System Software Associates Inc, the lame dog of the burgeoning ERP software business, announced a profits warning after markets closed Monday which plunged the company’s fragile recovery back into doubt. After a period of suspicious silence, and barely a month after its founder and CEO resigned for the second time, the company is now bracing itself for another stock massacre after warning that both revenues and profits would fall short of Wall Street’s expectations. SSA says it now expects to make a loss for the three months to April 30 against a First Call consensus of analysts estimates predicting a $0.06 per share profit. Meanwhile, the market in which SSA operates is estimated to be growing globally by 30% to 40% a year, but Chicago based SSA has failed to capitalize on such an exceptional business environment. William Stuek, who took over as CEO from resigning founder Roger Covey in April, must be wondering why he ever chose to leave IBM Corp. Initially hired by SSA as chief operating officer, Stuek has a $5m bonus riding on his ability to lift the company’s stock price; a bonus that now seems remote on the strength of Monday’s announcement. Although as a last resort, he could try emulating his predecessor. Covey single-handedly generated a 7% gain in SSA’s stock on the news he was stepping down. Now only an affiliate of the company, Covey still owns about a quarter of the stock, but he off loaded half a million shares in SSA, worth over $4m, as recently as May 5. A transaction which is bound to provoke interest in legal circles following the profits warning. SSA’s current troubles stretch back over several years. Its modular enterprise resource planning software was originally designed to run on IBM Corp’s AS/400 but the company drove itself close to extinction with its vastly over budget $200m attempts to write a fully object oriented, client/server version to run on Unix. In the process, accounting irregularities were exposed and SSA was forced to restate its 1996 sales figures downwards by $46m. Investor confidence sank to an all time low as the shares bottomed out. But just as the company looked to be running out of money, BPCS v6.0 was completed, and the company weathered the storm. Sales picked up, and although SSA had lost its chance to emulate its former rivals PeopleSoft Inc or SAP AG, a partial recovery seemed possible. Then suddenly Covey resigned to pursue other interests and now revenues are going backwards again. William Stuek announced that he has a 60 day plan to, reposition, restructure and revitalize SSA. But after months and months of losses, and with more restructuring charges poised to wreak havoc with SSA’s reported earnings, investors are unlikely to listen. No one at SSA was available for comment.
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