Manugistics
Posts Third Quarter Loss But Sees License Growth
S. McVey - January 5th, 2000
Event Summary
Manugistics Group recently reported revenues and earnings for its third fiscal
quarter ended November 30, 1999. License revenue increased for the first time
in five quarters, rising 35% over last quarter to $14.6 million. Manugistics
attributes the increase to the signing of several new clients, including BASF,
BMW AG, and Heilig-Meyers Company. Manugistics also sold new licenses to a number
of unnamed clients in the electronics/high tech sector, territory of rival i2
Technologies. In spite of its surge in license revenues, the company reported
a net loss for the quarter of $4.8 million, or $0.17 per share. CEO Greg Owens
cites investment in new E-commerce product development as the primary reason
for the loss. "By accelerating our development of Internet solutions using innovative
Web technologies, we are well positioned for opportunities in a substantially
larger market. While these investments widened the loss in the quarter, we believe
these strategic initiatives will better position us for the future in the business-to-business
eCommerce market," said Owens. Other events of note are new appointments to
Manugistics's executive team, including a new CFO, and partnerships with two
companies to build eBusiness trading partner exchanges.
Market
Impact
Manugistics's license revenue growth is a notable achievement and may represent
a turning point for the embattled software vendor. A review of three-quarter
moving averages for the top three supply chain planning vendors shows that Manugistics's
license revenues have begun to bottom out. Although future growth cannot be
predicted with certainty, Manugistics can make advances into positive territory
provided it can build on momentum created by its recent wins and find customers
for its eBusiness initiative, NetWORKS by the second quarter of calendar 2000.
Market leader i2 Technologies has a commanding lead over both Manugistics and
Logility and is unlikely to be overtaken. By arresting further decline in license
revenues, Manugistics has passed one of two important tests for a return to
financial viability. (See TEC News Analysis article: "Manugistics
Takes Another Hit on Earnings as CFO Resigns" September 16th, 1999) The
second, a return to profitability, may not occur for some time as the vendor
needs to continue to invest heavily in eBusiness development to keep pace with
other players. Additional expenses will be incurred from extensive training
of its new sales and marketing personnel.
User
Recommendations
Companies should be encouraged by Manugistics's recent success, particularly
veteran members of its installed base. Continued revenue growth and reduced
operating expenses will put Manugistics in a good position to contend with other
vendors, attract talented personnel, and raise capital to fuel its business
over the next 3-5 years. However, users should regard Manugistics's proposed
delivery of a mature eBusiness offering during the first quarter of calendar
2000 with much skepticism, as development is still in its early stages. Entry
into a B2B marketplace is a risky move regardless of whether it is NetWORKS,
i2's TradeMatrix, or Logility's i-Community. Logility and i2 have a head start
on Manugistics in B2B and are both on better financial ground, facts that should
figure prominently in decisions for companies who have a strong directive to
seek a B2B partner.