Want CNET to notify you of price drops and the latest stories?

Ups and downs for IT firm Affiliated

The information technology and business services company reports record earnings--the 33rd consecutive quarter Affiliated has achieved double-digit growth. Investors shrug.

Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
Ed Frauenheim
2 min read
Information technology and business services company Affiliated Computer Services could not buck a down day on Wall Street despite posting record earnings Tuesday.

Shares of Affiliated fell 67 cents, or 1.28 percent, to $51.74, even though the Dallas-based company said its December-quarter earnings jumped 26 percent year-over-year to 53 cents per share.

Affiliated's revenue rose 24 percent year-over-year to $929 million. Net income for the quarter was $74 million, an increase of 33 percent from the previous-year period.

"Quite simply, this was the best quarter in our history," Affiliated CEO Jeff Rich said.

Tuesday's announcement met Wall Street analysts' average profit-per-share expectation and marked the 33rd consecutive quarter that Affiliated has achieved double-digit earnings growth.

The company is riding high by handling business tasks such as insurance claims processing, student loan collections and human resource functions. The so-called business process outsourcing market is expected to grow from $124 billion in 2001 to $178.5 billion in 2005, according to research firm Gartner. Investment firm SG Cowen Securities expects the BPO market to jump by 10 percent to 15 percent in both 2003 and 2004, while IT services generally will grow just 5 percent to 6 percent this year and 6 percent to 10 percent next year.

Affiliated began in 1988 as an IT services provider, but now two-thirds of its revenue comes from BPO deals. The company posted annual revenue during the last fiscal year of $3.1 billion, and it employs more than 38,000.

In the December quarter, Affiliated signed new contracts with Motorola, Ingram Micro and the New Jersey EZ Pass Program.

Affiliated's fast growth compares with more tepid results at other IT services providers such as Electronic Data Services and IBM. Those companies and other competitors also are trying to make headway in the BPO market.

Affiliated said Tuesday that it was comfortable with Wall Street's average estimates of earnings of 56 cents per share in the March quarter and 59 cents per share in the June quarter.

Affiliated's good news, however, seemed overshadowed by war worries among investors. A warning from President George W. Bush, that Iraq's leader, Saddam Hussein, has "been given ample time to disarm," sent CNET's Tech Index sliding 12.22 points, or 1.21 percent, to 994.90. The tech-heavy Nasdaq composite index retreated 11.94 points, or 0.87 percent, to 1,364.25, and the Standard & Poor's 500 index lost 14.16 points, or 1.57 percent, to 887.62.