Invensys won't rescue Baan, analysts warn

Analysts have warned Invensys to reconsider its purchase of ailing ERP vendor Baan, citing poor product fit and anxious customers as just two reasons to steer clear.

Although the UK electronics and engineering company may see the move as a good entry into the e-business software market, its core competency is not well-suited to Baan's traditional market, enterprise resource planning (ERP), according to Gartner.

"Invensys' core competency of addressing manufacturing operations within the enterprise is not well-aligned with the demand to deliver inter-enterprise solutions," Gartner's manufacturing applications strategy division reported.

And the impact on Baan customers is delayed e-business capabilities, the report added.

Additionally, Invensys will struggle to make Baan's customer relationship management (CRM) subsidiary competitive, according to Gartner.

Forrester's take was no more positive.

Urging Invensys to back out, a Forrester analyst's report pointed to Baan's legacy software, anxious customers and shattered market perception as "hurdles that no company can jump over easily".

Meanwhile, Gerhard Rumpff, Baan's managing director for Australia and New Zealand, said movements overseas won't affect local operations.

Although the company would close 14 US offices and was reducing its workforce by four per cent, Rumpff said neither research and development nor customer support would be affected in Asia Pacific.

"The US operation performed extremely badly and needs some looking at . . . but, on a local basis, this does not affect us at all. We hired five people over the last two weeks, and plan to hire another five over the next three or four," Rumpff said. It appears Rumpff's team has done a reasonable job of insulating its Australian customer base from international turmoil.

Paul Cashmore, company secretary, Staedtler Pacific, a Baan site of five years and currently upgrading to Baan's latest finance and distribution package, reflects Rumpff's assurances on local impact.

"I know it's had problems but we haven't directly been affected," Cashmore said. "It will benefit in the end by a positive restructure and we hope that will be a benefit for us too."

A finance director at an Australian communications company was similarly unconcerned. "We will use it [Baan ERP] for the foreseeable future and are more likely to expand our use, as we are only using small part of the capability," he said.

Rumpff said the resignation of the company's chairman and CEO of only seven months, Mary Coleman, was due to incompatibility between her executive experience and the demands of the role. Coleman was previously CEO of Silicon Valley software start-up Aurum, which Baan acquired in 1997.

"She possibly felt more comfortable doing that [running a startup] than running a reasonably-sized software company needing to reassert itself in the marketplace," Rumpff said.

Analysts see Coleman's departure as yet another blow to the troubled software vendor, which many were convinced the well-regarded Coleman could turn around.

Baan has incurred global losses for the last five quarters, amid restructuring and a drop off in revenues for its core enterprise resource planning business. In October 1999, Baan reported a net global loss of $US25 million, or 12 cents per share, as well as significantly lower year-on-year revenue for the third quarter ended September 30.

Rumpff said Baan expected a new CEO would be appointed early in the second quarter of this year, after which time US operations would "pick up".

- Lauren Thomsen-Moore contributed to this storyOnce a darling of investors, software vendor Baan has seen a reversal in its fortunes. Just two years ago, the company was Europe's second largest software producer just behind Germany's SAP. But since then, it has struggled with accounting scandals, mounting losses and management unrest.

The biggest problem was the scandal that forced founders Jan and Paul Baan from their company, accused of producing misleading accounts that suggested its sales were growing faster than they really were. Sales then stagnated as its clients focused on correcting Y2K problems rather than buying new software. With bleak prospects ahead, Baan looked to an investor to help it out of its rut.

1978- Baan founded by Jan Baan, joined in 1982 by his brother Paul.

1981-82- Expands from providing financial and administrative consulting services to offering ERP software that enables businesses to coordinate data on sales and inventories, easing decision-making.

1994- Clinches a deal from SAP to supply $US20 million ($A35.5 million) software to Boeing.

1995- Floats on Nasdaq and in Amsterdam.

1997- Sales grow 64 per cent to $680 million, net income rises 111 per cent to $77 million, and shares rise 114 per cent in one year.

1998-

April 20- Share price hits lifetime high of 49 euros ($A79.90)May 13- Acquires British software supplier CODA Group.

July- Jan Baan announces he will step down as chief executive and president to chair the management board. Baan Investments, which owns 39per cent of Baan and is controlled by the Baan brothers, changes its name to Vanenberg Ventures.

July 28- Jan Baan resigns from the management board and Paul announces he will step down from the supervisory board to concentrate on Vanenburg Ventures.

October- Third-quarter loss is $31.7 million and Baan announces it will cut its workforce by 20 per cent worldwide.

Nov 30- A US law firm files a suit on behalf of Baan shareholders, charging the company improperly recognised revenue by using fraudulent accounting methods to inflate share prices between January 28, 1997, and Novenmber 2, 1998.

1999-

January 20- Reports a net loss of $250 million in the fourth quarter of 1998.

March 2- Full-year losses were $315.2 million against a profit of $77.2 million in 1997.

April 27- Loses a systems contract with airline KLM, shares drops seven per centJuly 28- Second-quarter loss is $9.2 million, and its fourth quarterly loss.

October 21- Third-quarter loss is $24.7 million. Shares fall more than 10 per cent.

2000-

Feb 8- Announces sale of CODA for $30 million book profit.

March 13- Sells software unit Meta4 for $20 million equity gain.

April- Reports seventh consecutive loss-making quarter.

May 23- Shares hit a low of 1.15 euros, a fall of 97 per cent from lifetime high.

May 31- Invensys offers 2.85 euros a share, valuing Baan at 762 million euros ($1.2 billion).

- ANDREW HARRISON

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