Struggling Baan put up for sale

For the second time in three years, business applications vendor Baan Co. is on the auction block, a development that has drawn mixed reactions from users and analysts.

Parent company Invensys PLC announced that it has put Baan up for sale as part of a plan to jettison two-thirds of its assets. Invensys, a London-based maker of manufacturing control systems and other products, bought Baan in August 2000 for US$709 million and has pumped another US$100 million into the Barneveldt, Netherlands-based software vendor since the acquisition.

But Invensys has been hit by a drop-off in revenue and profits, and the company singled out Baan as a weak performer during a business update in February. At the time, Invensys said Baan’s financial performance in the fiscal year that ended March 31 would likely be “materially worse” than expected, despite efforts to cut costs and improve customer service.

Dave Wangler, senior vice-president of global marketing at Baan, said officials at the software vendor are talking to several interested buyers and are looking to close a deal within months. “We’re hoping we can make it a quick process, and as far as customers are concerned, it’s business as usual,” Wangler said.

But Todd Roeller, e-business technology manager at Flowserve Corp. in Irving, Tex., said the maker of liquid flow-control products is in a wait-and-see position on Baan. “It’s a little disconcerting thinking you’re leveraged to a vendor’s product that may be in trouble,” Roeller said.

Flowserve runs a number of Baan applications, including one that lets its customers configure products and get pricing data online. The applications “need more investment to satisfy our requirements,” Roeller said. “Being on the chopping block will likely delay or eliminate the future developments we’re counting on.”

Invensys made a mistake by announcing the planned sale before it had a buyer lined up, because the uncertainty could be a cause of concern for some users, according to John Moore, an analyst at ARC Advisory Group Inc. in Dedham, Mass. “Customers will be worried, whether or not they should be,” he said.

However, Moore noted that Baan currently enjoys the highest customer satisfaction ratings it has had in years and that it has been largely successful in retaining existing users. Those factors, along with the quality of Baan’s product line, should make it attractive to potential buyers, Moore said.

“If it’s the right buyer, this could be a very good thing,” said Keith Bearden, CIO at dental equipment maker A-dec Inc. in Newberg, Ore. But he said he would be concerned if Baan is acquired by a venture capital firm that puts profits above product quality.

“I hope that Baan is allowed to continue some of the moves they have started,” Bearden said, adding that the software vendor’s focus on customer satisfaction and continued development of its next-generation Gemini applications are “critical to the long-term success of the company.”

Likely Baan suitors include fellow enterprise software developers SSA Global Technologies Inc. and PeopleSoft Inc., AMR Research Inc. analysts John Bermudez and Randy Weston speculated in a research note. Another potential future for Baan could be a return to independence as a privately held company, through a purchase by a venture-funded group, they said.

“Life will go on, just as it did when Invensys bought Baan. Baan is a solid product and a valuable property; no matter who gets it, it will still be taken seriously,” the analysts wrote. “AMR Research expects this all to play out in weeks, if not days. Baan will have a new home by summer, we are certain. In the meantime, users should continue with their plans.”

– with files from IDG News Service