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IMI Sees Red In Dawn Of Fiscal 2001

Written By: Steve McVey
Published On: September 21 2000

IMI Sees Red In Dawn Of Fiscal 2001
S. McVey - September 21, 2000

Event Summary

Industri-Matematik had no complaints about its performance during the first quarter of fiscal 2001 in spite of lower revenues and earnings. The Stockholm-based maker of supply chain execution and customer service software reported total revenues of $17.0 million, composed of $4.1 million in license fees, $12.4 million in services and maintenance revenue, and $431,000 in hardware sales. License revenue declined 20% from $5.2 million in the previous quarter but soared 151% over the $1.6 million in license revenue it achieved during the same period a year ago. Service and maintenance revenue also lagged 20% behind that of the previous quarter, $15.5 million, and fell 16% from those in the same period a year ago.

In addition to lower revenues, IMI's earnings sank deeper into the red in the first quarter. Net loss for the quarter was $3.5 million compared to a loss of $2.7 million for the previous quarter and $7.9 million for the same quarter a year ago. Positive earnings have eluded IMI since the quarter ended April 30, 1998. [Fig. 1]

Figure 1.

Figure 2.

In discussing the results, Chief Executive Officer Stig Durlow highlighted customer successes and cost reduction efforts. "We succeeded in adding new customers and selling add-on solutions to existing customers while continuing to reduce costs, primarily by trimming European overhead. This action removed about $2 million from our cost structure on an annualized basis," stated Durlow.

Among its new client success stories were two sales of VIVALDI CRM: one to Domain Technology, a leading domain name service in Europe; and the other to Grapes Communication Group, a Spain-based telecom operator rapidly expanding into other countries in Europe. IMI also announced a new agreement with a major international logistics company involving other customer-focused components of the VIVALDI suite. The deal is expected to spawn implementations in 52 countries.

IMI also has follow-on orders from existing clients include Spicers, Sherwin-Williams and NMD. Spicers, a UK-based office supplies wholesaler currently uses VIVALDI Advanced Order Management (AOM) to manage multiple distribution channels and provide value-added services to its retailers. It has added VIVALDI Fulfillment Center warehousing management and expanded its implementation of VIVALDI AOM to other parts of the organization.

Along with its financial results, IMI announced plans to launch a new product suite aimed at Supply Chain Event Management (SCEM). Citing its strength in global logistics execution, IMI believes it is uniquely capable of delivering SCEM applications that provide visibility to all participants in a company's extended collaborative network.

IMI also announced that SVP of Worldwide Sales and Marketing, John Geraci would assume the newly created position of Executive VP and Chief Operating Officer. The position carries executive responsibilities for sales, marketing, product development, and customer service.

Market Impact

Past sales execution problems coupled with a stifling Oracle relationship helped erode IMI's financial position (see Figure 2). Just two years ago, IMI's four-quarter revenues exceeded $100 million, ranking it first among supply chain execution software vendors. Since then, four-quarter total revenues have dropped 27%. IMI blamed Y2K remediation spending among clients in its core CPG market segment for its lower revenues in fiscal 2000, but this is unlikely to be a factor today. Though the first quarter has usually not been IMI's strongest in revenues, the company is plainly continuing to grapple with sales execution.

John Geraci's reappointment may indicate the company is unsatisfied with his ability to close deals or, at least feels that a larger sales organization (with Geraci in an operations role) is needed to cope with multiple channels and revenue models. Further undermining its sales efforts is the company's arrangement with Oracle, which precludes IMI from pursuing joint deals with other large-scale enterprise application software providers. At last report, IMI was still attempting to extricate itself from the arrangement.

To resume growth, IMI needs to do build greater brand awareness in the U.S. and explore possibilities for tapping into the B2B commerce market. The planned move into SCEM may, in the short term, help associate its name more strongly with B2B, but may have an adverse effect if it fails to deliver a viable solution that can work seamlessly with third party products. Vendors focused exclusively on SCEM such as Saltare.com stand a much better chance of success in this market since theoretically they have no allegiance to any particular ERP, SCM, or CRM product.

User Recommendations

Distribution-centered companies that sell high-volume, fast-moving goods via brick and mortar or Internet storefronts should consider IMI's VIVALDI suite among its short list candidates, especially when looking for advanced order management and WMS combined with CRM. Companies in Sweden are likely to find a wealth of support and implementation services at their disposal as IMI receives 37% of its revenue from this country. U.S.-based and global companies can also expect implementation help through IBM, which formed an alliance with IMI in 1999.

 
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