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J.D. Edwards On The Mend; This Time Might Be For Real

Written By: Predrag Jakovljevic
Published On: January 11 2002

Event Summary

The following recent announcements by, J.D. Edwards & Company (NASDAQ: JDEC), indicate that J.D. Edwards has been putting it's house in order, expanding its offerings, and executing an aggressive sales strategy, and improving its cash situation at a critical time.

The announcements include:

  • Advanced Planning 4.0

  • Financial results for fourth quarter and fiscal year 2001 (ended in October 2001)

  • Completed acquisition of YOUcentric

  • CRM version 1.1

This is Part One of a three-part Event Note on recent developments at J.D. Edwards. Part Two will discuss the Market Impact and Part Three will continue the Market Impact and make User Recommendations.

Advanced Planning 4.0

On December 17, J.D. Edwards & Company (NASDAQ: JDEC), a provider of collaborative enterprise applications, announced the general availability of Advanced Planning 4.0, a significant update of J.D. Edwards' supply chain suite with a number of new features and functionalities. The Advanced Planning solution integrates J.D. Edwards' supply chain planning (SCP) technology with its flagship OneWorld ERP software.

The company's comprehensive supply chain planning and execution (SCP&E) solution includes such planning modules as Strategic Network Optimization, Demand Planning, Production and Distribution Planning, Order Promising, and Production Scheduling for both discrete and process manufacturing on the planning side. These applications reportedly integrate in real-time with J.D. Edwards' fulfillment applications, including modules such as Warehouse Management, Transportation Management, Sales Order Management, Inventory Management, Shop Floor Management, Procurement Management and Product Data Management (PDM).

Significant enhancements available in Advanced Planning 4.0 include:

  • New scenario simulation capabilities in the Strategic Network Optimization application, which reportedly empowers users to make informed strategic decisions such as plant location, capacity allocation, and inventory pre-build to accommodate seasonality. It provides long-range strategic and tactical decision support regarding supply chain network configuration, asset rationalization, material sourcing plans and capacity plans. Decisions reflect global objectives for costs, profits, and customer service levels and allow a company to visualize multiple what-if scenarios to determine the most effective way to structure their supply chain. Strategic Network Optimization enhancements include a new scenario manager, multi-currency profit optimization, and several new views and reports. The scenario manager allows the user to quickly simulate the impact of adjusting supply chain variables and conditions and assess the effect of the changes on the supply chain in terms of cost, profit, margins, customer service levels, capacity and material requirements, etc.

  • Advanced Planning 4.0's Order Promising application now provides real-time Available-to-Promise (ATP), Capable-to-Promise (CTP) and Profitable-to Promise (PTP) capabilities. Order Promising supports enterprise-wide Capable-to-Promise by simultaneously supporting multiple order entry front-ends, including OneWorld Sales Order Entry, Customer Self-Service and CRM applications, as well as Web storefronts. Promises are made to individual customers based on user-defined business objectives such as maximizing customer service or minimizing costs, allowing the customer service representative to immediately quote accurate delivery dates to the customer while they are placing their order.

    Order Promising works in two ways. In Auto-Promise mode, orders are automatically promised in real-time, including pick, ship and delivery dates. In Scenario Manager mode, the user can evaluate multiple fulfillment alternatives and examine costs, margins and on-time performance for each alternative. The information can be used to support negotiation of price and delivery while the customer is still on the phone. Since Order Promising is tightly integrated to OneWorld's execution system, all inventory-related transactions, including late purchase orders, scrapped material or cancelled sales orders, should impact promises in real-time.

  • A real-time Microsoft Excel client and new Web enhancements for Production & Distribution Planning (PDP), which facilitates sharing of supply chain planning information with all trading partners, regardless of their level of collaborative software sophistication. A key enhancement to PDP allows customers to share supply chain planning information using Excel as an interactive reporting tool. To enable information sharing with a partner who only has Excel and e-mail capabilities, the software automatically extracts information into an Excel file, which can then be e-mailed to the partner. Conversely, Excel spreadsheets from a partner can be linked in real-time to PDP, automatically updating the necessary information.

In addition, as part of the rollout of Advanced Planning 4.0, a new application called Demand Consensus, which supports forward-looking, collaborative forecasting processes, will be available in January 2002. The above product release comes only two weeks after the company announced improved financial results, and it is seen as a very likely one of the major revenue driver in the future.

Financials

On December 3, J.D. Edwards reported financial results for the fourth quarter and fiscal year ended October 31, 2001. Total revenue for Q4 2001 was $235.4 million, a15% decline compared to $277.2 million in Q4 2000 (See Figure 1). While the license revenue grew to 54% to $76.9 million in Q4 2001, compared to $50.0 million in Q3 2001, it still represents a 44% plunge compared to $137.4 million in Q4 2000. Contrary to it, services revenue was $158.6 million, up 3% from $154.2 million in Q3 2001 and up 13% from $139.8 million a year ago. Net income from normalized operations grew significantly to $20.4 million, compared to a loss from normalized operations of $3.2 million in Q3 2001 and a $9.7 million profit in Q4 2000. The result from normalized operations for Q4 2001 excludes certain items such as acquisition-related charges, restructuring charges and a one- time valuation allowance for deferred tax assets. Without these, the net profit for Q4 2001 would have been $18.0 million.

For the fiscal year ended October 31, 2001, total revenue was $874.0 million, which is a 13% decline compared to $1 billion in FY 2000 (See Figure 2). Particularly disappointing was license revenue of $271.9 million, which is a 35% drop compared to $419.1 million previous year. Net income from normalized operations for fiscal 2001 was $20.3 million, compared to $4.9 million in fiscal 2000. However, the amounts from normalized operations exclude certain items, and the reconciliation from actual results to results from normalized operations was provided as supplemental information on the separate "Consolidated Statements of Operations." Without these, the net loss for 2001 would have been a whopping $179.8 million, compared to a year-earlier loss of $15.4 million.

Completion of YOUcentric Acquisition

As possibly the most important event in the quarter, J.D. Edwards completed its acquisition of YOUcentric in November. YOUcentric is a provider of Java-based customer relationship management (CRM) software including applications for sales force automation (SFA), campaign management, contact center management, and partner relationship management (PRM). The completion of the acquisition and the first phase of product integration should position J.D. Edwards to compete in the more promising CRM market. The above results do not include any reference to the acquisition, which was announced earlier in the year (see J.D. Edwards Fires Siebel, Hires YOU) but was not completed until November. J.D.Edwards claims to be already getting a strong interest in its CRM solutions, having completed several CRM transactions worldwide in the quarter. This is probably a part of what J.D. Edwards' CEO, Chairman and President C. Edward McVaney, referred to as a 'genuine pent-up demand' for its products and indicated that the company was well positioned for the future. The company also continued to experience demand for its supply chain products, and also signed license agreements with some new customers. Still, the lion share of the revenues came from existing customer base.

CRM version 1.1

On December 18, J.D. Edwards announced the latest release of its collaborative CRM solution. CRM version 1.1 leverages the company's collaborative XPI (eXtended Process Integration) technology to integrate customer-facing applications with both OneWorld and WorldSoftware. The integrated release comes less than a month after J.D. Edwards completed the acquisition of CRM supplier YOUcentric. CRM version 1.1 reportedly provides the ability to both know and fulfill customers' needs through real-time integration with J.D. Edwards' ERP applications, enabling a business to more effectively acquire, fulfill, service, learn from, and communicate with customers.

J.D. Edwards' latest release of CRM creates a unified "lead to cash" business process to handle all customer interactions, including sales leads, price quotes, order entry, delivery and billing. For instance: 

  • A sales representative can access leads generated by the marketing department, and convert those leads to prospects in the Sales Force Automation (SFA) application. 

  • If a prospect requests a price quote, the salesperson can provide that information using J.D. Edwards Advanced Pricing. 

  • Once the prospect is ready to order, the sales rep can check inventory and convert the quote to an order using J.D. Edwards' Fulfillment Management applications, which instantly access the prospect data entered into the CRM system. 

  • Customers can then track their order using the Web-based Customer Self-Service application, viewable via an Internet browser.

Historically, such activities have often been divided and distributed between niche CRM and ERP applications, which, if integrated, require separate data repositories. J.D. Edwards CRM applications reportedly share identical data with ERP applications, so that all users operate on the same information. J.D. Edwards' is utilizing its XPI and Data Model Inheritance capabilities to seamlessly connect business functions between CRM and its ERP applications. In addition, businesses can leverage both of these technologies to rapidly and efficiently connect the collaborative CRM solution to legacy data sources. J.D. Edwards currently plans to integrate CRM with its Advanced Order Configurator and Advanced Planning applications in 2002.

This completes Part One of a three-part Event Note on recent developments at J.D. Edwards. Part Two will discuss the Market Impact and Part Three will continue the Market Impact and make User Recommendations.

Figure 1

Figure 2

 
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