2Q04 Affiliated Computer Services Initial Response
Author: Eugene Zakharov, PSBQ Director
Published: 7.30.2004
Calendar Quarter: 2Q04
Fiscal Quarter: 4Q04

In 2Q04 (fiscal 4Q04), Affiliated Computer Services closed its fiscal year on a good note. The company reported an increase of 15% in its net income on a year-to-year basis, driven by sales growth, prior acquisitions and accelerated payments on certain contracts. Despite some operational issues during the year (the state of Georgia contract and inquiries into state of Florida contract practices), TBR believes ACS had a successful fiscal year, reaching a number of important milestones and finishing an important transition year for the company, overall. In FY04, ACS divested the majority of its federal government business to Lockheed Martin, successfully selling off the remainder of the Hanscom Air Force Base contracts and concluding its federal divestiture program initiated in July 2003. ACS is still able to serve clients in the education and healthcare markets at the federal level, and has successfully renewed its long-standing relationship with the Department of Education. The contract with the Department of Education now represents approximately 5% of the company’s revenue and remains ACS’ single largest client. Education and healthcare have always been important markets for the company at many levels, and TBR believes ACS will continue to be one of the leading outsourcing companies in these markets.
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