Software houses issue profit warnings

Mid-market vendor QSP and ERP providers Invensys – which recently completed its acquisition of Baan – and Progress Software have all announced they will not meet market expectations.

QSP stated its half-year results, due later this month, will show substantial growth. But results have been affected by reluctance by companies to embark on new IT projects following Y2K.

The e-commerce company also stated results also reflect a change in its accounting policy. Changes in how the company capitalises research and development costs and recognises software sales revenues led to a restatement reducing 1998 profits by more than £3m.

A spokesman for the company, said: ‘The marketplace has underestimated the Y2K indigestion factor, while many companies thought at the beginning of the year, everything would go back to normal, but this has not been the case’.

Until December 1998, QSP capitalised R&D and amortised it based on the estimated useful lives of the related products.

For 1999, the company decided to expense R&D costs as incurred and changed its software revenue recognition policy from the date sales were agreed to when the products were delivered.

Invensys, which last month completed the take-over of troubled Dutch software maker Baan for $750 million, said its own second-quarter trading was below expectations and warned first-half earnings would come in short of last year’s figures which came as a surprise to the City.

In response to the results, it plans to implement ‘significant staff reductions’ and closures to cut costs in the second half.

Some 1,000 former Baan employees have already been made redundant at a number of offices around the world.

Progress Software said that it expects to report earnings per share of 16 to 18 cents on revenue of $64 to $66m, lower than current expectations from some Wall Street analysts.

In the same quarter last year, the company reported earnings per share of 22 cents on revenue of $70.1m.

Meanwhile, QSP has revealed Ian Stewart, executive chairman, will become non-executive chairman with immediate effect.

The change is part of a planned transition following the appointment of Malachy Smith as group chief executive in February.



Related reading