Facing challenges, the venerable midmarket vendor beheads its North American operations.
Posted Oct 11, 2007
The Sage Group, the British parent of Sage Software, today announced the preliminary results for its fiscal year ending September 30. Substandard performance by the North American division has led the company to opt for a change in leadership: Ron Verni, chief executive officer of Sage Software, and Jim Eckstaedt, its CFO, were dismissed.
"Following a review of its North American business, the Board has concluded that a change in leadership is required to realise the full potential of this business," The Sage Group said in a statement. "With immediate effect, Ron Verni (CEO, North America) and Jim Eckstaedt (Chief Financial Officer, North America) have left the business. Mr. Verni has also resigned as a director of the Sage Board."
The remaining North American senior management will report to Paul Walker, Sage Group's chief executive, until such time as a replacement can be found for the North America CEO position. Andrew Griffith, group director of treasury and mergers & acquisitions, will be acting CFO, North America, effective immediately. The search is already underway for a new CEO and CFO, according to the company.
Sage cited disappointing financial performance as the reason for the departures of Verni and Eckstaedt. While preliminary results showed revenue of GBP 508 million ($1.03 billion) and earnings before interest, tax, and amortization (EBITA) of GBP 100 million ($203 million), the EBITA margin was only 19.7 percent and organic growth only 4 percent, both the lowest of any Sage operational division, according to David Bradshaw, principal analyst at Ovum. "We should not be surprised that Sage has taken drastic steps when results continue to be disappointing, especially after some of the exchanges when it announced its interim results in May and the 5 percent fall in share price," Bradshaw said in a statement.
Despite that, Bradshaw noted that there were certain challenges inherent to the unit and the overall North American market. Rising stock prices for software companies have made corporate acquisitions impractical for Sage, forcing the company to rely more on organic growth--the area where the unit fell short, he said.
"Sage also faces far stronger competition in the U.S. than in most other markets," Bradshaw continued. "In particular, we see Microsoft Dynamics competing ever more strongly at the top end of Sage's market. SAP is also re-doubling its efforts here," he said, referring to the German company's recent announcement of Business ByDesign, a midmarket challenger for Sage SalesLogix.
Verni, according to a biography no longer available on the Sage corporate Web site, joined Peachtree Software as president in 1996, and led that company's integration into its U.K. parent company, The Sage Group, in 1999. He became chief executive for Sage's combined U.S. operations in October 2000, and led the division through four major acquisitions in four years, and through a name change from Best Software to Sage Software.
A 2002 Sage press release regarding Verni's appointment to the Sage Group's board praised him and his team for "improved branding, sales incentives and customer analysis," and for "expanding Sage's industry-specific offer." But in the end, it seems, the corporate view shifted. "With the wisdom of hindsight, the disappointing results made it inevitable that Sage had to make a management change," Bradshaw concluded. "But one has to ask to what extent it was the now departed North American management's fault, or simply their misfortune at being in the wrong place at the wrong time."
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