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Playing for the Real Money in Homeland Defense

"And it's probably a more important deal for CSC because its future is dependent on continuing to penetrate the government sector," Bourgeois added. (His firm doesn't have an investment banking business.)

In fact, it's those differences that have prompted John Rutledge, portfolio manager of the Evergreen Technology Fund, to favor Accenture over Computer Sciences.

"I like to invest in Tier 1, Class A [companies] within an industry, and clearly Accenture is a Class A company by all measures," said Rutledge, whose fund counts Accenture as its sixth-largest holding. "CSC has a long history of disappointing investors once every six quarters."

Strong government sales at Accenture -- a 29% increase year over year in the February quarter -- have helped offset weakness in such sectors as communications and high-technology, Rutledge noted. But Rutledge is expecting those sectors to pick up as the economy improves, a thesis supported by an 18% year-over-year jump in communications and high-tech sales in the February quarter vs. a 6% increase in the November quarter.

The Remora Factor

Given the billions in revenue already collected by the leading companies, the contract could, in fact, have a bigger impact on a smaller subcontractor such as Unisys (U), Shaw noted.

Just last week, her colleague, Schwab SoundView analyst John Jones, upgraded his rating on Unisys to outperform from neutral, in part because it's a subcontractor on Lockheed Martin's US-Visit bid.

"US-Visit could represent the best near-term opportunity in Unisys," Jones wrote in his May 19 note. With about one-third of the total contract set aside for subcontractors, he figured that if Lockheed wins, Unisys could gain $800 million in revenue over 10 years, with the bulk of the contract starting in 2007.

Unisys earned $29 million, or 9 cents a share, on $1.5 billion in revenue in the first quarter. (Schwab SoundView hasn't done any banking with Unisys.)
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