MAPICS Moving On Pragmatically

Event Summary

For the last several months, MAPICS, Inc. (NASDAQ: MAPX), a global provider of extended ERP applications for world-class mid-sized manufacturers, has embarked on a painstaking process of producing a strategy going forward that would pragmatically blend the company's traditional values and success factors with new approaches to stay in tune with market trends. During this time, the company has been energized with a new functional structure and an expanded executive management team. It has evolved its marketing and revamped its solutions to focus on business issues and specific discrete manufacturing verticals and to thereby appeal to existing and prospective customers. The executive team includes a new chief financial officer (CFO), chief technology executive (CTE), chief marketing executive (CME) and senior vice president of North American sales persons to fill both existing and newly created positions.

Still, the company has not departed from its conservative approach of delivering practical innovations and bulletproof applications for its customers, and from its proverbial fiscal discipline. Despite largely flat revenues for the last few years and a major acquisition cost (see Figure 1), the company still has an impressive cash amount of nearly $24 million, while $19 million debt has been paid off during last 12 months.

On October 30, MAPICS reported net income according to Generally Accepted Accounting Practices (GAAP) for the fourth fiscal quarter ended September 30, 2002, of $4.0 million, including a gain of $2.3 million from the settlement of a royalty obligation, versus a hefty loss of $26.3 million, in the year-earlier period (see Figure 1).

Figure 1.

* Primarily represents a goodwill write down of the PivotPoint acquisition

However, the Company reported adjusted earnings for the fourth quarter of $2.7 million, compared with $2.6 million, or in the year-earlier period. Adjusted earnings represent income before goodwill amortization, restructuring charge and other items, net of income taxes. Revenue for Q4 2002 totaled $30.5 million, a 13% drop versus $35.2 million a year ago. For the fiscal year ended September 30, 2002, the Company reported net income (GAAP) of $13.7 million, compared with a loss of $27.0 million in fiscal 2001. MAPICS reported adjusted earnings for fiscal 2002 of $9.9 million, compared with adjusted earnings of $7.6 million in fiscal 2001. Still, total revenue for fiscal 2002 was $128.3 million, a 7% drop compared with $138.2 million in fiscal 2001 (see Figure 2).

Figure 2.

* Primarily represents a goodwill write down of the PivotPoint acquisition

As a result, throughout October, MAPICS has been given a flurry of accolades and Top Lists inclusions by many magazines and other institutions:

  • The most recent one was on October 17, when the company was named to the first Deloitte & Touche Atlanta Technology 50 list. MAPICS was reportedly ranked 18th out of 50 Atlanta area technology companies, based on revenues for the most recent fiscal year ending on or before December 31, 2001. This comprehensive list of the top 50 technology companies, based on revenue, in Atlanta and surrounding counties is a continuation of the former Fast Tech 50, which was conducted by Arthur Andersen for 18 years.

  • Then, on October 15, MAPICS announced that Forbes magazine has named it one of the 200 Best Small Companies of 2002, a compilation of financially strong small-cap businesses. With an overall ranking of 106, MAPICS was reportedly one of only 25 technology companies recognized on the prestigious 200 Best list. According to Forbes, all of the companies included on the 200 Best list are profitable, earning a minimum 5% net margin over the latest 12 months, and all have a five-year average return on equity (ROE) of 5% or greater.

  • Further, on October 8, MAPICS announced that it has been named one of Atlanta's A+ Employers by the Atlanta Business Chronicle. Among the list of 26 finalists, MAPICS reportedly ranked third, behind two companies that tied for first. MAPICS, along with nearly 120 other Atlanta-area companies, submitted detailed information about its benefits and work environment to be considered for the honor as one of the best places to work in Atlanta. The survey evaluated companies based on employee benefits such as 401(k) plans, insurance, vacation and flexible work schedules, as well as employees' attitudes toward their employers.

  • Finally, on October 4, the company announced its inclusion in the Software 500, Software Magazine's list of the world's foremost software and services providers, featured in the publication's Summer Edition 2002 issue. MAPICS was reportedly ranked 166th out of 500, based on software revenue. The Software 500 ranking is based on total worldwide software and service revenue for 2001, including revenues from software licenses, maintenance and support, training and software-related services and consulting. Suppliers are, however, not ranked on total corporate revenue, since many have other lines of business, such as hardware sales.

This is Part One of a four-part article on MAPICS.

Part Two will discuss the Market Impact.

Part Three will cover Challenges.

Part Four will discuss Competition and make User Recommendations.

Strategic Alliance With IBM

As for its go-to-market strategy, on September 26, MAPICS and IBM Corporation (NYSE: IBM), the largest IT company in the world and MAPICS' biological parent from a way back in 1978, announced a strategic alliance to deliver solutions that tightly integrate business functions and improve collaboration between suppliers and customers. The combined IBM/MAPICS solutions will target mid-market manufacturers in the electronics, automotive, heavy equipment and industrial equipment industries, as it is believed that manufacturing industries hold the most interest in ERP initiatives, as these companies are constantly looking for means to reduce costs and increase operational efficiencies in the face of increased global competition.

The IBM /MAPICS solutions will include a combination of flexible MAPICS enterprise solutions on a scalable infrastructure of IBM consisting of IBM eServer iSeries hardware, WebSphere Application Server, WebSphere MQ message queuing middleware, and IBM Business Innovation Services are currently used by some of the world's leading manufacturers, such as Volvo, Bayer, Pemstar, and Mitsubishi Caterpillar Forklift Europe (MCFE). Under the terms of the strategic alliance, MAPICS and IBM will jointly market MAPICS enterprise solutions, which include applications focused on addressing the major challenges facing manufacturers today, including:

  • Reducing lead times,

  • Reducing operations costs,

  • Speeding time to market,

  • Managing outsourcing,

  • Managing multiple locations and global operations,

  • Satisfying customer requirements, and

  • Increasing visibility into business performance.

These value-based applications are supported by IBM WebSphere Application Server and WebSphere MQ operating on IBM eServer iSeries and xSeries hardware. IBM will also provide consulting, customization and integration services for joint IBM and MAPICS implementations.

Since May, MAPICS has also been one of the first enterprise application providers to support the Linux environment running on the IBM iSeries platform. MAPICS believes to be well aligned with IBM's strategy to further accelerate the adoption of Linux-based solutions and intends to fully support solutions developed by Red Hat. The combined technology of MAPICS ERP for iSeries and Linux for iSeries should supposedly provide improved benefits including greater stability, reliability, scalability, performance and cost savings.

MAPICS ERP for iSeries' open, Java-based architecture, which features fat-client Desktop, thin-client Internet and wireless deployment, should provide a flexible technology for the iSeries platform to empower manufacturers to, e.g., collaborate more effectively over the Internet, improve customer service, deliver products faster and make better business decisions. In addition to providing users an economical way to deploy e-business server applications, the Linux operating system is reportedly highly scaleable for a large number of transactions and supports rapid innovations by constantly offering new features for users. Its single operating system across server platforms provides easy development, maintenance and skills deployment, and it is also increasingly being used as an application development platform for Web and Web application servers and to drive wireless devices and Internet applications.

Tailored Solutions and One Brand

On another matter, MAPICS' recent organizational realignment will focus on selling tailored solutions, which include various enterprise resource planning (ERP), supply chain management ( SCM), product lifecycle management (PLM), plant maintenance, and eBusiness collaboration components to address the unique business challenges of selected world-class manufacturing environments. The company has to that end been eliminating the use of multiple product logos and names. MAPICS is now structuring all offerings around one brand -- MAPICS (be it ERP, SCM, Portal, etc.) and its offerings will no longer be referred to by their current names, i.e. MAPICS XA, Point.Man, Thru-Put, and Maincor.

This concludes Part One of a four-part article on MAPICS.

Part Two will discuss the Market Impact.

Part Three will cover Challenges.

Part Four will discuss Competition and make User Recommendations.

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