Industri-Matematik Posts 2Q00 Loss But Sells CRM

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Industri-Matematik Posts 2Q00 Loss But Sells CRM
S. McVey - December 13th, 1999

Event Summary

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.

Stig 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.

Market Impact

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 this year.

VIVALDI, 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 software.

User Recommendations

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).

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