Computer Services Outlook Brighter for 2003
By Bill Snyder
12/31/2002 04:23 PM EST
The logjam of major computer services deals is starting to break up, a development that could signal a better 2003 for IBM (IBM:NYSE - news - commentary - research - analysis) and its major competitors, according to a note released Tuesday by SoundView Technology Group.
SoundView analyst John Jones Jr. reaffirmed his optimistic call that IBM's fourth-quarter earnings will come in at $1.34 a share or slightly higher, compared with consensus estimates of $1.30, in large part due to the strength of the company's services business, which accounts for 45% of IBM's revenue and profit.
Jones estimates that services revenue in the fourth quarter of 2002 (excluding revenue generated by the recently acquired PricewaterhouseCoopers consulting business) will hit $9.4 billion, up 4% year to year, and 6% quarter to quarter. He expects PWCC to add another $1.3 billion in services revenue, with $300 million being pass-through that does nothing for the bottom line.
He also forecasts bookings, or expected revenue over the life of a service agreement, of about $18 billion for the quarter, bringing 2002 bookings to a record $52 billion to $53 billion. Since mid-November, IBM has booked deals totaling about $7.3 billion, including a seven-year, $5 billion agreement with J.P. Morgan.
For the fiscal year overall, Jones expects IBM to post revenue of $81.4 billion and earnings of $3.97 a share; the consensus is for revenue of $80.7 billion and earnings of $3.91. Last year the company had revenue of $83.8 billion and earnings of $4.58 a share.
Also scoring big outsourcing deals in the fourth quarter were Computer Sciences (CSC:NYSE - news - commentary - research - analysis), with three major deals totaling $973 million, and Electronic Data Systems (EDS:NYSE - news - commentary - research - analysis), which booked a $1.5 billion deal with ABN Amro.
Does the fourth-quarter surge presage a more robust 2003? According to Jones, more than $40 billion in deals are up for grabs in early 2003, "materially higher" than in the first part of 2002. Paradoxically, the tight economy makes it harder for companies to approve expensive, long-term deals. On the other hand, outsourcing is seen as a cost saver.
My reference was to the functions the people perform as compared to the term top management.
CIO is active in seting policies that dictate how business is done, an active management role.
CEO usually manages costs and act as or is a member of the BOD, not what one would think of as top management.
CIO is a product of a sales job by IBM on the high tech industry.
CEO's or Chairmen are THE authority in top management, IT for the most part in American industry is considered a cost center NOT a profit center.
Oh, I forgot - CSC only hands out money to Van and His Merry Men, not the shareholders. Those folks who 'bought the market' yesterday will be suffering from remorse over this PoS before long.
Yes I know I made a mistake about the location of Oxford Health.
Nobody in top management considers the CIO a member of top management, that's the planet I am from.
If you think the CIO is REALLY a member of top management, you don't know the real story.
..yup, it's in the Nutmeg State, just as I stated - right in Norwich's back yard, and they still couldn't keep the contract! But look at the bright side - the $10 million in 'accelerated' revenue! This could be CSC's new business model - screw up so badly that your clients PAY you to GO AWAY! Oh, CSC stock was up today - Dubya's proposal to eliminate taxes on DIVIDENDS did wonders for this PoS.