Posts 2Q00 Loss But Sells CRM
S. McVey - December 13th, 1999
Stockholm-based supply chain execution (SCE) vendor Industri-Matematik recently
reported results for its second fiscal quarter, which ended on October 31, 1999.
Total revenues were $18.3 million, a decrease of 21% over the same quarter last
year. License revenues accounted for just over $1.0 million and service revenues
contributed $16.9 million to the total. Net earnings were negative at $6.9 million,
giving IMI its sixth consecutive quarterly loss.
Durlow, president and CEO of IMI, said the second quarter results were expected.
"While market demand for big enterprise systems continues to be limited, Industri-Matematik
is making real headway in repositioning itself as a provider of a suite of point
solutions across a wide spectrum," he said. "The repositioning process necessarily
takes time, and at this stage its effects are not seen in new license sales."
Despite a 20% staff reduction earlier this year in anticipation of its repositioning,
IMI's operating expenses have remained high, negating profits.
IMI's mix of license and service revenues has declined sharply over the last
four years (see Chart 2), an indication that IMI's strategy has failed to build
market acceptance for its products. IMI has suffered in part from an exclusive
sales agreement with Oracle Corporation that has complicated its ability to
collaborate with other complementary vendors. In addition to working to extricate
itself from the Oracle agreement, IMI is hoping for new license opportunities
as a part of IBM's Global Supply Chain Management initiative, announced earlier
its new suite composed of acquired customer relationship management (CRM) software
from Abalon, its former flagship suite System ESS, and newly developed products,
represents a positive move for IMI, but has yet to find more than a few buyers.
With demand for its SCE software at low ebb, IMI is likely to see the majority
of its license revenues over the next four quarters derived from the red-hot
CRM market. Evidence of this is the joint deal with Ericsson announced to provide
CRM software for Volvo's call center division. IMI announced a second "deal"
in which it will provide advanced order management and supply chain execution
software to a pre-IPO Internet retailer in exchange for an equity stake. Although
IMI rightly counts this a win, it is doubtful that license revenues will emerge
from the deal, given that few Internet companies ever achieve long term viability
and IPOs have historically underperformed the rest of the market. Still, the
contract provides IMI with a much-needed Internet test bed for its veteran SCE
In spite of its disappointing showing, distribution-centered companies who sell
high-volume, fast-moving goods via brick and mortar or Internet storefronts
should keep IMI on its short list due to its marketplace history and broad functionality.
Users should be encouraged by IMI's move into the CRM market, but should not
expect significant integration of its VIVALDI suite for several months. As a
point solution for customer fulfillment, however, IMI makes sense, at least
as an alternative to Descartes Systems Group. For more on IMI's strengths and
weaknesses (See TEC Technology Research Note: "Industri-Matematik
Faces Uphill Climb" November 1st, 1999).