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Harry You, 10 weeks at the helm of BearingPoint Inc., must hope the company’s recently troubled past isn’t a prologue.
The integrator’s difficulties started last November, when the company announced a $92.9 million accounting error. BearingPoint corrected the glitch, but the problem pointed to broader issues with the company’s financial systems. That was a bit of a cobbler’s kids embarrassment since financial applications rank among BearingPoint’s specialties.
As the financial story unfolded, two of BearingPoint’s top managers departed. Randolph Blazer, the company’s chief executive officer, resigned November 10. The retirement of Robert Falcone, BearingPoint’s chief financial officer, was announced a few days later.
Rod McGeary, a BearingPoint board member, was named interim CEO. In January, Joseph Corbett, a former Intelsat executive, was brought in as the new chief financial officer.
A new set of financial issues followed in March: BearingPoint reported that it missed the deadline for filing its 10-K annual report with the Securities and Exchange Commission. The company cited the need to confirm information generated via the company’s financial accounting system as a factor in the delay.
Enter You. On the same day BearingPoint disclosed the 10-K delay, the company announced the appointment of You as CEO. The former Oracle Corp. CFO has one of the toughest tasks in the integration world: push a $3 billion-plus company forward while extinguishing various fires.
You now oversees the financial systems fix and an internal audit that will let the company release its financial statements. He also has to keep an eye on attrition, which You described as his first-week-on-the-job crisis in a talk with analysts at the UBS Software and IT Services Conference. In an April SEC filing, BearingPoint reported its worldwide turnover rate among managing directors was 16.6 percent for the first quarter of 2005. The company issued a restricted stock grant to managing directors, a move that You said has stopped the outflow.
The task of finding a new CFO also appears on You’s to-do list. Corbett resigned May 24.
You’s top priority is to complete the audit, which he expects to wrap up this summer. As for the future, You said he wants to make relatively modest investments in “new growth areas.” He said the company may invest $30 million to $40 million in that regard.
He added that BearingPoint may pursue some small, tactical acquisitions.
You also plans to reposition his company in a pursuit of higher-margin projects. To that end, BearingPoint is revising its compensation plan.
The company’s managing directors had been rewarded in the past on the basis of staff utilization. That incentive led managers to take on small projects to keep busy, You said. Those projects, however, weren’t necessarily of the high-margin variety. The new compensation plan will take into account margin and customer satisfaction among other factors.
In another move, BearingPoint aims to concentrate its commercial business within vertical markets.
“I think we need to be more focused and differentiated,” You said, noting the company has achieved “good differentiation” in financial services. Elsewhere in the commercial sector, the company is “getting more focused by industry.”
No one would mistake You’s assignment for a walk in the park. But a healthy IT services market may make his turnaround job easier. He said consultant utilization stands at all-time-high levels, revenue growth ranges in the mid to high single digits, and new bookings are growing “at a very positive clip.”
That’s good news for a company that clearly needs to catch a break or two.
