BearingPoint Cuts Jobs, Restates Earnings As Consulting Rates FallBearingPoint Cuts Jobs, Restates Earnings As Consulting Rates Fall

Facing lower average consulting rates and what company officials call a "cautious" spending environment, IT services firm BearingPoint on Thursday reported a sharp drop in fourth-quarter earnings. The company also restated earnings for the first nine months of 2003 and said it would eliminate 250 to 275 professional-services jobs out of a workforce of 16,000.

For the quarter ended June 30, net income was $8.3 million, or 4 cents a share, compared with net income of $21.8 million, or 15 cents per share, a year ago--excluding a $21.4 million charge against earnings in 2002. Revenue increased 33%, from $583.2 million to $774.8 million, on the strength of increased public-sector spending on IT services.

For the full year, BearingPoint's revenue grew 33%, from $2.4 billion to $3.1 billion. Net income for 2003 was 22 cents per share, or $41.5 million, compared with a net loss of $26.9 million in the previous year, including an $80 million charge against earnings.

The company's per-share earnings for the first nine months of fiscal 2003 were lowered by 5 cents after it restated earnings for that period. News of the restatement--triggered by a move to more-conservative auditing methods--sent BearingPoint's stock price plummeting more than 27% to less than $7.50 in afternoon trading on the New York Stock Exchange.

"We would have liked to have had a warning," says David Garrity, an analyst with American Technology Research.

Like virtually all IT services firms, BearingPoint is facing pricing pressure for consulting work because of weak customer spending. Its gross average hourly rate for consulting in the United States in the fourth quarter fell 4%, to $213, compared with $222 three months earlier. Internationally, average rates fell 10%, to $127 from $141, sequentially.

The government market was BearingPoint's strongest-performing sector in the fourth quarter. Revenue from sales of IT services to federal, state, and local authorities increased 10.8%, to $281.7 million. Wednesday, BearingPoint signed a multiyear managed-services deal to operate the state of Florida's main data center. Terms of the deal weren't immediately available.

Decreased spending by the telecom sector helped lower the company's revenue from its telecommunications and content group by 18.5%, to $75.2 million. Revenue from the financial-services and high-tech markets remained flat at $61 million and $39 million, respectively. BearingPoint's international sales jumped 356%, to $241 million, as the company gained revenue from its acquisition of international business from Andersen Business Consulting.