BearingPoint Inc. chairman and chief executive Randolph C. Blazer resigned abruptly yesterday after leading the McLean consulting firm for more than four years.
The company said he will be replaced immediately by Roderick C. McGeary, a board member who in the past was co-chief executive with Blazer, while the company searches for a permanent replacement. The firm did not explain Blazer's sudden departure.
BearingPoint changed its name from KPMG Consulting in 2002 after splitting from the KPMG accounting firm in 2000 and going public in 2001.
Some industry experts said BearingPoint has been struggling to compete against larger information technology firms. "Anybody who's not in the top five consulting firms is not going to survive," said Jeffrey Embersits, an analyst with Shareholder Value Management.
Blazer guided BearingPoint through an initial public offering, an acquisition and a break from its parent firm, but the company has reached a crossroads, said Joseph A. Vafi of Jefferies & Co. "The commercial business continues to be somewhat challenged, while the federal business is doing well," Vafi said. He rates BearingPoint as "underperform."
In the commercial market for information technology consulting, BearingPoint has much larger competitors such as Accenture Ltd. and International Business Machines Corp. domestically, and increasingly sophisticated competitors from India, Vafi said. "The companies that do IT services based in India are rapidly moving up to higher-end services, so they are starting to overlap competitively with what companies like BearingPoint do," he said.
In October, Bloomberg News quoted Blazer as saying that the company would consider acquisition offers. Company officials said at the time that the firm was not shopping itself around. A source close to the firm, who declined to be identified on matters beyond the company's written statement, said yesterday there is no effort to sell the company.
"I think that the federal, public services business, would go for a nice price very quickly," Vafi said. "The commercial business is a little more problematic. . . . They are facing some headwinds here. It's a tough market." Also complicating a sale, he said, would be about $220 million in debt the company accumulated making its own acquisitions.
In May, the company's debt was placed on review by Moody's Investor Service after the company reported a 61 percent drop in first-quarter earnings. BearingPoint said the results were poor in part because restrictive labor laws in Europe made it difficult to lay off consultants.
BearingPoint, formerly known as KPMG Consulting, split off from tax and auditing firm KPMG LLP in early 2000 and went public in February 2001. In 2002, the company adopted the BearingPoint name to differentiate it from the KPMG accounting firm. BearingPoint spent $20 million to $40 million on a rebranding effort that included television commercials.
In 2003, the firm acquired the Austrian, German and Swiss consulting practices of German auditing firm KPMG DTG, and several Andersen Business Consulting practices. BearingPoint pursued the acquisitions as an opportunity to build an overseas presence and to give it the heft to better compete with rivals such as Accenture.
In the third quarter this year, BearingPoint earned $11.9 million (6 cents a share), up from a loss of $39.2 million (20 cents) in the third quarter of 2003. Revenue rose to $840.9 million from $743 million. About $330.4 million of its revenue for the quarter came from government clients.
The company confirmed its guidance for the current quarter yesterday, saying it expects revenue of $850 million to $870 million with profit of 9 cents to 11 cents a share.
Blazer, who owns about 1.7 million BearingPoint shares, according to a recent Securities and Exchange filing, has been on the company board since 1999 and has received an annual salary of $1 million since 2001. He did not return a call seeking his comments.
Shares of the company, which made the announcement after markets closed yesterday, closed unchanged at $9.