NEW YORK, NY--(Marketwire - Jan 29, 2013) - 2012 was a difficult year for information technology (IT) services companies such as Xerox Corp. and Accenture Plc as concerns over the weakening global economy and uncertainty resulted in businesses scaling back their spending on technology. Although the global economy is far from stable, the outlook at the start of this year has been better. This should boost corporate spending on technology and help IT services companies.
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In the last two years, the global economic environment has remained uncertain. The debt crisis in the Eurozone, which is now into its fourth year, has pushed a number of economies in the region into a recession. A number of companies in the region have been forced to cut back their investments, including in technology. Apart from the ongoing Eurozone debt crisis, business confidence was also hurt last year by concerns over a slowdown in China and the U.S. fiscal cliff issue.
As businesses scaled back their technology spending as part of cost-cutting measures, IT services companies faced a challenging environment. Exchange rate fluctuations also had a negative impact on bottom-lines. While the global economy is still far away from a complete recovery, there have been signs of improvement, especially in China and the U.S. In the U.S., the last minute fiscal cliff deal also ended some uncertainty, although issues such as long-term spending cuts and debt ceiling still remain unresolved. A timely resolution to these issues should boost business confidence and boost investment, which augurs well for IT services companies. Also, while the Eurozone is likely to remain weak, recent business confidence data from Germany was better-than-expected.
Xerox, which over the years has been known for its printing business, has been shifting its focus to IT services business. The company had entered the business back in 2009 through the acquisition of Affiliated Computer Services Inc. The shift from printing business to services was reflected in Xerox's fourth quarter results, which were released last week. In a conference call with analysts last week, Ursula Burns, Chairman and CEO of Xerox, said that the company was going through a seismic shift and 2012 had been a year of alignment.
For the fourth quarter of 2012, Xerox reported total revenue of $5.9 billion, down 1% over the same period in the previous year. Services revenue, which accounted for 52% of the total revenue in the fourth quarter, rose 7% on a year-over-year basis. Xerox also maintained its earnings guidance for full-year 2013. Burns believes that the company is well equipped to meet its target even though she did not expect economic conditions to improve much.
Apart from uncertain economic environment, exchange rate fluctuations have also had a negative impact on IT services companies' results. Last month, Accenture announced its expectation that net revenue for the second quarter of fiscal 2013 to be in between $6.9 billion and $7.15 billion, assuming a foreign-exchange impact of negative 1% compared with the second quarter of fiscal 2012.
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