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Wall Street Skeptical of BearingPoint's Plan

By Ellen McCarthy
Washington Post Staff Writer
Thursday, January 27, 2005; Page E05

BearingPoint Inc.'s top executives tried to sell Wall Street analysts on the company's turnaround strategy yesterday but met skepticism because they offered few details.

Roderick C. McGeary, who took over as chief executive after Randolph C. Blazer left suddenly in November, said the McLean consulting firm's goals include tightening financial controls, increasing its rate of employee retention, cutting sales and administrative costs, and discontinuing international offices that aren't bringing in profit. McGeary said he hopes many of the changes will be made, or at least begin, by late spring.

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But in questions during the meeting in New York and in comments afterward, analysts said they had hoped to hear more details.

"They are certainly aware of what their problems are," said David M. Garrity, an analyst with Caris & Co. But, he said, "I don't come out of the meeting feeling emboldened."

Profit at BearingPoint, whose services include software development and technology integration, has disappointed investors in recent years. The company also has said that it is struggling to meet the accounting standards required under the Sarbanes-Oxley Act after it made two corrections to its third-quarter earnings release in November because of accounting errors.

"I believe the business space we're in is good space. We have very strong relationships with our clients, " McGeary said. But he said the company has problems that need immediate attention.

McGeary said BearingPoint hasn't moved enough of its technology support operations offshore, particularly to India, where low salaries would allow it to develop customized software products for clients for much less money than it costs in the United States. He said the firm had not yet decided how to go about that expansion but is considering joint ventures and acquisitions.

The meeting with analysts in New York came during McGeary's 19-day, 30-city tour of the company's locations in the United States and abroad to boost employee morale. The company's turnover rate among its professionals was 17.3 percent in 2003, and McGeary said reducing turnover is a priority. He said BearingPoint's compensation packages were competitive and that the company could keep more employees by offering mentoring programs and better opportunities for advancement.

McGeary also was asked whether he has the authority to make major decisions because BearingPoint's board of directors is searching for a permanent replacement for Blazer. McGeary, who is a candidate for the job, said he would "make every decision as if I'm going to be CEO forever. . . . My view is, I am the CEO until some other decision is made."

More executive changes could create problems, some analysts said.

"If the board does find somebody and they bring him in, it could be a big disruption," said William R. Loomis, an analyst with Legg Mason Wood Walker Inc. "I think Rod has the right ideas and is saying the right thing, but the harder part is yet to come. . . . Now they have to execute on them."

Shares of BearingPoint rose 9 cents yesterday to $7.67.


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