Another Exec Flees SAP

The head of the software company's North American operations is jumping over to Siebel.
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SAN FRANCISCO - After 10 years with SAP (SAP) - Get Report, Jeremy Coote is moving from the back end to the front end of the software business.

Coote, who worked in SAP's senior management team for eight of his 10 years and most recently served as president of SAP's North American operations, told

TheStreet.com

in a phone interview he is moving over to

Siebel

(SEBL)

. Coote starts Monday as general manager at Siebel America. SAP will likely announce Coote's departure on Wednesday, although the departure has been announced inside the company.

SAP has historically sold software to help businesses automate back-office paperwork tasks, while Siebel sells front-office software to help companies deal with customers more effectively.

Coote's departure is a sign of the times for SAP, which has been struggling with other major enterprise-resource-planning software companies amid an industry slowdown. It is a particularly hard blow for SAP America because it has been leading the company's growth.

When SAP reported fourth-quarter earnings in January, it said fourth-quarter sales rose a meager 18% from the same quarter a year ago, compared with a 41% increase in sales for all of 1998. SAP America CFO Kevin McKay predicted then that the company's Asia-Pacific business would continue to depress earnings in 1999 but that strength in the Americas and Europe would pick up the slack.

But some analysts are skeptical of any pick-up this year. They have detected a steady stream of people leaving SAP in the past six months and say more departures are coming.

Credit Suisse First Boston

analyst George Gilbert was the first to note the defects. He wrote in December that the executive in charge of SAP's U.S. supply-chain software

had left, followed by

another report in January that said SAP had cut its U.S. sales force over the holidays. "The cuts are a leading indicator of what's to come," Gilbert wrote in the report. CS First Boston has not underwritten for SAP.

That proved prescient. Not only is Coote leaving, but he estimates that, during the past two weeks, SAP has probably lost about a half a dozen other people.

Coote also said he believes more attrition is likely, perhaps even among senior management.

"SAP doesn't have the executive compensation plans that other companies in the industry might have, so there's always a risk," Coote said. "It's an ongoing problem." Rather than granting employee stock options, SAP has a worldwide "stock appreciation program" that regularly pays a bonus based on the amount SAP shares appreciate from a specified base.

The system works well when SAP shares are rising, but since July's high of 60 1/8, the shares have steadily declined, closing down at 30 13/16 on Tuesday.

Besides, Coote said, "there are more exciting areas out there" right now, including the front-office space.

Coote has "moved from an area that's has seen a huge slowdown in growth to an area that's growing a lot," said one Wall Street analyst, whose firm has underwritten for SAP. "Siebel has been doing really well."

Siebel shares have more than doubled since October and closed up at 45 7/8 on Tuesday.