Stock Market Chumps..........9-27-06

Red Hat Inc. (RHAT)

Last Trade:	20.35
Trade Time:	11:35AM ET
Change:	5.97 (22.69%)

Red Hat Inc., which provides software, was downgraded by two brokerages on Wednesday after the company lowered its second-quarter earnings forecast and full-year cash flow on higher costs related to the JBoss merger.

In a research note, Jefferies & Co. lowered its rating to "hold" from "buy" and cut its price target on the stock to $24 from $34.

Separately, Prudential Equity Group lowered its rating on the company to "neutral weight" from "overweight" and cut the price target to $25 from $35.

Both brokerages said the company faces higher costs to integrate software maker JBoss, which Red Hat purchased in June.

Prudential said it is concerned that ongoing execution issues could cause Red Hat to miss outlook.

Shares of the company closed at $26.32 Tuesday on the Nasdaq.

Bearingpoint Inc. (BE)

Last Trade:	7.72
Trade Time:	11:32AM ET
Change:	0.76 (8.96%)

Shares of BearingPoint Inc. dropped Wednesday in premarket trading, a day after the management and systems consulting firm said it will have to delay a regulatory filing after a court said it defaulted on debt.

Shares declined 14 percent to $7.30 in premarket trading Wednesday after closing at $8.48 a day earlier on the New York Stock Exchange. The stock has traded in a 52-week range of $6.54 to $9.59 and is down about 7 percent from the beginning of the year to its Tuesday close.

JP Morgan Securities Inc. analyst Tien-tsin Huang reiterated a "Neutral" rating and anticipates shares will recover from an after-hours plunge Tuesday that at one point slipped 35 percent to $5.48. However, the analyst still expects shares to trade lower, in the $7 to $8 range.

McLean, Va.-based BearingPoint on Tuesday said it will delay filing its fiscal 2005 earnings report after a court found it defaulted on debentures due 2024 by failing to file certain Securities and Exchange Commission reports on time. A debenture is a long term corporate debt instrument.

The company also said an independent accountant might indicate uncertainty about BearingPoint's ability to continue operations as a going concern, relative to its 2005 reports.

The news caused two analysts to cut their ratings on the company, while other analysts said the bad news could be tempered with good business trends.

Stifel Nicolaus analyst William R. Loomis and Needham & Co. analyst Jonathan Maietta in separate client notes downgraded the company to "Hold" from "Buy" to reflect uncertainty in the stock's ability to perform well due to the ruling.

Yet the analysts, along with others, noted that BearingPoint indicated business fundamentals remain strong.

"Consistent with other industry data points, the demand environment continues to be robust," wrote JP Morgan's Huang. "In our view, this is critical for BE - if the environment weakens, we believe BE's turnaround could be put in jeopardy."

Citigroup analyst Patrick Burton reiterated a "Buy" rating for BearingPoint.

"We expect the latest developments may cause weakness near term in BE, but we remain patient with the turnaround," wrote Burton. "Our view is that the delay is due to technical factors that have little to do with fundamental expectations for 2007 and beyond."

A New York State court found the company in default on its 2.75 percent series B convertible subordinated debentures. The company gave preliminary 2005 results and also said higher-than-expected accounting and finance charges will cause 2006 operating income to fall significantly below a prior guidance.