The year 2000 dawned with surprisingly benign impact on the computer networks of businesses around the world. But for Baan Co., the world’s fifth-largest supplier of enterprise resource planning (ERP) systems, the new millennium is off to a dismal start. On January 4, the Barneveld, Netherlands- and Herndon, Virginia-based software maker announced that it expected to lose $236 million in fourth-quarter 1999–more than half the loss a restructuring charge due to the closing of 14 offices and a 4 percent reduction in the workforce. It was Baan’s sixth consecutive quarterly loss, and it virtually wiped out shareholders’ equity in the company.
But even all this may not have been the worst news from Barneveld that day. Baan also announced that CEO Mary Coleman–the company’s greatest asset, in the eyes of the analyst community–was resigning, just seven months after taking office. With her Silicon Valley roots, Coleman was seen as Baan’s best chance to survive in a market being transformed by the Internet. “Coleman was keeping the company afloat,” says Rod Johnson, research director at AMR Research Inc., in Boston. “When she left, people got spooked.”
And not just investors who drove the stock down 30 percent on the news. One week after Coleman hit the road, CFO James Mooney, whom Coleman had recruited from IBM in March 1999, left the company for greener pastures–namely, the corner office at TradeOut.com, a B2B Web business. (Coleman eventually landed as a managing director of operations at Internet Capital Group, a Wayne, Pennsylvania-based Internet incubator.)
The latest quarterly loss and management exodus (there have been four CEOs and five CFOs in the past four years) suggest that Baan is not yet out of a tailspin that began two years ago. At about $5, its stock is down 90 percent from a peak of $54 in April 1998, and now trades for a dollar less than its initial public offering price five years ago. Meanwhile, Baan’s customers, which have automated their mission-critical operations with the vendor’s software, have had their confidence badly shaken.
“Our prime concern is to regain the confidence of the financial community and our customers,” declares CFO Robert Ruijter, who was hired in February by interim CEO Pierre Everaert. Ruijter previously spent seven years with Royal Philips Electronics NV as group treasurer and later CFO of the company’s lighting division. With the giant Dutch manufacturer undergoing a massive restructuring over the past five years, Ruijter has had plenty of experience managing in tough situations. He knows only one thing can restore Baan’s battered image: “We need to become profitable soon.”
How did one of Europe’s most promising tech companies fall so far, so fast?
It Started With Accounting
Begin with the Baan brothers, Jan and Paul, who founded the business as a financial consulting firm in 1978. In the 1980s, Jan, the techie of the two, transformed Baan into a supplier of business management software based on the Unix operating system. With the explosive growth of the Unix platform, Baan too thrived, introducing its first ERP system in 1990, which automated and integrated various back-office operations of manufacturing companies. Baan’s European client list grew rapidly.