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Analysts: Users beware of BearingPoint's problems

Analysts: Users beware of BearingPoint's problems

BearingPoint clients should monitor closely their engagements with the struggling IT services provider, to make sure its financial problems don't affect the quality of its work, analysts cautioned Monday.

Chief information officers (CIOs) and IT managers should review the terms and conditions of their contracts with BearingPoint and keep a close eye on how the company performs.

They should immediately bring to BearingPoint's attention any problems and demand prompt corrections, analysts said.

"Whenever they're engaged with a provider that is in financial difficulties, CIOs and IT managers need to take an extra measure of caution and risk management to make sure they don't get the short end of the provider's problems," a Gartner analyst, said Lorrie Scardino, said.

This even went for a company such as BearingPoint, a provider whose clients tended to be loyal and which has a very good reputation for the quality of its work and its project management methodologies, Scardino said.

"Don't take a wait-and-see attitude. Stay on top of things," she said. "If there's something that seems unusual or a couple of things that together seem unusual that may affect the services you get, don't let it fester" and address it right away.

For companies considering hiring BearingPoint, the word was caution.

"You need to be very careful about making the decision to go with them," a Yankee Group analyst, said.

BearingPoint recently announced layoffs and a significant earnings restatement when it issued its fourth quarter financial report, in which it also missed expectations. The earnings report shocked Wall Street, and the stock at one point, last Thursday, lost more than 30 per cent of its value.

The consultancy and systems integrator adjusted its accounting and erased from the books almost 25 per cent of the net income it had reported in the fiscal year's first three quarters, from $US44 million to $US33.2 million. The company also announced layoffs of between 250 and 275 staffers, from a total of about 16,000.

The BearingPoint situation deemed special attention from CIOs and IT managers because it involved layoffs, always a serious matter, but especially so among IT service providers, which essentially sold the skills of their staffers, Scardino said.

This was the third layoff announcement the company had made in the past nine months.

BearingPoint, formerly known as KPMG Consulting, had about 17,000 employees at the beginning of December, but in the next two months it issued two lay-off announcements, for a total of between 1150 and 1250 job cuts, or up to 7 per cent of its workforce then.

BearingPoint didn't return calls seeking comment for this story.


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