysts surveyed by Thomson Reuters, on average, were looking for EPS of 79 cents.

For the third quarter, ACS said it expects to post EPS of between 92 cents and 95 cents.

"ACS has a recession-resistant model that performed well again this quarter," ACS president and CEO Lynn Blodgett said in a statement. "We have also undertaken several initiatives that will further increase the resiliency of our business. We are proactively managing the business to take advantage of opportunities in this market."

During the quarter, ACS signed outsourcing contracts worth a total of $853 million, with recurring annual revenue of $202 million. The quarter also saw the company acquire Grupo Multivoice for an undisclosed sum. Argentina-based Grupo Multivoice provides a range of business process outsourcing services.

Tech services appear to be holding up reasonably well despite the recession. On Wednesday, business software specialist SAP reported that sales of software-related services increased 8%. "The services pipeline doesn't look too bad," said Bill McDermott, SAP's president of global field operations, in an interview.

Product sales, however, are taking a hit from the downturn. SAP's software sales fell 7% year over year. Last week, Microsoft reported that sales of the Windows operating system declined 8%, while sales of Microsoft Office to consumers plunged 23%. Microsoft said it would lay off 5,000 full-time employees in order to deal with the recession.

Shares of ACS were up 6.13% to $47.47 in midmorning trading Friday.