Catalyst International to Tread Water With SAP Through 2000
Warehouse management system (WMS) vendor, Catalyst International, recently
reported fiscal results for the second quarter 2000. Total revenue was
$11.1 million, an increase of 7.2% over the first quarter, but slightly
less than revenue of $11.5 million for the second quarter of 1999. License
revenue decreased by 6.7% from the first quarter of 2000 and fell by an
even more alarming 30% from the second quarter of 1999. Services revenue,
derived primarily from modifications implemented for clients rose to $6.9
million, a slight increase over the first quarter figure, $6.2 million.
only financial highlight on Catalyst's second quarter report card was
profitability, which topped $603,000, an increase of 128% over the first
quarter. The strong profits notwithstanding, its recent results are disappointing
in that they fail to demonstrate the efficacy of the SAP alliance.
Masked by somewhat feigned exuberance over its earnings is the fact that
Catalyst's license revenue declined 30% from the same quarter one year
ago. While Catalyst should be congratulated for improving profitability,
the Wall Street and user communities were clearly expecting to see more
revenue from its pact with ERP giant SAP.
some observers might be tempted to pronounce the SAP alliance dead, a
few more quarters of operation are necessary to allow a valid determination
to be made. Catalyst admits that the deal, now nearly one year in existence,
has not produced results as quickly as previous estimates held. The company
recently revised downward its revenue projections for 2000 to $42 million,
which is simply twice their first half revenue of $21.4 million, implying
a flat growth curve for the remainder of the year. Though this may not
fall outside the realm of possibility, considering that the second half
is usually stronger than its first (with the exception of 1999 due to
Y2K), it clearly was less than Catalyst originally expected.
faces a Herculean task in educating SAP's sales force about its WMS products,
which is critical for enabling them to sell them efficiently without placing
an unmanageable burden on Catalyst. In the meantime, Catalyst has scrambled
to develop new Internet offerings, specifically its online marketplace
offering, Catalyst-Exchange, to address a conspicuous gap in its Web strategy
(see TEC note, "Catalyst
International"). Spread thin and faced with increasingly competitive
market pressures, Catalyst is unlikely to see any real growth in new license
revenue during the second half of 2000, though we feel its revised target
to be attainable (60% probability).
For companies in retail, consumer packaged goods, or industrial technology,
the Catalyst WMS products offer a rich set of features that can be customized
according to specific customer requirements. We encourage users to include
Catalyst on a short list for Unix WMS selections. SAP users who are unsatisfied
with mySAP.com's WMS capabilities will certainly wish to evaluate Catalyst,
but will have to wait until 4Q 2000 for general availability of the dedicated
interface between the two applications. These users should view the stated
timeframe for the release with caution, however, as Catalyst had previously
announced an interface would be available in 3Q 2000.
Catalyst uses third party software from EAI (Enterprise Application Integration)
vendor Mercator to integrate WMS and SAP R/3. Provided Catalyst can one
day refine its ability to execute alongside SAP, SAP users should find
the alliance to be a low risk alternative to other SAP WMS combinations.