J.D. Edwards Closes Out Millennium on an Up Note

Event Summary

On December 1, J.D. Edwards surprised Wall Street by returning to profitability in the fourth quarter, a sign the market may be turning around for J.D. Edwards as companies wrap up Y2K fixes and turn to implementing new software again. J.D. Edwards' Q499 revenue was $257.6M, down 16% from Q498 revenue of $307.1M. Profits for the recent quarter, which ended October 31, were $3.8M, a 90% slide from last year's fourth-quarter profits of $37.7M. But it was the first time J.D. Edwards has posted a profit after a string of losing quarters. The company's license fee revenue for Q499 was $101M, compared to $143.5M in Q498. Services accounted for $156.6M in revenue, compared to $163.6M for the same period last year. For the year, revenue was $944.2M, a dismal 1% increase from last year's revenue of $934M. The company posted a net loss of $7.9M, excluding acquisition-related costs, for the 1999 fiscal year, compared to profits of $74.5M last year. Including acquisitions, the loss for 1999 was $39.2M. Earlier this year, J.D. Edwards bought supply chain vendor Numetrix to round out its supply chain products. This year, most of the ERP vendors have posted sluggish earnings as customers turned their attention and IT dollars toward fixing last-minute Y2K glitches.

Market Impact

While Wall Street may be pleasantly surprised with the last quarter results, we believe that the Company cannot afford to be complacent, for the following two reasons:

  • First, the Company reported almost flat revenues for the fiscal 1999, which is far cry from management's ambitious predictions of a year ago to top PeopleSoft's ERP market share. As a matter of fact, fiscal 1999 is by far the least successful in the Company's history of public trading (See Fig. 1 & 2).

  • Second, the Company is entering 2000 with a great deal of painstaking integration efforts remaining, both with its recently acquired products and with products of its partners, such as Siebel, Ariba, and Synquest.

Nevertheless, we believe that J.D. Edwards is positioned better than the majority of its competitors to take advantage of the expected revival of the ERP market place in the second half of 200.

User Recommendations

As a summary of our recommendations in TEC's note on J.D. Edwards on September 1, 1999 ("J.D. Edwards - Creating OneWorld of Mid-sized ERP Users"), we generally recommend including J.D. Edwards in an enterprise application selection long list for mid-market and low end Tier 1 companies (with $100M-$2B in revenue). However, any organization evaluating J.D. Edwards should only consider existing functionality, and, in case of final selection, should negotiate the incorporation of new applications components now. Future clients are also advised to request the Company's written commitment to promised functionality, length of implementation, and seamless future upgrades, particularly for the recently released products and the products whose release date is due sh.

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