CSC Keeps Growing; KPMG's Sales Drop 16%CSC Keeps Growing; KPMG's Sales Drop 16%

Computer Sciences Corp. last week reported healthy growth, indicating that IT outsourcing continues to provide a vital revenue source for consulting companies as businesses look for ways to cut costs. And as slumping rival KPMG Consulting Inc. shows, firms dependent on systems integration and traditional consulting are hurting.

Revenue for CSC (CSC-NYSE) jumped almost 9% to $2.90 billion for the third quarter ended Dec. 28. Net income for the quarter reached $87.1 million, up 33% from the same quarter a year ago. Growth was driven primarily by outsourcing for businesses and the U.S. government. Commercial outsourcing revenue grew 7.2%, to $2.2 billion, led by a five-year, $1.1 billion extension of its contract with United Technologies Corp. Outsourcing revenue from the government rose 13.9% to $737.5 million.

Rival KPMG Consulting (KCIN-Nasdaq) struggled, with revenue for the quarter falling about 16% to $593.2 million compared with a year ago. Cost-cutting helped push the firm's net income to $6.6 million, compared with a loss of $37.6 million a year ago. KPMG Consulting relies mostly on systems integration and consulting. Integration work depends on major software companies selling licenses that require companies to hire integration consultants. Systems integrators believe the slide won't get worse, Lehman Brothers analyst Karl Keirstead says, but they haven't yet seen any material signs of a recovery.