Logility Surges on Second Quarter Earnings Announcement

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Logility Surges on Second Quarter Earnings Announcement
S. McVey - November 24, 1999

Event Summary

Logility, Inc. recently announced its financial results for the second quarter and six months ended October 31, 1999. In spite of the Y2K marketplace malaise, Logility reported increases in software license, services, and maintenance revenues. Software license fees for the quarter were $4.0 million, a 124% increase over the second quarter of last year. Services and maintenance revenues were $4.5 million, a 28% improvement over the same period last year. Total revenues for the quarter of $8.6 million or $0.07 per share represented a 60% increase over last year. In addition, profits fell comfortably in positive territory at $0.07 per diluted share. Logility CEO J. Michael Edenfield attributes the favorable results in part to the successful launch of Logility's i-Commerce initiative, focusing on internet-enabled supply chain management applications; collaborative planning, forecasting and replenishment (CPFR); trading partner collaboration; and application hosting services.

Market Impact

Logility's profitable quarter reflects the success of its effective strategic focus and marketing campaign. Within the past year, Logility redesigned its business strategy to embrace the Internet. Its i-Commerce initiative reflects the new direction and combines its older Value Chain Solutions Suite with two offerings aimed squarely at the Internet: i-Connection, its application hosting and management services, and i-Community, an on-line network for trading partner collaboration. Announced in July, i-Commerce is still in its early stages, although Logility has garnered two wins in the furniture industry for its Voyager XPS collaborative planning application, Wickes Furniture Co. and Homelife Furniture Corp. In contrast to its enthusiasm for Voyager XPS, the market has apparently reacted coolly to i-Connection and i-Community, and high profilee clients in these areas are conspicuously absent. The second quarter results are a reflection more of the market's confidence in Logility's traditional supply chain management applications than of the vendor's success in closing deals for its new i-Commerce components.

User Recommendations

In spite of the successful quarter, Logility's web offerings are relatively new, and more development work will be required before the applications can be considered safe investments. In addition, users should be wary of Logility's reluctance to name clients who have signed on for i-Connection. This may indicate that either customers are not impressed with the offering or that they hesitate to entrust key applications to an external party - the latter a hurdle that all ASP vendors will need to overcome.

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