Symix Systems' Slips Into Red During Its E-Commerce Transition
As reported in the press release on the company's Web site, on April 20,
Symix Systems, Inc. announced financial results for the third quarter
and nine months ended March 31, 2000. While total revenue for the quarter
was comparable to that reported for the same period last year, the Company
has realized an operating loss of $1.2 million for the quarter, or $0.16
per share, excluding a non-recurring charge of $638,000 resulting from
the Company's acquisition of Profit Solutions, Inc. in February 2000 (See
Figure 1). This operating loss is attributed to the Company's continuing
investment in its e-business operations, and the delayed rebound of the
traditional enterprise systems market following the Y2K-caused slowdown.
strategic advancements made this quarter include the launch of Symix's
Frontstep, Inc. e-business subsidiary; the acquisition of eCRM provider
Profit Solutions, Inc.; a strategic partnership with Commerce One, Inc.;
and the Company's on-time delivery of its eSyte e-business software suite.
According to Symix these e-business initiatives contributed more than
$2 million to third quarter revenue in business-to-business eCommerce
software and services.
results from this quarter confirm that the enterprise systems market is
fundamentally changing," said Stephen A. Sasser, Symix President and Chief
Executive Officer. "We have been preparing for this market shift, but
had anticipated a more immediate rebound of the demand for traditional
enterprise systems following Y2K. Although our pipelines for traditional
enterprise systems are increasing, the more immediate interest is in e-business.
Our market's technology considerations and investments have turned to
software and supporting services that will help these companies seize
new Internet-driven opportunities, such as providing customer service
and supplier collaboration over the Web."
are now delivering Web-enabled systems that enable our customers to buy,
sell and collaborate over the Internet, and this quarter we have just
seen the beginning in terms of market success," added Sasser. "In less
than three months, we have sold e-business applications to over 30 companies,
including standalone eCRM customers outside of our traditional manufacturing
markets. We have already seen this growth trend continue as we enter the
fiscal fourth quarter. Symix is positioned to make a profound impact on
the market - we will continue to move quickly to capitalize on this opportunity."
While there may be a reason for concern due to declining license revenue
and a tainted profitability track, there is no real cause for users' jitters.
We concur with Symix' justification of its Q3 loss and also believe there
are a few reasons for the company's recent flat revenues. The first reason
is the ever-increasing competition in the Small-to-Medium Enterprises
(SME) market within the discrete manufacturing segment of the ERP market,
with the intrusion of Tier 1 ERP vendors into an already crowded space.
Second, Symix Systems' initial benefits from on-time release of its fully
integrated supply chain software (CSRP) have recently been counteracted
by competitors' similar offerings. As an example, MAPICS has abandoned
the OEM agreement with Symix in favor of the Pivotpoint product it recently
Symix has recently taken advantage of its soaring market capitalization
to extend both its foothold in the coveted small-to-medium (SME) ERP market
segment and to fill the gaps and/or diversify its product portfolio. We
also believe that these moves have been prudent and in tune with the current
ERP market trends.
the company will be faced with some notable challenges. First, it will
have to execute full integration of the acquired applications if it wishes
to mine its large customer base. Second, the new products will further
complicate the manageability of Symix' portfolio of product lines that
currently run on disparate platforms. We are aware of Symix' efforts to
converge its products so that they run on identical platforms in the foreseeable
future. Third, Symix will have to create mind share within the industries
it had not targeted in the past (e.g., healthcare, hospitality/service,
financial services), which it intends to target now with its recently
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. Furthermore, companies from other industries may benefit
from evaluating Symix' components on a stand-alone basis for their e-business
and CRM needs and leverage that information against other vendors in the