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Interview Baan


Below a questionaire with Dave Spille from public relations Baan:



Question:
Why was it a surprise when Baan announced that the Q3 loss per share was $0,12? This unexpected loss was not the result of a smaller demand for Baan products but the result of the shift in Baan's business models towards more subscription based licensing agreements. Couldnít Baan announce this shift earlier this year?

Answer:
We did announce that earlier. Since the KPN deal that we made public on the 28th of April we are using the subscription based licensing agreements. Also we told annalists several times this year that we are shifting to more subscription based licensing agreements. In August we explained to annalists on a software meeting how the new license method works.

Question:
Then why was the average consensus still $0,03 loss per share? If annalists were aware of this new method it should have been clear that $0,03 was not a realistic goal.

Answer:
At the end of September we closed the Boeing deal. If we booked that deal according to our previous booking method the results would have been even better than the $0,03 loss per share. Annalists knew that we had several large orders in our pipeline and that is probably why the consensus was so high.

Question:
Did Baan expect that the shares were going to make a nose-dive after the Q3 results were made public? If yes, what did Baan think would be the share price after the announcements of the Q3 results?

Answer:
When you make results public that are below earnings estimates you know your share price will fall, so that is what we did expect. However you can never estimate how much value the shares will loose and therefore we did not have any idea of what the closing price of Baan shares would have been that day.

Question:
If Baan knew that the average consensus was around $0,03 loss per share, why didnít give Baan a profit warning of some sort?

Answer:
If youíre going to make pre-announcements you must be 100% sure. Because the Boeing deal was closed at the end of September there were to many uncertainties concerning the Q3 results. Therefore we couldnít make any forward looking statements.

Question:
After the Q3 results every one was talking about how bad Baan is doing, nobody was talking about the shift towards more subscription based licensing agreements. Why didnít Baan bring that more forward and explain to everybody that the shift towards more subscription based licensing agreements was the reason that the Q3 results were lower than the consensus.

Answer:
During and after the announcement of the Q3 results we did tell everybody that that was the reason. All journalists and annalists received several statements from us concerning the shift toward more subscription based licensing agreements. Jim Mooney told the press several times that the Q3 results would have been about $0,02 loss per share if Baan had used the conventional method of booking licenses. Unfortunately the press doesnít repeat these statements literally and journalists sometimes decide to tell their own story. This usually means negative publicity for Baan. But I must say that I did read a lot of annalists reports that said what the reasons were of the lower than expected Q3 results. These annalists were pretty accurate with the data we gave them.

Question:
Baan has, certainly after 1998, a bad reputation concerning honesty and openness toward its shareholders. Baan was slowly recovering from this bad reputation. But there isnít much left from that recovery after these results. I donít see Baan trying to change its reputation. Is Baan still planning to try that?

Answer:
Recently Baan made $25 million available for advertising. A part of this $25 million budget will be used to improve Baanís reputation. Donít forget that our share price recovered from itís $7 low thanks to investor confindence in Mary Coleman and Jim Mooney.

Question:
Can we expect more of these surprises in the future?

Answer:
Naturally I do not hope that. However we are in a difficult market right now. After the end of this year we do expect that our results will improve drastically. But we must surpass Q4 first and that wonít be easy. The license revenue in Q4 will be around the $36 million which is lower than our Q3 license revenue. Also the results at other companies like SAP and Peoplesoft are under a lot of pressure.

(end of interview)

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