More lunch for ORCL!
re:Baan from Forbe,
January 04, 2000
One Week View
At wit's end
By Lisa R. Goldbaum
NEW YORK. 5:20 PM EST-Dutch enterprise resource planning software vendor Baan (nasdaq: BAANF) may have just run out of chances to be a viable long-term competitor. The company forecast this morning yet another quarterly loss--this time in the range of a whopping $240 million to $250 million for the fourth quarter--due to a restructuring that will focus the company's operations on business-to-business e-commerce.
But the far bigger blow was the announcement that its chief executive, Mary Coleman, resigned after only seven months at the helm, signaling what could be interpreted as a loss of faith in Baan's future prospects.
"This is a bad sign for Baan, since it's been our impression that [Coleman] was holding the company together, keeping employees from leaving and the customers happy," asserts Rod Johnson, an analyst with AMR Research. "This shows she felt that the burden was not worth the potential reward."
The company said Coleman left to pursue opportunities closer to her home in Silicon Valley, and analysts believe she will likely emerge as the CEO of an Internet software startup. Baan's supervisory board chairman, Pierre Everaert, will act as interim CEO until a replacement is found, most likely from outside the company.
As part of the announced restructuring, Baan will record write-downs of assets not related to its core Internet strategy, close 14 offices and slash its workforce by about 4%. Investors pummeled Baan's American Depositary Receipts, which plummeted nearly 32% to $10.44 by mid-afternoon on Tuesday, and HSBC promptly lowered its recommendation on the stock to "sell" from "hold."
While many industry pundits believe Baan has the right idea in trying to place a greater emphasis on the burgeoning B2B e-commerce market than on the maturing ERP space--as well as the technology to back it up--they still question the company's ability to execute its plans from both a marketing and sales perspective. Baan, like many of its competitors in ERP, has been suffering from the fact that businesses held off on making infrastructure software purchases while they dealt with year-2000 issues and from the fact that this once-hot marketplace has matured and slowed.
Competitors, including Oracle (nasdaq: ORCL), SAP (nyse: SAP), PeopleSoft (nasdaq: PSFT) and J.D. Edwards (nasdaq: JDEC), have tried to diversify beyond their ERP roots to higher-growth areas like customer relationship management and online marketplaces, which allow companies to interact with their suppliers, customers and partners. Even struggling SAP, which has experienced many of the same problems as Baan, has had a resurgence lately because of its mySAP.com B2B e-commerce initiative. But many of Baan's competitors seem to be doing a better job at marketing their wares, and even Baan's existing customers may start to turn to its rivals if the company continues to sink further into the red.
"The good news is that, of anybody, Baan has all the pieces of technology in terms of function: supply chain, front office, ERP, the middleware to pull it all together and e-enablement as the wrapper," asserts Doug Lynn, an analyst with the Meta Group. "But they're not getting the execution and not selling, because customers aren't willing to take the bet with Baan versus the others. [Baan's] marketing machine has not been generating the noise to allay investors' fears."
While the company did launch a $25 million ad campaign last year, analysts say it was mostly an effort to get the company's name out there, rather than a clear message to show that it has an integrated solution for mid-market customers. "[The campaign] was just for brand recognition, but even that got a lukewarm reception because of Y2K," Lynn argues.
The big question now is whether the company has dug itself so deep a hole that it can't emerge in its current form. Without a strong leader and a clear sales and marketing message, some observers say, the company may have to do something drastic in order to unlock some of the value in its assets.
"This is a very unforgiving industry, and Baan may be at the point where as it is structured today it cannot thrive," says AMR's Johnson.
One possibility for Baan would be to spin off one or more of its business units. The one cited most frequently is Aurum, the CRM software arm that Baan acquired back in 1997. "Some of these apps, like Aurum, are much more valuable than the whole, and they have to figure out how to leverage these assets," Johnson notes.
But that's likely to be a last resort. "If they do [divest of Aurum], that?s a sign that it's a fire sale and that they're going to go under," contends Meta's Lynn.
One thing is clear: Baan has to get a top-flight CEO--and fast--if it hopes to restore any credibility with the investment community. Most industry experts agree that it will likely have to look outside of its own ranks. "There isn't anyone we know within the management team that could fill the void," says Johnson.
If the company can lure another prominent software executive, ideally from a well-placed rival, it might be able to restore some of its depleted talent. But that probably won't be easy, considering the monumental task any potential CEO would have to take on: turning around a struggling, mature business facing intense competition and mounting losses. Baan can't boast the appeal of being new and nimble like CRM leader Siebel Systems (nasdaq: SEBL), which was able lure the CEO and 26 other executives away from SAP during the past year.
Even if it does succeed in landing the ideal CEO, the best Baan might be able to hope for at the end of the day is mere survival.
"Success in this space is not becoming a winner; it's surviving," asserts Lynn. "You don't need to be number one; you just need to break even."
For Baan, even that may be a stretch these days. |
