Baan has issued a warning that it expects to make losses of about $250 million or $1.22 per share for its fourth quarter, but said that due to the complexity of the situation, it would release its results later than expected.
The enterprise resource planning applications supplier today said it anticipated generated turnover for the quarter ending 31 December 1998 to be $142 million, although it will not report this as "recognised revenues" because it is taking a very cautious approach to revenue recognition on this occasion.
The generated figure includes license revenues of $100 million, up from $86.6 million in the year ago quarter. The firm also generated $17 million through its indirect channel, but this will not being counted as recognised revenue in the current quarter.
The cost of its restructuring, which was announced on 29 October 1998, has increased to $160 million from $110 million, with $70 million of that being attributed to 'real' re-structuring costs that deplete cash resources. The remainder will be made up of adjustments to the value of various assets held on the company's balance sheet.
Apart from firing 1,200 staff, Baan has also closed or is consolidating about 50 offices and disposing of 14 non core businesses and related research and development costs.
But the company also used the profits warning as a vehicle to clarify its relationship with Vanenberg Ventures, the investment organisation that is ostensibly owned by the firm?s founder Jan Baan and his brother Paul, and which owns 25 percent of Baan's current traded share capital.
Baan?s trading company has now acquired Baan Midmarket Solutions (BMS) from Vanenberg for an immediate payment of $2 million, and has committed to pay the equivalent of 15 per cent of BMS? ongoing license revenues for the next three years. The lowest sum payable is $32 million, but the figure has been capped at $80 million.
However, the share trading activity related to Vanenberg's holdings in the trading company has meant that Baan has had to restate the way it accounts for its recent Caps Logistics acquisition.
As a result, it will take a $10 million one time charge related to in process research costs that will feed back into its third quarter results, which means its previously announced loss of $31.7 million for the third quarter will rise to $41.7 million.. The charge will also appear as an ongoing expected cost of $3 million in the fourth quarter and in future periods.
Klaas Wagenaar, Baan's chief financial officer, said: "We've taken the opportunity to clean up the company and put right the things the investment analysts were unhappy about."
When asked as to whether the new operating cost base of $200 million per quarter was low enough to bring the company back into profit quickly, Wagenaar added: "We hope it's enough, but it is early days on what is for us day one of a new era."
(see analysis section for further details)
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