Affiliated Computer Services (ACS) Inc. was the only bright spot in a rather dim week for channel stocks.
Shares in the Dallas, Texas-based IT outsourcing specialist rose 5.72 percent for the week ended Nov. 24, even as our overall Ziff Davis Channel Zone Stock Index slipped a modest 2.05 percent, closing at 1022.87.
ACS won a $1 billion, five-year contract with the U.S. Department of Education. Under terms of the deal, ACS will provide loan servicing, consolidation and portfolio management services. Electronic Data Systems Corp. (EDS, -1.89 percent), a subcontractor on the deal, will provide systems engineering and software development services worth $180 million over 5 years.
Only three other stocks in our 30-member index -- Unisys Corp. (UIS, +2.87 percent), Perot Systems Corp. (PER, +2.61 percent) and GTSI Corp. (+1.35 percent) -- managed to gain more than 1 percent during the week. Overall, losers routed winners by a tally of 23 to 7.
On an upbeat note, Unisys opened a lab that allows customers to design and deploy applications using beta versions of Microsoft Corp.'s BizTalk Server 2004. Thomson Financial endorsed the lab after using it to design new e-business applications in partnership with Unisys and Microsoft. Unisys also benefited when J.P. Morgan predicted the company would profit from a potential IT spending up-tick.
The Decliners
Meanwhile, the biggest one-week index decliners were PC Connection Inc. (PCCC, -16.13 percent), Computer Sciences Corp. (CSC, -7.01 percent), Sapient Corp. (SAPE, -5.55 percent) and Ingram Micro Corp. (IM, -5.28 percent).
PC Connection's nosedive occurred when the General Services Administration (GSA) canceled a lucrative government contract with the direct marketer of IT products. The move involved PC Connection's GovConnection Inc. unit, which may have sold unqualified systems to the government, according to a PC Connection press release issued Nov. 17. The matter has been referred to the Department of Justice for review. PC Connection says it intends to cooperate fully with the potential review.
Losing the GSA deal is a painful setback for PC Connection. During the first nine months of 2003, the GSA contract represented about $56 million in revenue and about $4.8 million in gross profit for PC Connection. As of this writing, PC Connection's board is conducting an internal review of the matter.
Looking ahead, most channel eyes are now on Tech Data Corp., which is scheduled to announce 3Q results on Tuesday, Nov. 25. The Clearwater, Fla.-based distributor saw year-over-year net income plummet 45 percent to $38.7 million during the first half of this year. At the time, Tech Data blamed the declines on fierce pricing competition in the IT marketplace.
Still, there are high hopes for Tech Data's 3Q results. Wall Street expects the company to deliver earnings of 43 cents per share, according to consensus estimates from Earningswhispers.com.
A holiday reminder: U.S. markets are closed on Thursday for Thanksgiving and close three hours early on Friday.
The Ziff Davis Channel Zone stock index tracks 30 channel-related stocks on a weekly basis. We don't recommend buys, sells or holds. Rather, the index seeks to measure the channel's financial health. We launched the index on October 24 with a value of 1000. Each stock in the index is equally weighted. For example, if one stock rises 5 percent and another falls 4 percent, the net result is a 1 percent gain.
Joseph C. Panettieri (joe_pan5@yahoo.com) has covered Silicon Valley since 1992. He is editorial director of the New York Institute of Technology and founder of JCP Media Inc.
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