License Revenue Up At The New Manugistics

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License Revenue Up At The New Manugistics
S. McVey - July 19, 2000

Event Summary

Supply Chain Management (SCM) software vendor, Manugistics Group, Inc., recently reported unaudited results for the first quarter of fiscal 2001, which ended May 31, 2000. Total revenue for the quarter was $50.5 million, an increase of 16% from revenue of $43.7 million for the fourth quarter of fiscal 2000 and an increase of 29% from revenue of $39.2 million for the first quarter ended May 31, 1999. License fees topped $26.0 million, the best showing since the company's heyday of fiscal 1998. Licenses exceeded services revenue for the second consecutive quarter, but their ratio remains little more than unity. Despite the increase in revenue, heavy investment in sales and marketing resulted in a net loss for the quarter of $1.9 million, or $0.04 per diluted share. [Figure 1].

Figure 1.

Figure 2.

Fueling Manugistics' increase in license fees were wins at several new clients including, ASMe (Advantage Sales and Marketing e, LLC), Bradlees Stores, Inc., Minnesota Corn Processors, Inc., Publix Supermarkets, Inc., Tnuva Ltd. and YKK (USA), Inc. Sales of additional licenses to existing clients included BP Amoco plc, Canadian Tire Corporation (CTC), Rohm & Haas Company, and Staples, Inc.

Manugistics also found acceptance for its ExchangeWORKS, trading exchange empowerment software with wins at Commerx, Inc., eConnections, and The National Transportation Exchange.

Market Impact

Manugistics' recent rise in license revenues can be attributed to the company's aggressive sales and marketing initiatives implemented by CEO Greg Owens and his new management team. Though successful in achieving some key wins, Manugistics' investment forced it into the red with $52.7 million in total operating expenses, $23 million of which paid for sales and marketing in the first quarter. As in past quarters, the bulk of new license revenue was derived from traditional software products, not hosted application subscriptions or ExchangeWORKS, which require a much longer timeframe to yield appreciable results.

Among its new clients, Manugistics has a wealth of opportunity for strengthening its position as a leading SCM vendor while demonstrating its proficiency in the world of e-commerce. is an important proving ground for Manugistics' ability to supply profit-saving IT infrastructure to the negative-margin Internet retailing industry. If, as a result of installing NetWORKS, Amazon achieves a significant reduction in inbound and outbound shipping charges, Manugistics will have obtained tangible evidence of the viability of its products. Manugistics will need all the marketing help it can muster if it is to survive as an independent company alongside formidable competitors like i2, SAP, and now Oracle.

User Recommendations

Users evaluating supply chain management vendors should remember that the core competencies of Manugistics' NetWORKS suite remain in process manufacturing for consumer goods, but it has captured significant wins in other verticals like high tech electronics (Compaq Computer) and chemicals (DuPont). Clients of its new marketplace tools are still few and users would do well to consider other vendors such as Ariba or i2 for marketplace connectivity in addition to Manugistics.

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