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Manugistics Takes Another Hit on Earnings as CFO Resigns

Written By: Steve McVey
Published On: September 16 1999

Manugistics Takes Another Hit on Earnings as CFO Resigns
S. McVey - September 16th, 1999

Event Summary

Manugistics Group announced their quarterly revenues and earnings for the period ended August 31, 1999. Total revenues for the company were $33.8 million, of which $10 million were derived from new licenses and the remainder from services and support. Net loss for the quarter was $3.4 million, or $0.13 per share. In a related news story, Chief Financial Officer, Peter Repetti will step down while Greg Owens and the rest of the senior management team search for a replacement.

Market Impact

After the small profit reported in their first quarter ended May 30, 1999, one might have assumed that Manugistics had put their financial troubles behind them. However, for those who read TEC's note on Manugistics "Manugistics Faces Uncertain Future ", these latest events should come as no surprise. The significant headcount reduction accomplished during the last quarter of fiscal 1999 resulted in a drop in operating expenses, enabling Manugistics to post a small profit in their first quarter of $0.4 million or $0.01 per share. "Restructuring" alone, however, cannot return a company to long term profitability. The 30% revenue from new licenses stands in stark contrast to the 62% figure achieved by growth-oriented i2 Technologies, Manugistics' primary competition. Manugistics has only recently cleared itself of allegations brought forward in a series of class actions lawsuits in June 1998. Investors who purchased shares of Manugistics earlier this year, attracted by the prospects of new management, a new product suite, and cost cutting measures, may cause more problems for the company if it fails to return their investment.

While Manugistics is not the only enterprise applications vendor to face financial upheaval in recent quarters, their decline could have a significant effect on the marketplace. Manugistics was a pioneer in the advanced planning and scheduling market, in operation before such market even existed. Originally founded in 1969 as Scientific Time Sharing Corporation, a division of Continental Telecom, the company became independent under then CEO, William Gibson, through a leveraged buyout in 1986. Renamed Manugistics Group, Inc. in 1992, the company established a dominant position in the advanced planning and scheduling and transportation planning markets through successful integration of acquired technologies (such as ROVER Technology in 1991). More recent acquisitions such as ProMIRA and Tyecin Systems have proven unprofitable. Manugistics' large customer base (~900) will enable it to persist independently for at least a few quarters. However, if Manugistics fails to demonstrate that it can build new license revenues and reverse its bottom line, then acquisition is very likely, especially given the current rapid enterprise market consolidation.

User Recommendations

This event underscores the need for users to investigate thoroughly the financial strength of a vendor in addition to product features and functionality. News of Manugistics' poor earnings and top management turnover will hardly be included in their product brochures or corporate profiles, yet these events serve as important indicators for their ability to deliver solutions to the marketplace and support their clients over the long term. Users who are considering Manugistics as a software provider should not assume that its future stability as an independent company is certain.

 
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