In an attempt to improve its image with Wall Street, Baan is prepared to divest its holdings in several resellers of its products and clarify a relationship with a venture capital firm set up with profits from software sales.
Baan Investments is changing its name to Vanenburg Ventures to reflect its independence from Baan. The capital company also is divesting its holdings in an organization set up to resell Baan products to small and midsize companies. Baan Investments owns a 39 percent stake in the software arm, the Baan Company.
The Dutch vendor also is shifting top management responsibilities. Founder Jan Baan is becoming chairman and taking less responsibility for the day-to-day operations of the firm, while current chief operating officer and president Tom Tinsley will take over as chief executive officer.
"Baan Investments has been a dark cloud hanging over the [rest of the] company for some time," said Andrew Roskill, financial analyst at Credit Suisse First Boston in New York. "[Wall] Street's been concerned the company is playing financial games. Baan Investments is a foundation set up with the assets of Baan stock. It then began investing in companies that directly or indirectly benefit Baan. Since we have no view of Baan Investments' books, the concern is the actual financial numbers may be different than what Baan is reporting."
Wall Street analysts were concerned that Baan Investments could be used by the Baan Company to bolster sales and hide losing ventures. The reason is that, as a reseller, the Baan Company could simply sell software to the reseller organizations near the end of a quarter, beefing up the numbers on its own books while not actually gaining new customers.
So Baan Investments is divesting 85 percent of its interest in Baan Midmarket Solutions, a venture founded two years ago to provide Baan software and support services to small and medium-sized companies. The venture capital firm will retain a 15 percent stake in the company. Baan Investments said it also has retained Goldman Sachs to "realize the value of its investments in" Baan Business Systems [BBS], a reseller of Baan products.
So far, the market is reacting positively to the news. Baan's shares on the Amsterdam Stock Exchange were up 10 percent today and have been up since word of the reorganization first broke late Thursday night.
"This is a big step in the right direction," Roskill added, saying that it appears as if Baan is preparing to divest interest in BBS as well.
As for the management shakeup, it is the latest move by the Baan brothers to give up control of the company they founded 20 years ago.
Jan Baan announced late last week he is turning over his position as chief executive to Tom Tinsley, currently chief operation officer and president. Baan will continue as the company's chairman. Tinsley has slowly moved up the ladder in the company to take on more of the company's operations.
"Jan Baan and Tom Tinsley have been acting in a sense as duel managers. The company is in very capable hands. Tom has been doing a lot of the CEO duties already," Roskill said.
The move is the latest in a series of management shakeups to bolster Baan's position in the enterprise resource planning market. Baan is now running a distant fourth in the industry, which is lead by powerhouse SAP and followed by PeopleSoft and Oracle.
"After twenty years of building the Baan Company and guiding its growth, I feel--and the supervisory and management boards agree--that my move to the chairman's role will give me the opportunity to provide continued stewardship in the development of the organization," Jan Baan said in a prepared statement. "At the same time, I hope to be able to spend additional time on the charitable activities of the Oikonomos Foundation."
The foundation is as charitable organization that the Baan brothers found to provide food, shelter, and infrastructure in Third World countries. Paul Baan now runs the organization full time, reflecting his diminishing role within the software firm.
Roskill said this kind of move is common in European companies. Of particular interest is that Tinsley is setting up shop in Baan's new Reston, Virgina, campus. The Baan Company has been moving most of its operations to North America, in effect becoming a U.S.-based company. It's a move that has been quite successful for SAP, whose SAP America's operation in Philadelphia has gained a lot of autonomy from SAP's Waldorf, Germany, headquarters.
"It's clear that North America is one of the fastest-growing markets and as far as software goes tends to be viewed as a leading economic indicator," Roskill noted. "It is important to have not only a foothold in the market but also to be viewed as a North American software company."