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Four analysts and top management from thirteen sector firms examine the IT Consulting & Systems Integration sector in this 67 - page IT Consulting & Systems Integration Issue from The Wall Street Transcript available at (212/952-7433) or http://www.twst.com/info/info600.htm

TWST: Adam, will you begin for us today by going over what you include in your coverage universe?

Mr. Frisch: We cover the computer services and IT consulting sector, which includes outsourcing companies such as Electronic Data Systems (EDS) and Computer Sciences (CSC); IT consulting and systems integration firms such as Accenture (ACN) and DiamondCluster (DTPI); and transaction processors, including Automatic Data Processing (ADP), Paychex (PAYX) and Ceridian (CEN), with others to follow. We also follow several companies with more of a niche focus, such as PEC Solutions (PECS) and SRA International (NYSE:SRX) in the federal IT services space, Tier Technologies (TIER) in the state/local government IT services space, and Cognizant Technology (CTSH) in the offshore application management and development sector.

TWST: So within the IT consulting space, how have the stocks performed year to date?

Mr. Frisch: With the exception of SRA International and Cognizant, most stocks have been down with the market. The consultants were the first to get weak, and they were followed by the outsourcers and, most recently, the payroll processors.

TWST: How much has the industry been affected by the tech bubble burst?

Mr. Frisch: I think the industry was materially affected by the tech bubble bursting on several different fronts. First, I don’t believe this industry has ever seen the huge demand build-up for services as it did in the late 1990s and early 2000, and the demand was being driven by what we would call “natural” factors like Y2K and “market” factors like the Internet frenzy and general robust IT spending on new technologies and products. All of these things happening simultaneously enabled most companies in the services space to hire aggressively, realize high rates of utilization, and charge exorbitant fees to clients. In the discretionary space, all of the primary operating levers (including pricing, people, and utilization) were pinned to the right because demand was so strong. We obviously saw that dry up first with the dot-coms and then with broader corporate technology spending patterns.

TWST: As IT consulting is already working with the federal government, can investors still get involved with the names there?

Mr. Frisch: I believe they can because the growth will likely be sustainable in the space, but the valuations are what investors need to be careful about. Many of the stocks will probably move together as group, especially the pack that focuses more on the federal side of the business, including SRA International, ManTech (MANT), Anteon (ANT), CACI (CACI), and American Management Systems (AMSY). There are several names that have recently gone public, so we have limited data in terms of their ability to execute as public companies, but we would expect the better management teams in the space to trade at a premium to the group over time. Should one of the names falter, then the group would likely take a hit, but we believe investors should take advantage of such a move and buy the better names on dips. Our top picks in the government space are PEC Solutions and SRA International.

TWST: Which companies are best suited for this current environment where consumer demand is slumping but federal government is on the rise?

Mr. Frisch: The ones that have more government exposure. Those are some of the names I mentioned before, including PEC Solutions, which boasts an internal growth rate of 30%-40% and total top-line growth in the 65%-75% range. SRA International is also a company we are positive on due to its growth and margin expansion opportunities.

1) Special Focus - IT Consulting & Systems Integration Issue, In an in-depth (9,600 words) Analyst Roundtable, Cynthia Houlton, a Senior Analyst at RBC Capital Markets, Prakash Parthasarathy, a Senior Equity Research Analyst for Banc of America Securities, Christopher Penny, a Senior Analyst and Vice President in FBR & Co., examine the outlook for the sector and share specific stock recommendations.

2) Computer Services & IT Consulting - In an in-depth (3,300 words) Analyst Interview, Adam Frisch, an Executive Director at UBS Warburg, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of ten - sector firms examine the outlook for their firm and the sector.