Invensys has warned that Baan is likely to lose $16.8 million this year.
Dutch ERP vendor Baan continues to haunt Invensys. The London, UK-based automation and control systems vendor has warned that it will have to write down a substantial part of the $714.7 million it paid for the company in 2000 as the poorly performing operation is likely to contribute a $16.8 million loss this year.
Invensys warned in its mid-term report that the performance of its combined IT services businesses was considerably lower than last year due to the substantial decline in market demand. However, in a profit warning it issued on Friday, the company said the full-year outcome is likely to be materially worse though significant management action has reduced costs and improved customer service.
Even though Invensys claimed that Baan was breaking even a year after it was acquired, there have been growing signs that the company was not a goldmine, and recently Invensys has been forced to deny rumors that Baan was to be sold off.
Chief executive Rick Haythornthwaite said Invensys wants to keep a business with a good technology, loyal customers and a growing market and we’re committed to make that happen. He said the potential for performance improvement in the discrete manufacturing sector is enormous.
However, Baan’s failure to make progress at a time when market leader SAP is holding its own in difficult market conditions suggests that it is losing market share. Invensys has been heavily criticized in the investment community for its poor performance, and unless its can turn Baan round quickly, there will be strong pressure to sell the operation.
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