UPDATE: Baan CEO Resigns After Seven Months

Baan Co. NV today said Mary Coleman has resigned as chairman and chief executive officer.

Not coincidentally, Baan is taking charges of roughly US$200 million, according to a company statement, and plans to close 14 branch offices and reduce its workforce by about 4 percent in yet another company restructuring.

Analysts see the moves as another blow for the troubled software vendor, which many were convinced could be turned around by the well-regarded Coleman. She was the former head of Aurum Software, a maker of CRM (customer relationship management) software, that Baan acquired in 1997.

"She was the great white hope," said one market observer who knows the company, but asked not to be named. "She was a good manager who was going to transition Baan to a wider spectrum of products."

The current chairman of the Baan supervisory board, Pierre Everaert, will serve as interim CEO while the search for a permanent CEO of the business software maker is underway, Baan said in its statement.

Harry Tse, a senior analyst with the Yankee Group in Boston, said that Coleman's departure reflects impatience on the part of Fletcher International Ltd., which want to see good financial results from Baan. Fletcher is the investment company that has been providing Baan with cash infusions and now has several members on the company's board of directors.

"They didn't want to wait, so they removed Coleman," Tse said, referring to the fact that Fletcher is less than pleased with the continuing losses at Baan.

Baan has incurred losses over the past five quarters, amid restructuring and a drop off in revenues for its core enterprise resource planning (ERP) business.

But as recently as November, Coleman proclaimed at BaanWorld in Vienna that the company was back on track, in spite of predicted fourth-quarter losses. [See "BAANWORLD: Baan Focus on Biz-to-Biz E-Commerce," Nov. 10, 1999.] In October, Baan reported a net loss of $25 million, or 12 cents per share, as well as significantly lower year-on-year revenue for the third quarter ended Sept. 30.

Baan shares fell sharply today in Europe before recovering during the afternoon in the U.S. trading day. Baan shares on the NASDAQ fell more than 28 percent to a low of $10.13 per share when the U.S. market opened this morning, well after news of Coleman's departure had been reported. The share price had begun to recover, however, by late in the afternoon on the U.S. east coast.

Even without Coleman, it appears that Baan will continue in the direction that she indicated last month, with an emphasis on business-to-business electronic commerce. Baan has said it will build on its relationships with manufacturing companies to expand into that product area. It is unclear, however, how much attention Baan will pay to its traditional line of back-office software products.

"I think they will drastically cut back their product line and move into the front-office area," Tse said.

However, another analyst doubts whether such moves will improve the situation for Baan.

"I don't think Baan has much of a chance of surviving," said Peter-Thilo Hasler, a software analyst with HypoVereinsbank AG in Munich. "The (current) management was not able to achieve anything, and I don't think new management will have it any easier."

Baan, with headquarters both in Barneveld, the Netherlands and Reston, Virginia can be reached on the World Wide Web at http://www.baan.com and in the Netherlands at +31-342-42-8888.

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