Mr. Shirvaikar: I like Accenture; we rate it a "buy." As you know, it is an IT services company, and such companies tend to be late cyclical. So when we upgraded late last year, one of the factors we considered was that the volume of demand for Accenture services would gradually improve over the course of the year. So we have gone a couple of quarters, we have seen sequential improvement. Over the next couple of quarters, we would expect to see that continue. We would also look for positive commentary on the consulting front with regards to their bookings. A partial offset to that is that the strength of the dollar versus the euro and the British pound hurts reported growth. So that could offset some of the benefits of the fundamentals improving. But in spite of that, if you combine the improving fundamentals in terms of higher volumes, modest margin improvement, their solid balance sheet and cash flow, tendency to return cash to shareholders and valuation, it makes a pretty good case to own the stock.
TWST: Would you speak to the threat that offshoring poses to Accenture?
Mr. Shirvaikar: Coming out of the last downturn, the offshoring of services was a threat. One of the good things that Accenture has done over time is that they have developed their offshore capabilities to a large extent. Today when clients have a need to perform work in a lower-cost location, they can do it as well as an India-based company. So I view them very much like an Indian offshore company because they have a similar cost structure in India and they have similar billing rates for most of their services. From that standpoint, we believe that the growth of Accenture's Indian workforce is a positive. Well-run Indian companies tend to have higher margins than traditional IT services, companies in the U.S. and Europe. And as Accenture builds its lower-cost infrastructure, it should help lift gross margins over time towards the levels that offshore companies have displayed over time. Now one of the risks that does come up is the potential for revenue cannibalization. This has been a modest impact over time - nothing serious - because a lot of the work that Accenture does in India is work that it didn't do before - applications outsourcing, remote infrastructure management, BPO, things of that nature. It's not as though they have a very significant amount of development work that gets cannibalized. In the context of the multiyear period over which the transition occurs and the specific mix of how Accenture provides services, we do not think it is a massive impact.
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