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August 4, 2004 1:17 pm

SEC suit hits Business Objects

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Shares in Business Objects, France?s best-known software group, fell 7.4 per cent on Wednesday after it said the US Securities and Exchange Commission was planning to file a lawsuit against it for an alleged failure to properly disclose its order backlog.

Investors deserted the Paris and Nasdaq-listed company after it admitted receiving a Wells notice from the SEC informing it that the US market watchdog was planning to recommend ?a civil action be initiated?. Business Objects said it believed the ?inquiry addresses the fact that the company does not disclose its backlog of unshipped orders, and that the inquiry does not involve revenue recognition issues?.

The company argued its ?disclosures are compliant with the security laws and are consistent with industry and general practice? and said it planned to ?vigorously defend its position?.

It will be allowed to make a written response to the SEC. The SEC declined to comment.

Founded in Paris in 1990, Business Objects is now largely based in Silicon Valley. Its $1.2bn acquisition of US rival Crystal Decisions last year made it the world?s leading provider of business intelligence software, used by companies to analyse data held in other software systems.

The company said ?none of its officers or directors would be named as defendants in the matter?. But it is a blow for Bernard Liautaud, the 41-year-old founder and chief executive, who has built a reputation as a software pioneer since Business Objects listed on the Nasdaq in 1994.

Its shares fell ?1.77 to ?15.72 on the Paris bourse, sliding near their 52-week low in May when details of the SEC?s inquiry were first released. They were down 6 per cent at $19.48 in midday trade on the Nasdaq.

Business Objects initially tried to play down the probe, describing it as ?an informal request for information?.

Last week the company reported a 72 per cent rise in second-quarter revenues to $222m and a drop in earnings per share from $0.18 to $0.13. It forecast revenues this year of $905m-$915m, up from $561m last year and said pro forma earnings per share would rise from $0.35 to $0.80-$0.85.

It also announced the second departure by a senior US executive this year, with the resignation of John Olsen as chief operating officer and president of its American operations. This comes only a few months after John Temple quit as senior vice-president of its American operations.

The business intelligence software market has been a rare bright corner of the generally depressed technology industry. Research group IDC estimates it is worth more than $7bn worldwide and could double by 2006.

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