JD
Edwards Reports Strong License Revenue Growth in Q1 2000, but
P.J.
Jakovljevic - March 28th,
2000
Event
Summary
J.D. Edwards & Company reported financial results for the first fiscal
quarter ended January 31, 2000. Revenue for the first quarter of fiscal
2000 was $231.7 million, compared to revenue of $222.9 million in the
first quarter of fiscal 1999 (See Figure 1).
Net
income for the quarter, excluding amortization of acquired intangible
assets was $3.6 million, or $0.03 per diluted share, compared with net
income of $4.3 million, or $0.04 per diluted share, in the same period
last year. Net loss for the quarter, including amortization of acquired
intangible assets, was $152,000 or $0.00 per diluted share. License fee
revenue grew 20% over the same period last year, to $83.3 million. Services
revenue was $148.4 million, compared to $153.3 million in the first quarter
of fiscal 1999.
JD Edwards has recently forged a number of alliances as the company looks
to expand the availability of its OneWorld product suite. In a two-pronged
attack, the company has secured an agreement with Andersen Consulting
and extended its existing deal with IBM Global Services. It will concentrate
on the consumer packaged goods market, and a co-development deal with
Andersen will provide collaborative brand management and promotions applications.
The
JD Edwards storefront for e-business will be powered using IBM's Websphere
Commerce suite and will be available in the spring. Doug Massingill, chief
executive of JD Edwards, said: "We have to give customers a solid, integrated
platform that scales, and for us, that means reselling Websphere. We're
going for the one-to-few rather than one-to-many sector with Andersen
and IBM, providing customization services."
JD
Edwards has also reviewed its reselling agreement with Siebel to include
Siebel's entire suite of front office applications. Alongside these agreements,
JD Edwards will focus on its demand planning, scheduling, and product
configuration products that include applications from last year's Numetrix
acquisition.
Mike
Schmitt, senior vice president of product strategy at JD Edwards, said:
"Mid-market enterprises need to respond to competition from customer-driven
digital exchanges. These applications add value to their businesses."
Schmitt conceded that JD Edwards' own development needs to move forward
so that customers get access through a full HTML client, which will be
available in June. This will allow ASPs to host on a one-to-many basis,
which is not possible under client/server architectures.
Asked
whether the company is comfortable with having many critical components
outside its immediate control, Schmitt said: "We think the OneWorld architecture
insulates us from incremental application change issues." "We have to
show offerings in all these markets, but today it's hard to know where
the demand will concentrate itself. It will be tough for the foot soldiers
out there selling," added Schmitt .
Market
Impact
While we believe that the worst was over in 1999, 2000 will be a challenging
year for J.D. Edwards. The Company has entered 2000 with a great deal
of painstaking integration efforts remaining, both with its recently acquired
products and with products of its partners, such as Siebel, Ariba, and
Synquest.
J.D.
Edwards is repositioning itself as an enterprise vendor to convince medium
sized manufacturing enterprises that it is worthwhile extending their
activities into e-business. However, managing a large application portfolio,
much of which involves partnering or extensive integration and customization,
will be cumbersome despite a highly marketed flexible product architecture.
Ten
alliances have been highlighted in announcements since September 1999.
Of these, at least seven deal with functional areas that are included
as standard not only by larger rivals like Oracle and SAP, but also by
its smaller competitors like Great Plains, Symix Systems, and IFS AB.
J.D. Edwards' heavy reliance on other vendor's software flies in the face
of its aggressive positioning around flexibility. Customers may find this
disconcerting.
J.D.
Edwards also has to be careful how it manages its alliances with "big
stars" like Siebel and Ariba. In most of its key relationships the partner
seems to be more influential and currently has a stronger brand. J.D.
Edwards could therefore find it a challenge keeping control of its own
destiny. The strategy gives the company less control of its own business.
Its income can become so constrained as to be insufficient for any further
broadening of a product offering through R&D or acquisition.
User
Recommendations
We generally recommend including J.D. Edwards in an enterprise application
selection long list for mid-market and low end Tier 1 companies (with
$100M-$2B in revenue). Organizations whose requirements fall within the
scope of the standard ERP offering would do well to consider J.D. Edwards.
However, any organization evaluating J.D. Edwards should only consider
the existing functionality, and, in case of final selection, should negotiate
the incorporation of new applications components now.
Future
clients are also advised to request the Company's written commitment to
promised functionality, length of implementation, and seamless future
upgrades, particularly for recently announced partnered offerings. If
a complementary product (e.g., CRM, e-Commerce, etc.) is of a critical
importance, they should think carefully about the implications, and may
benefit from considering its competitors' value propositions too.