Baan blamed restructuring costs and a slowdown in the enterprise resource planning (ERP) market due to the Year 2000 problem for its second quarter losses and a 59 per cent plunge in software licence sales.
The onetime sweetheart of the markets suffered a sharp reversal of fortune last year, following questions about aggressive accounting practices that may have contributed to its fast growth. It was also hurt by a slowdown in its core ERP applications market and internal management turmoil.
Baan reported net losses of $9.2 million or $0.04 per diluted share compared with year ago profits of $17.1 million or $0.08 per share. This was in line with the First Call analysts’ consensus of losses of $0.04 per share.
Revenues, however, plummeted 25 per cent to $172.8 million, while license sales plunged to $54 million from $131 million in the year ago quarter and $65 million in the first quarter of this year. But maintenance and service revenues rose 20 per cent to $118 million, while service and maintenance margins increased to 27 per cent from 24 per cent in the first quarter.
The other bright spot was the company's success in cutting costs, with operating expenses and costs falling to $184 million from $202 million in the first quarter. Baan’s shares closed down 37.5 cents at $13.813 on the news, however.
Jim Mooney, Baan’s chief financial officer, said: "The second quarter materialised as expected and the overall results were in line with investment community expectations. We delivered on our bottom line objectives through strong expense discipline and continued growth in our services business.”
He added: “License revenue continued to be impacted by short term factors affecting the enterprise applications industry and by the residual impact on sales productivity from the restructuring program. The improvement in our sales pipeline and our recent aggressive marketing investments make us cautiously optimistic that license revenues will grow in the second half of 1999."
Analysts were less hopeful, however, saying the short term outlook for the company remained uncertain.
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