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Baan posts larger-than-expected loss

Dutch business software maker Baan announces the company lost $45 million more than expected its fiscal fourth quarter.

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
3 min read
Dutch business software maker Baan today announced the company lost $45 million more than expected its fiscal fourth quarter.

Baan, which had earlier warned of a smaller loss, reported fourth quarter net revenues of $131 million and a net loss of $295 million or $1.45 per share. The company's net loss was $45 million higher than preliminary estimates reported January 20.

In January, shares of Baan stock tumbled after the company said it was likely to report revenues of approximately $142 million and a net loss of $250 million, or $1.22 loss per share, for its fiscal fourth quarter, ended December 31, 1998.

The company, which is restructuring, said it needed to line its budget with additional reserves and allowances to prepare for the continuing downturn in the enterprise resource planning (ERP) software market.

"Since our preliminary announcement, the consensus among industry and financial analysts, as well as other ERP vendors, is that prospects for the ERP market in 1999 has worsened," Baan chief executive Tom Tinsley said in a statement. "Consequently, management believes an even more cautious approach with respect to our balance sheet by including additional reserves and allowances is prudent."

Contributing to the $255 million fourth-quarter loss was a $140 million charge for disposal of subsidiaries, asset write-downs, and restructuring; $59 million for restructuring-related allowances and reserves; and $56 million against revenue to clear the indirect channel of inventory.

The company, once the darling of Wall Street with 70 percent yearly growth rates, posted a total net loss for 1998 of $315 million or $1.59 per share. A nonrecurring charge accounted for $270 of the year's operating loss, the company said.

As part of the restructuring, Baan has reduced its workforce by about 1,000 employees in the quarter, bringing total headcount to about 4,975 worldwide. The company also closed or consolidated 50 offices, and 14 businesses were either sold during the quarter or are in the process of being sold.

Baan said last week it had cancelled its BaanWorld user meetings in the United States and Europe.

Tinsley said business should improve once "we turn the corner on the Year 2000," and corporations move forward with delayed IT spending, which hurt Baan--along with rivals PeopleSoft and SAP--last year.

Analysts said Baan's main problem is that that the company was hit on three fronts: The firm is trying to establish an indirect sales model while at the same time trying to melding a number of acquisitions and product lines into its fold--all while the overall ERP market is slowing.

But to help turn the company around, Baan today named five new members to its supervisory board to help turn the company around. New members include John Barter, former executive vice president and CFO of AlliedSignal; Henk van den Breemen, retired Chief of Defense for the Dutch Armed Forces; Pierre Jean Everaert, former CEO of Koninklijke Ahold and former management board member of Philips Electronics N.V.; Joop Janssen, Chairman of the Board of Managing Directors of Heijmans, N.V. and a supervisory board member of Lathouwers Beheer B.V.; and Koichi Nishimura, board chairman, president and CEO of Solectron. The company said Everaert will likely be named board chairman, replacing David Hodgson.

Shares of Baan closed at 8.28, down more than 10 percent for the day.