Amdocs DOX reported fourth-quarter and fiscal 2009 results that were in line with our expectations, and we are leaving our fair value estimate unchanged. For fiscal 2009, overall revenue fell 9.5% to $2.87 billion, with foreign currency fluctuations accounting for 3.5 percentage points of the decline. Amdocs' results reflected a very tough operating environment characterized by an elongated sales cycle and unwillingness by customers to engage in new projects, especially large transformational initiatives. With Amdocs deriving almost 30% of its revenue from project-based services, any cutback in discretionary IT spending by carriers will have an adverse impact on the company's top-line growth, and that is what happened in the last four quarters. The decline in demand for project-oriented business was partially offset by stable demand for the company's managed services and maintenance support services business. These services, which account for about 70% of total revenue, are considered critical by carriers and hence the funding for these services was spared from budget cuts.The trend seems to be improving of late for Amdocs. Management's tone during the earnings call indicated that the operating environment is gradually improving, with a slight pickup in demand for smaller project-based services. Management did caution that it's too early to look for any recovery in large transformational deals. Amdocs enters fiscal 2010 with a backlog of $2.38 billion, which is marginally down year over year but essentially flat with the last quarter. The backlog typically contains long-term contracts (managed and maintenance service projects) and is a good indicator of revenue growth prospects. Despite a significant decline in revenue, Amdocs, through its cost-cutting initiatives, managed to maintain its operating margin at 12.8%, essentially flat with the prior year. As a part of its effort to cut costs, Amdocs laid off some of its employees, moved part of its workforce to low-cost offshore destinations, and reduced its spending on discretionary items such as travel and marketing.
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Analyst Notes
07-23-09 | 11:49AM Amdocs Reports 3Q Results
07-20-09 | 3:59PM Amdocs' 3Q Earnings Preview
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