Accenture On Oracle’s Radar?

Accenture (NYSE:ACN) seems to be struggling to keep up with the market’s expectations. Q2 results for the current fiscal were disappointing, with revenues of $5.2 billion falling 2% over the year. On a constant currency basis, revenues would have been 8% lower. EPS of $0.60 marked a decline of 5% over the previous year. The market was expecting revenues of $5.21 billion with EPS of $0.61.

Consulting revenues fell 3% over the year to $2.93 billion and outsourcing revenues remained flat at $2.24 billion. By region, revenues from America fell 4% over the year while Europe, the Middle East, and Africa (EMEA) reported a 1% decline. Asia Pacific revenues grew 6% over the year.

But still, the situation seems to be improving. Accenture reported new bookings worth $6.52 billion in the quarter. The company ended the quarter with more than 181,000 employees, and the quarter’s utilization was 88%. Attrition rose to 15% compared with 12% a quarter ago and 9% a year ago. Accenture plans to hire more than 50,000 people around the world in the current fiscal year.

During the quarter the company repurchased or redeemed 10.4 million shares for $434 million, including 2.4 million shares repurchased in the open market.

Accenture is launching new service and product offerings for their clients. They recently launched a new data management platform to help clients manage, integrate and analyze real-time data to transform the data into actionable and predictive insights and help accelerate grid implementations while reducing deployment risks. The company released a secure, high-speed, high-volume mobile financial transaction software solution for telecommunications service providers and large banking institutions to tap into the growing mobile device market. It is also acquiring and tying up with smaller players. Recently, it acquired Rio de Janeiro-based Risk Control, a software firm with a platform that focuses on financial services institutions to help them manage, monitor, and evaluate balance-sheet exposure to market risk factors such as fluctuations in interest rates, foreign exchange rates, stock prices, indices, or commodities prices. It also tied up with SAS to release the next generation of predictive analytics products and services.

The company projects Q3 revenues of $5.5 billion-$5.7 billion. The market was projecting revenues of $5.56 billion. For 2010, Accenture expects revenue growth of negative 3% to positive 1%. It has lowered their EPS outlook for the full year by $0.06 to $2.61-$2.69.

The stock is trading at $42.40 with a market capitalization of $26.8 billion. Earlier this year it touched a 52-week high of $43.89.

Gartners predicts the enterprise application market to grow consistently to over $14 billion by 2013. Accenture is known for its IT consulting offerings, and it could be a potential acquisition target for bigger IT players. It is already a leader among Oracle service providers with a strong practice in all major Oracle product lines and across industries. Annual revenues for Oracle services for Accenture are estimated at more than $2 billion. It could be a good fit for Oracle, which recently completed the acquisition of Sun. Cisco could be another interested party as it too needs a big services acquisition to compete with HP or IBM. Oracle and Cisco, eventually, will need to acquire their own service arms just as HP did earlier by acquiring EDS.

For Oracle, Accenture would be a natural fit.