Shares of the enterprise software firm SUSE SA fell 12% today as it reported a wider after-tax loss for its fiscal second quarter.

The Germany-based company reported a basic loss from continuing operations of 20 cents per share, similar to its loss in the same period one year earlier. The company’s net loss for the period came to $25.5 million, down slightly from the $26.4 million loss it reported a year ago.

SUSE’s revenue grew by a single percentage point, to $161.9 million. Core revenue, which mainly covers sales from its popular enterprise Linux software distributions, reached $132 million, down 1% from a year earlier. Emerging revenue rose 11% to $30.4 million.

The company said its after-tax loss for the period widened from $13.7 million a year before to $31.6 million at the end of the quarter. It blamed ongoing economic uncertainty that’s weighing on customer’s decision-making, as well as delayed contract signings, for the shortfall. In addition, SUSE admitted that its first-quarter salesforce reorganization hadn’t performed at the expected level, leading to subpar growth.

SUSE is the maker of a popular Linux software distribution of the same name. The open-source SUSE Linux platform runs in enterprise public cloud deployments, on-premises data centers and at the network edge. It offers a range of software products further up the stack too. Many of its customers use the platform to run SAP SE applications. In addition, it sells tools for managing software container environments, which provide another source of revenue.

Although the quarter was disappointing, SUSE did at least achieve annual recurring revenue of $658 million, up 6% from a year earlier thanks to what it said was “continued growth from new and existing customers.”

SUSE has just emerged from a major leadership reshuffle that saw Dirk-Peter van Leeuwen named as the company’s new chief executive officer in May. Van Leeuwen’s appointment was followed by the hiring of Werner Knoblich as the company’s new chief revenue officer, tasked with enabling closer customer relationships. The company has yet to name a new chief financial officer, however, following the decision of former incumbent Andy Myers to step down on June 30.

Analyst Holger Mueller of Constellation Research Inc. said SUSE is faced with several problems at the moment. It has hit significant headwinds, he pointed out, with customers investing less in its software, leading to pedestrian growth. “Couple this with executive changes including a new CEO, CRO and soon, a new CFO, plus the new sales structure, and it’s challenging to deliver an immediate improvement,” Mueller said.  “The good news is that SUSE’s enterprise offerings remain attractive and viable, but it just has to work out how to sell them better amid an ongoing down market. There’s hope the new team will get it right, and the next few quarters will tell us more.”

The new CEO explained in a statement that he has mainly been focused on finding his feet over the first couple of months at the helm.

“I have spent my first two months getting to know SUSE and key stakeholders and I am impressed with the culture of openness, innovation and excellence,” Van Leeuwen said. “We have some challenges to address; I have already taken swift actions to unlock future growth and we will continue to set up our organization for success over the coming quarters. With these changes and the growth in our markets, open source model and strong product portfolio, I am very confident we are well placed to deliver on our long-term potential.”

Looking forward, SUSE reiterated its full-year and medium-term guidance, with adjusted revenue growth for the year likely expected to be in the mid-single digits.

Photo: SUSE