Former KPMG Consulting cuts staff again

January 17, 2003 —

IT services company BearingPoint Inc., formerly known as KPMG Consulting Inc., Wednesday announced plans to eliminate between 450 and 550 jobs, with most of the cuts happening in the North America and Asia-Pacific regions.

This is the second workforce-reduction announcement made by the McLean, Virginia-based company in little over a month. On Dec. 10, BearingPoint announced its intention to cut about 700 jobs from its recently acquired operations in Germany, Austria and Switzerland.

Before the December announcement, the company had about 17,000 employees, so the two rounds of layoffs, when completed, will bring down the total workforce number to between 15,750 and 15,850 employees, a reduction of about 7 percent.

On both occasions, the company has said the layoffs are necessary to rebalance its workforce with market demand. BearingPoint had about 9,000 employees as of May 2002, and nearly doubled its workforce in the next six months mainly through the acquisition of KPMG Consulting AG -- now its Germany, Austria and Switzerland operations -- and of former IT consulting units and staffers from Andersen Worldwide SC.

BearingPoint expects to take a charge in the current quarter of between US$17 million and $23 million related to the layoffs announced Wednesday.

About 90 percent of the employees losing their jobs in the second round of layoffs are "billable people," a term used to refer to employees who deal directly with clients, such as managing directors, senior managers and consultants, a company spokesman said Friday. About 45 percent of the layoffs will be former Andersen employees, while the rest will be employees who already worked at BearingPoint before the Andersen deals, the spokesman said.

The Andersen layoffs are not surprising and could even be considered small, but the cuts among "legacy" BearingPoint employees is more concerning, analysts from the research department of investment bank Merrill Lynch & Co. Inc. said in a note published Friday. "The cuts at the legacy BearingPoint unit in the Americas is somewhat surprising, and seems beyond the scope of normal personnel realignment. The layoff suggests the business tone is not improving near-term and the core business is in continued decline," the Merrill Lynch analysts wrote.

BearingPoint focuses on the consulting and system integration sectors of the IT services market, two sectors that suffered from declining demand last year.

BearingPoint plans to announce its results for the quarter ended Dec. 31 before the financial markets open in New York on Thursday Jan. 30. It will also hold a conference call that day at 8 a.m. ET during which it will discuss its performance during that quarter, as well as the layoffs.

The company's stock was at US$7.53 per share in midday trading Friday, down 2 percent. Its 52-week high is $21.49.

ITworld.com