UPDATE 2: Baan CEO Departure Disappoints Analysts

Industry analysts expressed disappointment at the abrupt departure today of Baan Co. NV Chairman and Chief Executive Officer Mary Coleman after only seven months at the helm.

Baan is also taking charges of roughly US$200 million in its fourth quarter, 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.

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

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.

"I think it's a disaster," said Joshua Greenbaum, principle with Enterprise Applications Consulting in Berkeley, California. "Mary Coleman lent an enormous credibility and marketability to the company. She was the only reason I was optimistic about the company." He advises any company considering upgrading to a new Baan release to sit on the sidelines until the smoke clears.

Harry Tse, a senior analyst with the Yankee Group in Boston, said that Coleman's departure could reflect impatience on the part of Fletcher International Ltd., which wanted 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 he thinks Fletcher is less than pleased with the continuing losses at Baan.

It is not immediately clear under what circumstances Coleman left, however.

Baan officials could not be reached for comment, and Baan did not elaborate in its statement.

Baan has incurred losses over the past five quarters, amid restructuring and a drop off in revenue 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 revenue for the third quarter ended Sept. 30 compared to the same period on year earlier.

Baan shares fell sharply today in Europe before recovering during the afternoon in the U.S. trading day. Baan shares on the Nasdaq stock exchange 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.

Baan will likely also become less of a U.S.-oriented company, predicted Enterprise Application Consulting's Greenbaum.

However, analysts are split on the company's long-term prospects.

"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."

Ed Markowitz, a Cincinnati, Ohio-based ERP strategist for WidePoint Corp., a market research and consulting company, still believes that Baan has some "superior" products, and that with its large installed base, the company will not suddenly disappear. But, he, too, is advising companies to wait and see what direction the company takes in coming months.

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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