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Baan suffering continues
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October 21, 1999: 5:07 a.m. ET
Dutch software firm incurs fifth straight quarterly loss, stock droops 10%
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LONDON (CNNfn) - Dutch business-software maker Baan disappointed the market Thursday with a third-quarter loss of $24.7 million, as license revenue fell by almost 60 percent.
The company's shares tumbled more than 10 percent in early trade in Amsterdam to 11.71 euros, as Baan's fifth straight quarterly loss exceeded by $16.5 million the most pessimistic forecasts for the period to Sept. 30. In the same quarter last year the company lost $39.7 million.
Baan was hit by a 59 percent slump in new software sales from $86.6 million last time. Total revenue dropped 27 percent to $132.8 million.
The company said a change in strategy hit earnings this time round. "Our results reflect the impact of the shift in Baan's business models towards more subscription-based licensing agreements," chief financial officer Jim Mooney, said in a statement.
Under subscription-based licensing the customer pays a monthly fee for every user who has rights to one of Baan's products. This contrasts with the previous practice of charging a one-time lump-sum fee and will reduce licensing revenue in the short-term, the company said.
This quarter saw large customers, such as aerospace giant Boeing (BA), switch to the new charging structure.
The company warned of further trouble for this year. "While we expect the balance of 1999 will continue to be a difficult year for the enterprise applications market as a whole, we are encouraged by the positive response to our renewed investment in marketing and brand awareness," Baan's chief executive Mary Coleman said. The company recently launched a $25 million publicity campaign.
Europe's No. 2 business-software company is not the only victim of the decline in its main market - enterprise resource planning software. Demand slumped as businesses took time out to implement the new technology after two very strong years of orders in 1997 and 1998. Concerns over the millennium bug have also held back demand.
Baan is the third company in the sector in as many days to report disappointing results. The world's No.1, Germany's SAP, said Wednesday third quarter profits slumped 64 percent. It's closest rival, California-based PeopleSoft (PSFT), announced Tuesday a 67 percent dive in new software sales, although it managed to cling onto a small third-quarter profit.
-- from staff and wire reports
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Baan
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