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Logility FY 2001 Comes In Like a Lamb

Written By: Steve McVey
Published On: September 11 2000

Logility FY 2001 Comes In Like a Lamb
S. McVey - September 11, 2000

Event Summary

Business-to-business collaborative planning software vendor Logility, Inc. announced its financial results for the first quarter of fiscal 2001. License revenue fell 57% from the comparable quarter of last year to $1.9 million, a 44% improvement over the previous quarter's license revenue of $1.3 million. License revenue for the fourth quarter of fiscal 2000 was itself a disappointment attributed at the time to delayed purchasing decisions among several key accounts.

Logility offered no details to explain the current quarter's difficulties, although the company assured their public that changes are underway. "While we are disappointed in our license fee performance during the quarter, we are positioning the company for success by improving the direct and indirect sales channels," said J. Michael Edenfield, president and chief executive officer of Logility. "Additionally, we have taken action to improve sales execution including the addition of new management leading our direct sales team, the formation of an e-Business unit and continued expansion of our alliance programs."

A 20% increase in services revenue counteracted the shortfall in licenses from a total revenue perspective and total revenues increased slightly over last quarter, but fell 16% in comparison with the first quarter one year ago. The fall in revenues combined with unchanged operating expenses contributed to a net loss of $760,000 for the quarter. Despite these results, the overall financial condition of the company remains good, with cash and short-term investments of approximately $23 million and negligible debt.

Figure 1.

Edenfield hinted that other activities during the quarter may have diverted company attention from sales execution goals. "This past quarter, Logility extended its market reach through an exciting new partnership with Great Plains, an organization with tremendous expertise in solving the business needs of the midmarket. Great Plains will market and sell Logility products to new accounts as well as their own significant customer base of approximately 7,000 through a network of over 2,000 business partners." Clearly, Logility is optimistic about prospects for the remainder of 2000 and beyond.

Market Impact

Its weak revenues in the last two quarters stem largely from a loss of focus in Logility's sales organization. This is not unexpected as the company's small direct sales personnel have been assimilating their revised role supporting an OEM agreement with Great Plains Software. In the deal, some of Logility's products will be branded and sold as Great Plains' Supply Chain Series. The first modules to be offered are Logility's warehouse management system, WarehousePRO and its logistics execution application, Transportation Management. Great Plains plans to incorporate more applications in the future, including Logility's collaborative planning products, Voyager XPS and Voyager XES.

Once boundaries are drawn and the two organizations are working together in tandem, we see excellent potential for the partnership and little chance of conflict. Provided Great Plains resists following the example of SAP and Oracle and does not develop its own supply chain suite, the OEM agreement should eventually afford Logility a healthy flow of indirect revenue. Great Plains has established very strong branding and penetration within the Small-to-Medium Enterprises (SME) segment of the ERP market and enjoys an extensive partner channel with over 1,600 experienced partners.

User Recommendations

Flagging revenues might cause day traders to panic and throw all their money into i2 stock, but cooler heads (and current customers) should not be overly concerned about Logility's current difficulties. Users with relatively uncomplicated business processes in process manufacturing industries, such as food & beverage, chemicals, and other consumer goods should certainly include Logility on shortlists.

Users with very particular business requirements that defy simple implementation should still involve Logility in the selection, at least through the scripted scenario demonstrations, but should ask for quotes that detail additional costs raised by customization. Small to mid market companies evaluating application service providers should ask Logility for a reference from its small, but growing, list of clients who use hosted Voyager products.

Figure 2.

 
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