Symix Expands Its Product Offering While Remaining Profitable

Symix Expands Its Product Offering While Remaining Profitable
P.J. Jakovljevic - February 28th, 2000

Event Summary

On February 10, Symix Systems, Inc. announced that it had completed the acquisition of Profit Solutions, Inc. ("PSI"), a provider of Web-based customer relationship management (CRM) software. PSI will merge with Front Step Inc., Symix's eBusiness subsidiary. The acquisition was first publicly announced January 20, 2000.

PSI's eCRM Front Office(TM) is one of the industry's first completely Web- based CRM solutions, delivering marketing automation, sales management, service management, and business intelligence. The eCRM Front Office applications will be integrated with Front Step's eBusiness software suite to provide a complete, Internet-based customer service, customer intelligence, and customer relationship and response solution. As an eCRM business unit within Front Step, PSI independently markets to midsize companies in the manufacturing, hospitality/service, financial service and healthcare industries. The new Front Step eCRM business unit, led by PSI President Susan Woelfel, will maintain its headquarters in Minneapolis, Minn.

On January 31, Symix Systems, Inc. announced that it had partnered with Software Plus, a leading provider of human resource and payroll solutions, to deliver Web-based HR/Payroll systems to its midsize manufacturing customers. Software Plus' Geneva, Geneva Xpress and Geneva Web applications complement Symix's eBusiness and SyteLine ERP suites, allowing SyteLine customers to better manage administrative personnel processes, and rapidly disseminate this personnel-related information internally via a corporate intranet.

Software Plus' Geneva, Geneva Xpress and Geneva Web applications are available today integrated with SyteLine ERP, Symix's enterprise resource planning application for midsize manufacturers of industrial products. Geneva enables SyteLine customers to expand their financial management capabilities to meet payroll, regulatory and management HRIS challenges. Geneva Web facilitates the transition of the traditional HR/payroll management function to a dynamic online employee information source.

On January 20, Symix Systems, Inc. announced financial results for the second quarter and six months ended December 31, 1999. Total revenue for the quarter increased 4 percent to $34.4 million from $33.1 million in last year's comparable quarter. For the six-month period ended December 31, 1999, total revenue increased 11 percent to $66.5 million from $60.0 million last year.

Net income for the second quarter of fiscal 2000 decreased to $288,000, or $0.04 per share (diluted), from $2.3 million, or $0.32 per share (diluted), in the second quarter of fiscal 1999. Net income for the six-month period was $1.2 million, or $0.15 per share (diluted), versus $3.2 million, or $0.44 per share (diluted), in the comparable period last year. License fee revenue for the second quarter was $15.5 million reflecting a 16 percent sequential increase from the first quarter and an 18 percent decline from last year's comparable quarter.

"With the passing of Y2K, I am pleased to report that Symix maintained consistent profitability throughout altered market conditions while actively positioning the company for the digital economy," said Stephen A. Sasser, Symix President and Chief Executive Officer. "Now that Y2K concerns have been widely put to rest, we anticipate that our traditional Customer Synchronized Resource Planning business will begin to rebound during the coming year, and will be driven primarily by the requirement for integrated eBusiness systems. Symix is prepared to deliver on these market requirements. We are growing and advancing the business through several new strategic initiatives, including the establishment of an eBusiness applications and services subsidiary, Front Step, Inc., and the pending acquisition of eCRM vendor Profit Solutions, Inc."

Market Impact

Although much less visible and publicized than its larger brethren, Symix Systems continues to be a profitable vendor (See Figure 1). While there may be a reason for concern due to declining license revenue, the fact remains that profit has been posted despite increasing R&D expenses.

The company is taking full advantage of its soaring market capitalization to extend both its foothold in the coveted small-to-medium (SME) ERP market segment and fill the current gaps within its product portfolio. We believe that the company is striking a good balance in extending its offering by both acquisition and partnering with best-of-breed vendors. We also believe that these moves are in tune with the current ERP market trends. However, the company will be faced with two challenges.

First, it will have to undertake full integration of the acquired applications if it wishes to mine its large customer base.

Second, the new product will further complicate the manageability of Symix' portfolio of disparate product lines that run on disparate platforms.

User Recommendations

Symix should be included on a short list in any selection within the SME market (companies with $30M-$500M in revenue) where discrete manufacturing, assembly, and distribution modules are the main pillars of an enterprise application.

However, any organization evaluating Symix Systems should only consider existing functionality, and, in case of final selection, should negotiate the incorporation of new application components now. Future clients are also advised to request the Company's written commitment to promised functionality, length of implementation, and seamless future upgrades and/or integration, particularly for the products in question.


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