Stalled Navision + Mixed Bag Damgaard = Satisfactory NavisionDamgaard
Written By: Predrag Jakovljevic
Published On: March 27 2001
Stalled Navision + Mixed Bag Damgaard = Satisfactory NavisionDamgaard
In February, NavisionDamgaard a/c (CSE: NAVI), a Danish provider
of enterprise business solutions for mid-sized companies, released its
semi-annual report for fiscal 2001 that ended on December 31, 2000. The
merger of Navision Software and Damgaard (for more information, see Does
NavisionDamgaard Merger Mark Further Mid-Market Consolidation?) is
reportedly proceeding faster than anticipated. NavisionDamgard achieved
a 7% combined annual revenue growth to DKK 713.9 million (~$84.5 million)
compared to the combined last year's results of then separate companies.
While revenues from Navision Financials showed a dismal
increase of only 2%, revenues from Damgaard Axapta flagship
product showed a whopping 227% increase. However, the other Damgaard product
lines, Damgaard C4/C5 (marketed solely in Denmark)
and Damgaard XAL had 18% and 22% revenue decreases respectively.
Combined net income was DKK 58.3 million (~$6.9 million), which is a 30%
decrease compared to the combined last year's results of then separate
solutions are sold exclusively through a worldwide network of close to
2100 partners, although less than 5% of them offer the entire NavisionDamgaard
product range. The company currently has more than 121,000 installations
worldwide, and derives 74% of its revenue from the international market
outside of Denmark.
the first half year, NavisionDamgaard released a number of new versions
and products specifically targeted to customers' needs for e-business
and CRM functionality. It introduced new versions of Damgaard Axapta (2.5)
and Damgaard XAL (3.1), both with notable enhancements. For Navision Financials,
the browser-based customizable User Portal was launched. Also a Wireless
Applications Protocol (WAP) Resource Kit was introduced, which makes information
in Navision Financials available via mobile devices. The company plans
to introduce in the second half of fiscal 2001 the combined Navision Financials/Siebel
eBusiness MidMarket Edition, the e-commerce applications Commerce Gateway
for Navision Financials and Damgaard Axapta, and the new version of Navision
marriage of convenience has been turning into a synergy. Navision's dowry
was a strong international presence, proven execution and a profitable
business model, although the company had begun to run out of steam just
prior the merger (for more information, see Navision
Executes At a Slower Pace). Damgaard, on the other hand, contributed
with a more scalable product for the higher end of the market, Axapta,
that also featured a significantly broader functionality footprint and
vertical focus (heavy manufacturing, project control, warehousing management,
HR, etc.), is Web-enabled and well-suited for multi-site and multi-national
product lines are technologically compatible (Microsoft-centric)
and will be maintained concurrently. This should enable the Research and
Development (R&D) team to gain economies of scale by building application
components that can be deployed within the entire product portfolio. To
that end, additional e-business and e-collaboration initiatives should
be expected. The company has been developing the concept of Commerce Portals,
Commerce Gateways, and enterprise-focused Role Based User Portals to allow
users to interoperate with trading communities. It has also been pursuing
ASP partnerships as an important business model for its target market,
although the company admits only symbolic revenue from it to date.
has so far achieved significant cost savings because of the elimination
of overlapping units, such as physical infrastructure and duplicated field
organizations worldwide that resulted in 95 jobs cuts, but has vowed to
keep R&D intact for now. Significantly increased R&D investment that constituted
approximately 20% of revenues in the first half 2001 speaks to the commitment.
the merger still has some hurdles to overcome. Despite the complementary
nature and different target markets of the main products, the growing
pains in appropriate positioning of multiple products continue. The company
will have to revise its strategy to optimize the sale of three major product
lines with somewhat overlapping functionality. It will also have to avoid
internal competition, not to mention the need of showing 'one face' to
customers and probable brand recognition/confusion. Given the fact that
the market opportunity for Axapta it is at first sight larger than for
XAL or Navision Financials, and due to Axapta's strong Web-enablement,
manufacturing focus and scalability capabilities, we should imagine it
to tacitly become the main offering for the company in the long run. That
is not going to happen any time soon since Navision Financials has much
stronger name recognition and solid niche functionality.
challenge of further international expansion and brand awareness remains.
While NavisionDamgaard has done a respectable job of establishing its
North American network, it has been facing a fierce challenge from a slew
of incumbent competitors.
NavisionDamgaard can expect growing pains (and added costs) in merging
disparate product lines, and in cross training and vertically specializing
the newly extended affiliate channel, which is still closely focused along
previously separately run product lines. It will be difficult to support
existing customers and existing products, while blending those somewhat
competitive product lines.
the great challenge will be to defend the territory against Great Plains'
aspired onslaught on the global small-to-mid-market boosted by its recent
acquisition by Microsoft (for more information, see Microsoft
And Great Plains - A Friendship That Turned Into A Marriage) but also
by Tier 1 vendors that are looking for additional revenue and market share
growth (for more information, see SAP
Claims Big Gains In The Low-End Battleground and PeopleSoft
Joins The Hunt For SMEs).
increased M&A activity in the mid-market continues (the merger of AremisSoft
and Fourth Shift being the most recent example) and, therefore,
we regard this merger as a promising, although indisputably challenging
venture. The current market trend is towards vendors that can provide
complete solutions for the entire spectrum of medium-sized companies.
NavisionDamgaard seems to have a fair shot at delivering that.
Potential and existing NavisionDamgaard customers should certainly consider
the new offering, bearing in mind what the other vendors have to offer.
We recommend identifying your unique needs and doing comparison shopping,
at least for the sake of negotiation leverage. As with all new releases,
users should employ a critical approach in their evaluation of NavisionDamgaard,
and require all vendors involved in a selection process to demonstrate
specific technological and functional capabilities.
comprehensive recommendations for both current and potential NavisionDamgaard
users can be found in Does
NavisionDamgaard Merger Mark Further Mid-Market Consolidation? and
Software a/s: Mid-market invasion.