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Has Intentia Turned The Corner? Almost.

Written By: Predrag Jakovljevic
Published On: March 16 2001

Has Intentia Turned The Corner? Almost.
P.J. Jakovljevic - March 16, 2001

Event Summary

On February 16, Intentia International AB, a Swedish provider of enterprise business applications, published its 2000 report. Intentia's net revenue rose in 2000 by 11%, while license revenue for the year increased by impressive 53% (See Figure 1). Australia, France, Germany, Great Britain, Sweden and the United States were Intentia's biggest license markets in 2000. However, consulting revenue in 2000 decreased by 1%. The company believes that the decline in license revenue during 1999 had a major impact on consulting revenue in 2000. Therefore, growing license sales were not reflected in improved consulting revenue until the latter part of the year. As a result of low capacity utilization, particularly in the first half of the year, Intentia's consulting margin for the year amounted to a highly unsatisfactory 9%. Net loss for 2000 was approximately $32.7 million, compared to a $41.6 million loss in 1999.

Figure 1.

Nevertheless, this was the first profitable quarter in the last 24 months. Net revenue was up by 33% in the fourth quarter 2000, while license revenue increased by 112%, the strongest growth for a single quarter in several years (See Figure 2). License revenue was partly attributable to large orders such as Hagemeyer and Autodistribution. Consulting revenue for the quarter surpassed the same period of 1999, increasing by 6%. Net income for Q4 2000 was approximately $11.1 million compared to a $4.9 million loss a year ago.

Figure 2.

Over the past year, Intentia has focused on developing a complete range of integrated e-business components. It has repositioned itself from being a traditional ERP vendor to an e-collaboration provider. Intentia believes its goal-oriented strategy has provided the company with a solid base for the future. Intentia's objective during the year was to strengthen its long-term position, to establish a base that combines rapid growth with solid profitability and balanced cash flows. In addition, the company has focused on rapidly regaining a positive operating margin. Intentia signed agreements with more than 400 new customers in 2000. The fact that Intentia signed more large contracts than in any previous year possibly illustrates the greater credibility and competitive strength it now enjoys with big companies.

Intentia claims that the successful shift in technology, the evolution toward e-collaboration and the considerably improved functionality of prioritized industry applications have made its Movex product more competitive than ever before. As a result of the strategic global alliance concluded with Sun Microsystems Inc. (for more information, see Intentia's Growing Pains) during the year, Intentia now also delivers Movex on the Sun Solaris platform, opening the door to new markets.

Market Impact

Like its compatriot Volvo, Intentia has shown endurance during unpleasant environmental conditions. Early in 2000 it outlined a cost-effectiveness plan aimed at returning to profitability as quickly as possible. In accordance with the plan, the company reduced the size of its organization in areas that had significant excess capacity (for more information, see Intentia Attempts to Become 'Lean and Mean'). Consequently, and to its delight, Intentia achieved both growth and development within its existing infrastructure as planned, further improving cost-effectiveness.

The encouraging signs are an outstanding increase in license revenue and a long awaited profitable quarter. Still, the company's cash and stockholders' equity values have more than halved during the last 12 months as Intentia, like many of its competitors, has had the misfortune of concurrently tackling international expansion and ambitious product development in a sluggish and morphing market.

Nevertheless, Intentia has rounded out its platform-independent extended ERP product portfolio, which also features strong industry-specific functionality and expertise (see User Recommendations). Movex NextGen release, its enterprise resources planning (ERP) system launched in 1999, is now a Java-based software suite deployable across multiple platforms. Intentia continues to perform well in Europe and has articulated an attractive strategy to support e-marketplaces. Very impressive is e-Collaborator, which should handle the transmission of almost all types of business information among companies over the Internet; it supports application-to-application (A2A) and business-to-business (B2B) integration.

Intentia now offers extended ERP applications that expand far beyond traditional ERP functionality to include Supply Chain Planning & Execution (SCP/E), Customer Relationship Management (CRM), Partner Relationship Management, Business Performance Measurement and integrated e-business components. In line with global technology trends towards wireless applications, Intentia also introduced in 2000 wireless applications protocol (WAP) - based functionality into its flagship Movex product suite. Gaining platform independence and providing a comprehensive product offering for the new economy should expand Intentia's opportunities.

However, one of the company's challenges remains its still moderate toehold in North America, which has traditionally hindered the significant improvement of its competitive position. Recent alliances like the ones with Sun Microsystems, IBM (a joint project to develop e-business applications based on IBM's WebSphere technology) and MRO.COM marketplace, might promote Intentia's visibility. The company might now be able to make an onslaught onto the North American applications market after a number of dismal attempts. Intentia must market the Movex product with a more aggressive and flashy media blitz and an audacity that is particular to its US-based counterparts.

Further, the task of curbing costs of product development and sales & marketing, with an uncertain license growth and the low utilization of a bloated consulting practice remains daunting despite the recent improvements. Intentia should also make substantial progress in developing an indirect channel to supplement its strong direct sales and consulting force. The apparent tardiness in tackling the ASP business model opportunity may also impede the company's agility in the long run.

User Recommendations

While Intentia's long-term viability has never been seriously questioned, this positive quarter must produce a sigh of relief. The company has broadened its product lines and seems to have responded to most of the recent market trends. Its functionality footprint, technological innovation and expertise, and sharp vertical focus should be attractive to the enterprises within the following industries: automotive, aviation, fashion, food & beverage, furniture, MRO, paper, retail & distribution, service & rental, and steel.

More important will be how well Intentia will manage brand recognition and channel development, and how well it will target the right e-business issues for the manufacturing and distribution large and mid-market enterprises and demonstrate benefits to the prospect or customer.

More comprehensive recommendations for both current and potential Intentia users can be found in Intentia Possibly Seeing Daylight.

 
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