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  • Subject: SSA reports fourth quarter loss
  • From: clewis@xxxxxxxxxx
  • Date: Mon, 23 Nov 1998 17:21:32 -0800 (PST)

This NEWS.COM (http://www.news.com/) story has been sent to you from  
clewis@iquest.net.

Message from sender:
   News on SSA...

Chuck
-------------------------------------------------------
SSA reports fourth quarter loss
By Randy Weston
November 20, 1998, 2:45 p.m. PT
http://www.news.com/News/Item/0%2C4%2C29129%2C00.html?sas.mail

System Software Associates is slowly trying to recover from the  brink of 
financial ruin but is unlikely to ever be the powerhouse it once  was in the 
business application business.  

  Chicago-based SSA today announced a  fourth quarter loss of $3.5 million, or 
7 cents a share, compared to a  profit of $300,000, or 1 cent a share, in the 
like period last year.  

  Revenue for the recent period was $112.5 million, compared to $125.6  million 
a year ago.  

    

  But SSA executives are pointing to the quarter over  quarter improvements 
this year as proof the company is on the rebound.  

  "We continue to aggressively manage cash balances by  focusing on expenses,  
accounts receivable, and capital," said William Stuek, chairman and chief  
executive of the software firm. "We believe SSA's performance in the fourth  
quarter validates the success of our restructuring plan. Operating losses  
decreased from $12.4 million in the second quarter, to $11.2 million before  
restructuring and other charges in the third quarter, to $2.3 million in  the 
fourth quarter. We believe SSA is well positioned for growth and  profitability 
in 1999."  

  SSA took a $120 million  restructuring charge in July, the third step in a 
four-part plan to  recover from its two-year slide. The firm, whose 
AS/400-based BPCS software  once ruled the industrial market sector, has 
struggled to regain the  momentum it lost when client-server computing, led by 
SAP, stole its market share.  

    SSA also has itself to blame. A main reason it wound up where it is today  
is that it spent millions in early 1996 to revamp its product to an  
object-oriented, Unix-based system. It was an attempt to leapfrog  competition 
but nearly killed the firm in the process. The planned $125  million project 
took $200 million to complete, and customers stalled placing  new orders while 
waiting for the new product to be released and then mature.  

  SSA executives said the company also made the fatal mistake of trying to  
compete head on with SAP for large  enterprise deals at top-tier Fortune 500 
companies instead of sticking with  its core market-divisions of those huge 
companies and smaller manufacturing  firms.  

  "SSA needs to stay out of SAP's headlights," said Bruce Richardson, analyst  
at AMR Research in Boston. "SAP  will leave them as road kill. SAP has driven 
everyone out of that market  including those in better financial shape than 
SSA."  

  SSA is now hoping to corner the market on selling systems to automate  
plant-level processes while letting SAP automate the corporate offices. SSA  
also has a huge installed base to continue to care for as it struggles to  find 
its new niche.  

  With roughly 8,000 customers running SSA's BPCS product at some 21,000  sites 
word wide, SSA has a pretty substantial base to work with as it tries  to 
stabilize and sell its latest component-based which has a history of  being 
extremely buggy. This fact added to the new management and growth  plans has 
Wall Street keeping a wary but interested eye on SSA.  

  "On the road to marriage, we have had a good first or second date, that's  
what I call this quarter," said Eric Upin, financial analyst at BancBoston  
Robertson Stephens in San Francisco. "I don't think they can return to  where 
they once were."  

  Still, BancBoston Robertson Stephens  upgraded SSA's stock rating in 
recognition of the new management's progress  in steering the company toward 
recovery.  

  "We upgraded them from a market performer, which means avoid at all costs,  
to a long-term attractive buy," Upin said. "SSA is what we view as a double  
speculative buy. It still has a lot of bleeding that needs to be fixed but  it 
has good doctors now."  

  SSA stock has been trading around the $7 range, a range that traditionally  
means a company could either plummet or make a big comeback. Upin said if  SSA 
continues to stabilize its  product and focus on its traditional customer of 
middle market  manufacturers, it has a good chance of being a threat to the 
growth plans  of larger competitors like SAP and PeopleSoft who are trying to 
sell to  these smaller companies too.  

  And if it is remotely successful, that cheap stock could double or triple  
easily making it an OK risk for speculative investors with extra cash lying  
around, but not a good bet for your life savings.  

  The next few quarters are the ones too watch. Stuek has promised a return  to 
profitability in 1999.  

            


-------------------------------------------------------

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