Düsseldorf There is only one year between great euphoria and bitter disappointment. When the software provider Suse went public in September 2021, CEO Melissa Di Donato spoke of a “historic day” for the company – and promised that it was the best time to buy the shares.
When Suse published the quarterly figures on Thursday, Di Donato sounded much more subdued. “In the midst of macroeconomic and geopolitical uncertainties”, the company “achieved strong sales and profits”. And she assured: we are working “to overcome the challenges that our company is facing”.
The reasons for the serious tone of the shareholders could be found in the announcement. The Group, which is listed on the TecDAX, had failed to meet the expectations of financial analysts in the third fiscal quarter to the end of July and had also lowered its annual order intake target. The share price fell by up to 31 percent to a new record low. The paper recovered somewhat over the course of the day, but was still down 19 percent in the afternoon.
It is now clear at the latest: Di Donato, who was hailed as a role model for women in technology professions after the multi-billion dollar IPO, must switch to crisis mode. The next few months will be rough. The poor order situation will be reflected in sales in the coming periods, warned Mohammed Moawalla, an analyst at Goldman Sachs.
Suse, founded in Nuremberg in 1992 as a company for Software and System Development, has built a business model on open source programs. In the scene, for example, the company is known for developing – with a community of programmers – its own version of the open and free operating system Linux, called Open Suse.
Suse earns money by adapting the freely available solutions for use in companies and offering additional services such as maintenance, customer service, consulting and training. For example, there is an operating system for servers running SAP systems or other business-critical applications. Even in cars and mammography devices, the products from Franconia are used.
In addition, Suse wants to open up a new market with the so-called container management. These are programs that facilitate data processing in the cloud. In order to expand the business, the German software manufacturer took over the American provider Rancher Labs in 2020.
No one-time slip-up for Suse
A supplier of equipment for the digital transformation: that was a convincing argument for the Swedish financial investor EQT. in 2018, he took over the company for $ 2.5 billion – and brought it to the stock market in 2021, in the middle of the boom, with a valuation twice as high. The majority of the shares continue to belong to the Swedish Group.
However, the situation has changed significantly since then. In the third fiscal quarter, Suse was able to increase revenue by 13 percent to $ 171 million, and profit adjusted for a number of factors (Ebitda) by 18 percent to $ 65 million. However, the company completed significantly fewer orders. Order intake for the next twelve months – a key indicator – fell by four percent to $ 114 million. The strong dollar also became a burden.
This is not a one-time slip-up. For the current financial year, Suse CEO Di Donato expects order intake in the core business with Linux solutions to increase by only ten percent in constant currency, instead of a mid-ten percent, in the growth business with container services by 20 percent instead of the previous 50 percent. In other words, the open source specialist cannot keep his growth promise.
The business with container solutions was hit particularly hard. The economic situation is particularly burdening this division, “as the purchase decisions for new contracts are made more slowly and some customer projects are delayed,” as Suse explained on Thursday.
97 Customers in 100 Days
Suse BOSS Di Donato, who visited 97 customers in the first hundred days of office, now wants to respond more closely to the needs of users. Additional security certifications and features are designed to entice you to adopt the Rancher Labs products. In addition, the marketing specialist has her own sales team set up.
There is a “robust plan,” the manager stressed to investors on Thursday. In the coming months, they will take a close look at how well this is working out – and what this means for the Suse shares in their portfolios.