Software Leasing Trend Slams Baan Earnings
P.J. Jakovljevic - October 27, 1999

Event Summary

On October 21, Baan Co. 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. Although the business software vendor was able to reduce its third-quarter loss compared with the $40 million in red ink it posted for the corresponding quarter in 1998, revenue fell by roughly 27% to $143 million, down from $195 million in last year's third quarter. Baan cited the market's move toward leasing rather than buying software as one reason for its sagging revenue. The shift toward leasing has an impact on revenue over the short term, but will build customer loyalty and produce an ongoing revenue stream, Baan said in a statement. Baan named Boeing Co. and KPN NV as two major companies this year who have decided to license Baan's software on a subscription basis. Licensing revenue for the third quarter totaled $36 million, while maintenance and service revenue reached $107 million, Baan said. The company said it expects the rest of 1999 to be 'a difficult year for the enterprise applications market.' Tough market conditions have already been reflected in worse than expected results from business software vendors such as PeopleSoft Inc. and SAP AG. Baan, however, is also battling internal woes. It has reported losses for five consecutive quarters and has undertaken a major restructuring designed to stem losses and clean up its financial practices...