9 U.S. IT Service Providers - The Good, The Bad, and The Hairy: Morningstar.com
Morningstar
surveyed the U.S.-based information technology services firms landscape
and sorted the
key players into the good, the bad, and the hairy.
The Good: Morningstar would willingly invest in these companies' shares if they traded at the proper discount to fair value estimate.
- Accenture (NYSE:ACN), Rating: 2 Stars
- Computer Sciences (NYSE:CSC), Rating: 5 Stars
- Electronic Data Systems (NYSE:EDS), Rating: 5 Stars
The Bad: Morningstar would avoid these companies, as they face the brunt of competitive threats.
- Keane (NYSE:KEA), Rating: 3 Stars
- Sapient (NASDAQ:SAPE), Rating: 1 Star
- Unisys (NYSE:UIS),
Rating: 1 Star
The Hairy: Morningstar likes these firms, but for various reasons, cannot wholeheartedly recommend their shares.
- Affiliated Computer Services (NYSE:ACS), Rating: 4 Stars
- BearingPoint (NYSE:BE), Rating: 3 Stars
- Perot Systems (NYSE:PER), Rating: 4 Stars
The key problems confronting the U.S. firms, according to Morningstar:
- Indian firms have been disruptive to the entire industry, exerting pricing pressure through lower-priced contracts.
- Commercial clients are starting to use multiple vendors for shorter-term projects; by slicing up the contracts, they can send appropriate work to Indian firms.
- Most U.S. firms have set about developing offshore operations to create a global delivery network.
- The companies are not immune to more typical problems such as management turnover and regulatory filing delays.
