Baan forecasts large loss, cancels user shows
- 02 March, 1999 13:05
Plagued by financial losses, ERP (enterprise resource planning) software vendor Baan is trying to cut costs wherever possible, including cancelling its two major user group shows this year and possibly imposing staff layoffs in the future.
Beleaguered Baan revealed last week that it is cancelling its two major BaanWorld user group meetings in North America and Europe for 1999 and replacing them with a series of smaller, regional "town hall meetings," according to Kevin Cancilla, vice president for North American operations at Baan.
The change is part of an initiative to interact better with customers handed down by Chief Executive Officer Tom Tinsley and President Mary Coleman, according to Cancilla.
But at least one analyst viewed the BaanWorld cancellations as a bad sign.
"You can't afford to miss the opportunity of being in front of users and partners," said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, California. He noted that although Baan is a close partner with Microsoft, it also had no presence at Microsoft's DNA for Manufacturing conference earlier this week in Redmond, Washington.
"These are very serious times for Baan, and if the company doesn't execute a dramatic turnaround soon there may be no alternative but to start selling off the assets," Greenbaum said.
Baan has already warned that its fourth quarter results, to be officially revealed next Tuesday, will include a $US250 million net loss.
According to an internal company memo from Coleman, that was confirmed by a Baan representative, the company needs to cut another $US15 million from its expenses, including employee travel, cell phones, and office supplies.
The company will not fill vacancies except in crucial areas such as sales and services, and may even leave posts empty in research and development, Coleman said in the memo.
And further staff cuts cannot be ruled out since Baan cannot predict the demand for its applications over the next few quarters, Coleman continued in the memo. Since October 1998, the company has already laid off about 1,200 people, or 20 per cent of its workforce.
The trade show cancellations are not related to Coleman's cost-cutting plans, said Bill Pendergast, a company spokesman, yesterday.
"It's a question of reallocating resources," Pendergast said. "This is a highly volatile industry, and Baan is involved in a thorough examination of every part of its business... I can't really comment on inferences (anyone might draw)."
Pendergast added that because Baan is about to announce its official quarterly results, federal regulations bar it from discussing future plans that could affect its stock price.
BaanWorld '99 was originally planned for mid-May in Nashville, Tennessee, according to company documents. The company decided near the end of 1998 to cancel the show in favour of a round of "town hall meetings" with users and partners that more people could attend because they would not have to travel so far, Cancilla said.
"We had a finite amount of dollars and resources, and we had to figure out how to reallocate it," Cancilla said. "It wasn't a simple decision."
BaanWorld Europe '99, which presumably would have been in the Netherlands in October like its 1998 counterpart, will also be replaced by smaller regional meetings, Cancilla said.
The company plans to return to BaanWorld events in 2000 and thereafter, but may merge the North American and European events into a single global meeting, Cancilla added.
Baan has been hit by bad financial news for the past few quarters. Some problems it shares with competitors such as SAP AG and PeopleSoft, notably slowing demand as IT departments turn to work on the year 2000 problem. Price cutting is increasing and profit margins dropping as competition gets tougher.
But other problems are internal, such as a series of acquisitions since 1997 that the company has had trouble digesting. Last summer it had to restructure its complex accounting procedures after its close relations with other companies owned by Founders Jan and Paul Baan were questioned.