Baan chief leaving as problems mount

For exiting Baan CEO Mary Coleman, holding a flailing software company together over the past seven months seems to have become too heavy a burden.

Kim Girard
Kim Girard has written about business and technology for more than a decade, as an editor at CNET News.com, senior writer at Business 2.0 magazine and online writer at Red Herring. As a freelancer, she's written for publications including Fast Company, CIO and Berkeley's Haas School of Business. She also assisted Business Week's Peter Burrows with his 2003 book Backfire, which covered the travails of controversial Hewlett-Packard CEO Carly Fiorina. An avid cook, she's blogged about the joy of cheap wine and thinks about food most days in ways some find obsessive.
Kim Girard
4 min read
Mary Coleman For Baan CEO Mary Coleman, who announced her resignation this morning, holding a flailing software company together over the past seven months may have become too heavy a burden.

Coleman, who lives in Silicon Valley, was spending much of her time traveling between the company's U.S. offices in Herndon, Va., and main European headquarters in the Netherlands. But quite a few leading enterprise resource planning (ERP) executives have lately been departing for greener pastures.

Before her abrupt resignation today, Coleman was reportedly fielding CEO job offers from several Internet companies--potentially lucrative deals that had stacked up in the months since she took over for ex-Baan leader Tom Tinsley last May.

Also today, shares of Baan tumbled more than 30 percent in trading after the company said it expected fourth-quarter losses to widen, exacerbated by a reorganization to focus on the Internet business-to-business sector. (See related story)

Baan's chief marketing officer Katrina Roche said Mary Coleman's departure was a personal decision.

"She really spent most of her time commuting from Silicon Valley to the Netherlands," Roche said. "She really did want to pursue an opportunity in Silicon Valley." Roche added that she's sure Coleman has offers on the table now that she's probably considering.

When appointed Baan's CEO last spring, Coleman, the well-liked former head of Aurum, a sales force automation software company that Baan acquired in 1997, was touted as a key force behind a Baan turnaround. Baan makes software that automates a company's back-office business needs including financials, logistics, order entry and accounting.

"Mary Coleman was one of the very few bright lights at the company," said Douglas Crook, a financial analyst at Prudential Securities. "She's a proven software entrepreneur and I thought if anyone had a chance of turning [Baan] around, Coleman would."

But Crook, who held Baan at a "sell" rating for most of 1999, added, "Given what's happening in the market and with her proven skills, I've questioned for a while why she would stay at Baan."

Coleman is not the first leader of an ERP software company to jump ship during this turbulent time for once high-flying companies. PeopleSoft founder Dave Duffield left his post as chief executive last September but remained as board chairman. A host of senior executives have left German software giant SAP in the past year, including SAP America president Jeremy Coote.

Oracle may be one of the few companies to emerge unscathed from a downturn in ERP software sales, which optimists are blaming on a halt in corporate technology spending due to fears surrounding the Year 2000 software problem.

Harsher critics say the nose-dive is due to a loss in confidence within corporations that no longer view multimillion-dollar ERP projects as the sole technology answer. Now, analysts say, companies are turning their investments to Internet-based customer sales and marketing applications and supply chain software as they move to tie their Web-based sales to their manufacturing cycles--and ERP companies are scrambling to adapt their software to those needs.

Hopes that Coleman would ride out these rough times within the ERP market were dashed today as Baan projected a wider-than-expected fourth-quarter loss that sent shares tumbling more than 30 percent. Baan said it will close 14 offices and reduce its workforce by about 4 percent.

These write-downs and restructuring charges, coupled with increased investments and other reserves and allowances, are expected to add up to about $200 million during the fourth quarter of 1999.

Including this charge, the company expects a loss of up to $250 million for the fourth quarter on revenues of about $150 million.

Bruce Richardson, an industry analyst at AMR Research who met with Coleman last November, said he suspects Coleman simply tired of the pace--she was clocking about 500,000 air miles per year--at a company that isn't expected to turn around financially for at least a year.

"It is grueling racing around playing Smokey the Bear--not putting out small fires but huge conflagrations," he said.

He said Coleman could land at a hot customer relationship management software company such as Calico or Epiphany.

"People were coming to her and saying, 'We can put together $25 or $50 million packages for you,'" Richardson said. As for Baan, Richardson said it seemed clear during a conference call with analysts this morning that chief financial officer James Mooney, a former IBM executive, is in charge of the day-to-day operations for now, although the company today named board chairman Pierre Everaert interim CEO.

Richardson said he suspects Baan will move to spin off several of its acquisitions, including supply chain software maker Caps Logistics and financial software maker Coda, to pare down its business to compete in the middle market and collect the cash it needs to build a top-notch supply chain and the front-office software offering it needs.

Yankee Group analyst Harry Tse said he believes Baan may consider selling off its acquired front-office product from Aurum, but keep its supply chain management product to help reposition itself as a business-to-business e-commerce software company.

"They have been in a sad state for a while," said Tse. But he added that any changes the company makes now are meant to help the company recover and compete.

"Baan could have a shot" at being a business-to-business company, Tse said.

But FAC/Equities financial analyst Rob Kugel said Baan has a tough road ahead.

"Two years ago, this was a four-horse race with maybe five [principal ERP companies]" he said. "Today, I think it is clearly SAP and Oracle [leading the way].