Baan Posts Loss, Announces Restructuring, Layoffs

Buffeted by a substantial third-quarter loss, Baan Co. is planning layoffs and a corporate restructuring.

The vendor of enterprise resource planning software today reported a loss of $31.7 million for the quarter, compared with a $18.3 million profit last year. Following a profit warning earlier this month, Baan lost 16 cents per share, well below the profit of 15 cents per share Wall Street had originally predicted. Revenue for the quarter was $195 million, up 13% from $173 million in the year-ago quarter but not high enough to bring a profit.

In the aftermath of the weak results, Baan will lay off roughly 1,200 employees, or 20% of its workforce--this after the company had increased its head count 69% in the quarter through hiring and acquisitions such as the August purchase of Caps Logistics Inc., a supply-chain vendor. Baan will restructure its organizations so that all sales, support, marketing, consulting, and engineering efforts from its various acquisitions are in centralized organizations. The layoffs will accordingly eliminate duplicate sales, marketing, and administrative positions in its separate units, but won't affect engineering and customer service groups. The reductions will produce a one-time fourth-quarter charge of $110 million.

Baan blamed the poor results on a number of factors, including global economic uncertainty, reductions in capital expenditures by large companies, higher competition, and customer focus on the year 2000 problem. That has led to longer sales cycles, customers' purchasing hesitation, deferred IT projects, and allocation of expenditures to year 2000 problems, the company said. With those factors looming, Baan says it will shift its focus from large enterprises to the midsize market and will come up with cheaper applications that are simpler to implement. It will also move away from the direct-sales model to more partnerships and channel distribution, which should give the company a lower cost structure.

Baan also jostled its management structure, naming as president Mary Coleman, former president and CEO of front-office vendor Aurum Software Inc., which Baan acquired last year. Tom Tinsley, formerly president, CEO, and chairman, will remain as chairman and CEO.

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