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Correction to This Article
BearingPoint Inc. earned a profit of $41.3 million in 2003. A chart in the Nov. 22 Washington Business section incorrectly showed a loss for that year.

BearingPoint Leader Plans Shake-Up

By Ellen McCarthy
Washington Post Staff Writer
Monday, November 22, 2004; Page E01

Paul Villella's recruiting firm has seen a surge in inquiries from employees of BearingPoint Inc. in recent weeks. "What we've seen is a lot of concern by individuals who work there" about the future of the company, said Villella, chief executive of HireStrategy, a Reston technology staffing firm.

On Nov. 10, Randolph C. Blazer abruptly resigned as chief executive of BearingPoint, a McLean-based technology consulting firm. On Thursday, Chief Financial Officer Robert S. Falcone announced he plans an early retirement. And the company this month posted two separate revisions to its third-quarter financial results.

Randolph Blazer, shown in 2001, resigned abruptly this month as BearingPoint's chief executive. Eight days later, CFO Robert Falcone said he would retire early. (Michael Robinson Chavez -- The Washington Post)

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The events have fueled speculation among analysts that BearingPoint is a possible target to be acquired and that big operational changes are in store for the 16,557-person company.

Roderick C. McGeary, a board member who took over as interim chief executive after Blazer's resignation, said he is not being pressured by shareholders to sell the company. But he agreed that BearingPoint needs to be shaken up.

"I'm the CEO, and I'm going to make changes," McGeary said when asked why Falcone's retirement announcement came so soon after Blazer's departure. The new chief executive declined to elaborate on the reasons for the changes in the company's executive offices. But he said, "BearingPoint should be performing, on an earnings-per-share basis, significantly better than it is, and our board is very focused on having the appropriate returns for our shareholders."

McGeary said the company's government sector and the sector selling information technology consulting to major U.S. companies are doing well. The most troubled parts of the company, he said, are those focused on selling services to small and medium-size business in both the United States and Europe.

Analysts say technology spending in Europe slumped just as the company was making investments in overseas operations.

"They were buying into a soft, deteriorating market landscape," Joseph A. Vafi, an analyst with Jefferies & Co., said of BearingPoint's 2002 acquisitions of the Austrian, German and Swiss consulting practices of German auditing firm KPMG DTG and of several overseas practices of Andersen Worldwide. Tough labor laws have made it difficult to reduce staffing in Europe, and in February the company said it would take a $120 million charge related to its acquisitions there.

McGeary said BearingPoint started its initiative to sell services to small and medium-size businesses domestically and abroad several years ago but has been disappointed with its results. The company also needs to reduce its sales and administrative costs, he said, and executives are evaluating whether to reduce its efforts to sell to smaller companies or exit some of those markets altogether.

Some analysts say the abrupt management changes of recent days could indicate significant problems at the company. "I just think two unexpected resignations back-to-back, they don't bode well for what the future might hold," Vafi said. "Guys don't resign unexpectedly when things are going well."

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