MAPICS Back On Track, But Not Without Restructuring Pains
As announced in a press release from August 23, MAPICS, Inc., one of the
leading mid-market ERP vendors, announced that it is taking steps to reduce
costs through a restructuring plan that includes directing a greater proportion
of its resources on the worldwide growth opportunities for its newest
extended enterprise solutions for manufacturers. As part of this restructuring,
the company has laid off approximately 10% of the workforce dedicated
to ERP backbone solutions. The Company said that as a result of the strategic
rebalancing, it expects to record a pre-tax restructuring charge of up
to $2.0 million, most of which should be recognized in the fourth fiscal
quarter which ends September 30, 2000.
results in fiscal 2001 should benefit from these actions that include
direct cost reductions as well as other operating changes that are intended
to improve margins," remarked Dick Cook, president and chief executive
officer. "We expect to gain increased efficiency as well as to capitalize
more effectively on the exciting potential we have with our new solutions
such as Thru-Put. We have identified that the most significant growth
opportunities for MAPICS lie in the supply chain management and e-business
arenas. We are instituting an intensified product development and marketing
effort for these offerings with an active focus on additional partnering
arrangements that we can form to help manufacturers move rapidly into
an e-business operating mode. We also are firmly resolved to continue
evolving and enhancing our ERP backbone solutions of XA and Point.Man,
which consistently provide a very positive return on investment for our
customers. One of the fundamental strengths of MAPICS remains our closeness
to the marketplace through superb customer support and a very effective
Affiliate network. We are in a dynamic period and are committed to positioning
our assets where we can realize the maximum return for our customers and
shareholders. We are confident that by rebalancing our personnel, we can
capitalize on the leadership that MAPICS has established and augment our
solutions with additional innovative extended enterprise applications.
This change focuses on the current and future needs of our customers as
they increasingly move into a collaborative world."
August 15, MAPICS announced the MAPICS Certified Service Providers (MCSP)
program. Under this new certification program, external service organizations
will expand MAPICS' service offerings by providing manufacturers high
quality, consistent and in-depth implementations. MAPICS established the
MCSP program to enhance the top-notch customer service provided to the
company's increasing number of multi-national customers and to increase
customers' ROI through high capacity use of MAPICS solutions.
all the changes in technology today, and the increasing number of worldwide,
multi-site implementations, we want our customers to know that the superior
customer service we provide them will never change," said John Koontz,
vice president of MAPICS North American operations. "MAPICS has consistently
been rated high in customer service rankings by leading industry analysts,
and the MCSP program was developed to ensure that customers continue to
receive the highest quality, in-depth implementation and support across
on July 27, MAPICS reported results for the third quarter of its fiscal
2000 that included earnings of $1.3 million, or $0.07 per share (diluted),
before goodwill amortization. Including goodwill amortization, the Company
reported a net profit of $0.3 million, or $0.02 per share. Total revenue
for the third fiscal quarter was $36.5 million compared with $32.1 million
a year ago. In the year-earlier period, net income was $2.4 million, or
$0.12 per share (See Figure 1).
Haley, chief operating officer, said, "We are entering the fourth fiscal
quarter with solid marketing momentum. At the same time, we must acknowledge
that the dynamics driving sales in our industry have not been easy to
evaluate thus far in calendar 2000. Manufacturers clearly face conflicting
pressures on their capital budgets, influenced by the increasingly evident
potential of e-business but tempered by economic concerns. MAPICS has
the advantage of offering a broad product line that meets the needs of
manufacturers seeking our supply chain and e-business components as either
part of a total enterprise solution or an extension of their existing
ERP foundations. This flexibility and the size of our installed base are
helping us maintain our revenue and sustain consistent operating profitability
during a very challenging period of adjustment for our industry. Our strategic
goal remains achieving long-term growth, and we are intent on focusing
our investments to gain the maximum return. Another component of our plan
involves expanding our marketing channel, which has proven the benefit
of both direct and indirect sales. We see significant potential for using
application hosting strategies as well as conventional delivery methods
and are excited that a number of additional companies are approaching
MAPICS to represent our solutions."
While nobody, including the company's management, can deny the difficulties
of current times, MAPICS' management should nevertheless be pleased. The
company has returned to profitability in an enviably short period of time,
while disposing of most of the acquisition charges and continuing to invest
heavily in R&D. This is in a sharp contrast with a position of many Tier
2 and Tier 3 ERP vendors that are currently in for a rough time as they
continue to expand their products, refine their marketing message and
defend their turf from each other and from ever more intruding bigger
vendors, while coping with much scarcer resources.
there may be reason for concern due to a flat license revenue and the
staff turnover rate departing from its long record of low, there is no
real cause for serious users' concern. We concur with MAPICS' justification
of its need for restructuring and also believe the company's decision
to deal with it was another necessary move. Staff layoffs are not uncommon
in the industry, and Great Plains remains the only honorable example of
an acquisition (of Solomon Software) consummated with almost zero attrition.
favorably regard the company's recent e-business initiatives, which are
in tune with the market trends and its manufacturing customers' requirements.
Moreover, we condone MAPICS downplaying its role as yet another ERP-turned-e-commerce
vendor in favor of portraying itself as a vendor that provides a comprehensive
solution of ERP transactional systems, extended ERP and e-business applications.
We also agree with MAPICS' plans of enhancing its core ERP products and
continued emphasis on integrating e-commerce components with its back-office
systems. The most recent product of that effort is the new release of
Point.Man Extended Enterprise Edition, which offers appliance-independent
links via the Internet directly to the ERP back office.
company also introduced MAGIK!, an Internet-enabled product development
collaboration and product lifecycle (PLC) tool. Also, MAPICS continues
to make the right moves in order to maintain (and possibly improve) its
highly acclaimed customer satisfaction record by nurturing the close relationship
with its affiliate channel. The broad scope and flexibility of its product
offering as well as the size of its existing customer base should provide
MAPICS with recurring revenue and sustained profitability during the forthcoming
rocky transition period.
the company faces some notable challenges. The management of dual flagship
product lines remains possibly the biggest challenge for MAPICS and its
affiliate channel. Another challenge facing MAPICS is figuring out how
to facilitate adoption of the e-business trend by the manufacturing industry.
Manufacturers have traditionally not been early technology adopters, but
they indisputably can benefit from e-business functionality such as collaborative
planning. While MAPICS seems to have most of the required components,
it still has to articulate a solid e-business value proposition for wary
MAPICS/PivotPoint should be included on the selection list for mid-market
companies (with $50M-$500M in revenue), where discrete, batch manufacturing,
engineering and logistics modules are the main pillars of an enterprise
application. Organizations seeking a Web-based solution and out-of-box
functionality with little or no re-engineering effort may benefit from
evaluating MAPICS' ASP offering. Support, connectivity, ease of use, security,
acceptance, and scalability are only a few regular considerations.
to expected growing pains in merging disparate product lines within the
current affiliate channel, potential clients should conduct a preliminary
research on industry expertise and reference sites of a regional MAPICS
affiliate service provider when the MAPICS/PivotPoint product is selected.
They should also familiarize themselves with respective products' strengths/weaknesses
within certain vertical industries.
MAPICS/Pivotpoint users may want to inquire about the company's plans
regarding Internet marketplaces in their respective industries. Which
specific market places does (or will) MAPICS connect with, what methodology
does (or will) the company adopt, are some of the necessary inquiries
in that regard. Furthermore, companies outside of above-mentioned industries
may benefit from evaluating MAPICS non-core ERP product components on
a stand-alone basis for their e-business needs and leverage that information
against other vendors in the selection.
for the new added functionality through partnerships, users are advised
to ask for firm assurances on the availability and future upgrades timeframes,
and more detailed scope of combined product functionality. In any case,
make sure that MAPICS or its affiliate service provider offers a single
contract and help desk for all disparate components of its product offerings.
This should not be a problem given the company's past customer satisfaction