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New management to help Baan ride out its financial storm

New management to help Baan ride out its financial storm

One of the enterprise application market's fabulous four, Baan, has blamed its less-than-impressive performance in 1998 on the slowing down of the purchase of ERP licences.

Simultaneously announcing his appointment as a new general manager for Asia-Pacific and relocation of Baan's Asia-Pacific headquarters to Sydney, Thomas Erickson used yesterday's media briefing to report the company's 1998 fourth-quarter revenue of $142 million has not stopped accountants from completing Baan's balance sheets in red pen.

In contrast with the performance of the remaining three ERP market leaders, Baan has reported a $40 million loss for the last quarter of 1998.

"The reason we hit the wall was our reliance on licence revenues," Erickson said.

"While some of our competitors get up to 70 per cent of their revenues from services, we were getting almost 60 per cent of ours from licence sales."

The Dutch-American applications vendor ended 1998 with the announcement of a major restructuring program that has cost Baan $160 million in charges incurred by restructuring, asset write-downs and sale of subsidiaries.

As part of the program, the company closed or consolidated 50 offices and sold 14 subsidiaries mainly in Russia, Poland and other emerging markets, losing 20 per cent of its workforce in the process.

Injecting a bit of optimism into predictions for Baan's post-restructure performance, Erickson said that despite the seemingly bleak state of affairs, Baan has recently won 340 new accounts with companies such as Volvo and AT&T and has $100 million in new licence contract commitments.

He nevertheless conceded that the restructuring process was "an expensive exercise", but said the latest results were to be expected.

Baan will now focus on growing the services side of the business, trying to present "one face" and "one sales model" to its customers in Asia-Pacific, which was one of the reasons behind the company's decision to move its headquarters to Sydney.

"Locating near [our partners] will allow for closer working relationships and better leverage for our customers throughout the region," Erickson said.

"Additionally, it will allow us to strengthen our commitment to the Australian market, where we have had important recent successes."


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