One of the problems, Vafi and other analysts said, is that while many of BearingPoint's competitors have taken on longer-term projects for clients, such as taking over and managing human-resources administration for large companies, BearingPoint remains focused mainly on providing shorter-term analysis and integration services.
Also, overseas information technology companies, particularly in countries such as India, have increased the competition BearingPoint faces, Vafi said.
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)
Other analysts are more upbeat. David M. Garrity of Caris & Co., said he believes BearingPoint has weathered the worst of its problems and could double its profit in 2005. He said that value is not reflected in its share price, something that could lead the company to sell its federal-sector business because the mergers and acquisition market for government contracting companies is so active now.
Garrity estimates that BearingPoint's federal-sector business could sell for $11 per share, a premium over the company's recent trading price. BearingPoint went public in February 2001 at $18 a share. Shares closed Friday at $9, down 42 cents for the day.
The analyst said he expects some institutional shareholders are pushing BearingPoint to sell. "If you have that big a block of stock, don't you have an interest in going out and marketing it for as much value as you can?," Garrity said.
While denying such pressure, McGeary would not comment on the possibility of a sale.
BearingPoint's consulting and integration services are fairly straightforward: When a company wants to update its accounting or supply-chain systems, for example, it might hire BearingPoint to evaluate its needs, design a new system and integrate the technology with its existing software.
Since the firm spun off from accounting firm KPMG LLP in early 2000, it has found success selling to the government market. In the third quarter, sales to the government grew to $330 million, an increase of 22 percent over the same period a year earlier, and nearly 40 percent of the company's total revenue. But BearingPoint has struggled in the commercial sector. The third-quarter revenue of $57 million from communications and content customers, for example, was down more than 10 percent from the previous year.
Earlier in the month, BearingPoint told investors that it had to reduce two line items on its balance sheet by $3 million each because invoices had been counted twice.
Last week the company said it misclassified $92.9 million in assets, an error that McGeary said was caused by a "clerical" mistake and did not affect its cash flow or earnings for the quarter. The company categorized the $92.9 million as "accounts receivable," but it should have been counted as "unbilled revenue" because the clients had not yet been billed. McGeary said neither of the recent executive changes was related to the financial revisions.
Calls to Falcone and Blazer were not returned. Falcone, who will retire at the end of the month, has been with the firm since April 2003.
Blazer and McGeary were co-chief executives from 1997 to 2002, when Blazer took over the top spot.
Blazer will receive a $2.5 million severance package, according to a filing with the Securities and Exchange Commission.
Falcone's retirement package has not yet been made public, and the company's spokesman declined to comment on the topic.