Event
Summary
On February 16, Intentia International AB, a Swedish provider
of enterprise business applications, published its 2000 report. Intentia's
net revenue rose in 2000 by 11%, while license revenue for the year increased
by impressive 53% (See Figure 1). Australia, France, Germany, Great Britain,
Sweden and the United States were Intentia's biggest license markets in
2000. However, consulting revenue in 2000 decreased by 1%. The company
believes that the decline in license revenue during 1999 had a major impact
on consulting revenue in 2000. Therefore, growing license sales were not
reflected in improved consulting revenue until the latter part of the
year. As a result of low capacity utilization, particularly in the first
half of the year, Intentia's consulting margin for the year amounted to
a highly unsatisfactory 9%. Net loss for 2000 was approximately $32.7
million, compared to a $41.6 million loss in 1999.
Figure
1.
Nevertheless,
this was the first profitable quarter in the last 24 months. Net revenue
was up by 33% in the fourth quarter 2000, while license revenue increased
by 112%, the strongest growth for a single quarter in several years (See
Figure 2). License revenue was partly attributable to large orders such
as Hagemeyer and Autodistribution. Consulting revenue for
the quarter surpassed the same period of 1999, increasing by 6%. Net income
for Q4 2000 was approximately $11.1 million compared to a $4.9 million
loss a year ago.
Figure
2.
Over
the past year, Intentia has focused on developing a complete range of
integrated e-business components. It has repositioned itself from being
a traditional ERP vendor to an e-collaboration provider. Intentia believes
its goal-oriented strategy has provided the company with a solid base
for the future. Intentia's objective during the year was to strengthen
its long-term position, to establish a base that combines rapid growth
with solid profitability and balanced cash flows. In addition, the company
has focused on rapidly regaining a positive operating margin. Intentia
signed agreements with more than 400 new customers in 2000. The fact that
Intentia signed more large contracts than in any previous year possibly
illustrates the greater credibility and competitive strength it now enjoys
with big companies.
Intentia
claims that the successful shift in technology, the evolution toward e-collaboration
and the considerably improved functionality of prioritized industry applications
have made its Movex product more competitive than ever before.
As a result of the strategic global alliance concluded with Sun
Microsystems Inc. (for more information, see Intentia's
Growing Pains) during the year, Intentia now also delivers Movex on
the Sun Solaris platform, opening the door to new markets.
Market
Impact
Like
its compatriot Volvo, Intentia has shown endurance during unpleasant
environmental conditions. Early in 2000 it outlined a cost-effectiveness
plan aimed at returning to profitability as quickly as possible. In accordance
with the plan, the company reduced the size of its organization in areas
that had significant excess capacity (for more information, see Intentia
Attempts to Become 'Lean and Mean'). Consequently, and to its delight,
Intentia achieved both growth and development within its existing infrastructure
as planned, further improving cost-effectiveness.
The
encouraging signs are an outstanding increase in license revenue and a
long awaited profitable quarter. Still, the company's cash and stockholders'
equity values have more than halved during the last 12 months as Intentia,
like many of its competitors, has had the misfortune of concurrently tackling
international expansion and ambitious product development in a sluggish
and morphing market.
Nevertheless,
Intentia has rounded out its platform-independent extended ERP product
portfolio, which also features strong industry-specific functionality
and expertise (see User Recommendations). Movex NextGen release,
its enterprise resources planning (ERP) system launched in 1999, is now
a Java-based software suite deployable across multiple platforms. Intentia
continues to perform well in Europe and has articulated an attractive
strategy to support e-marketplaces. Very impressive is e-Collaborator,
which should handle the transmission of almost all types of business information
among companies over the Internet; it supports application-to-application
(A2A) and business-to-business (B2B) integration.
Intentia
now offers extended ERP applications that expand far beyond traditional
ERP functionality to include Supply Chain Planning & Execution (SCP/E),
Customer Relationship Management (CRM), Partner Relationship Management,
Business Performance Measurement and integrated e-business components.
In line with global technology trends towards wireless applications, Intentia
also introduced in 2000 wireless applications protocol (WAP) - based functionality
into its flagship Movex product suite. Gaining platform independence and
providing a comprehensive product offering for the new economy should
expand Intentia's opportunities.
However,
one of the company's challenges remains its still moderate toehold in
North America, which has traditionally hindered the significant improvement
of its competitive position. Recent alliances like the ones with Sun Microsystems,
IBM (a joint project to develop e-business applications based on
IBM's WebSphere technology) and MRO.COM marketplace, might
promote Intentia's visibility. The company might now be able to make an
onslaught onto the North American applications market after a number of
dismal attempts. Intentia must market the Movex product with a more aggressive
and flashy media blitz and an audacity that is particular to its US-based
counterparts.
Further,
the task of curbing costs of product development and sales & marketing,
with an uncertain license growth and the low utilization of a bloated
consulting practice remains daunting despite the recent improvements.
Intentia should also make substantial progress in developing an indirect
channel to supplement its strong direct sales and consulting force. The
apparent tardiness in tackling the ASP business model opportunity may
also impede the company's agility in the long run.
User
Recommendations
While Intentia's long-term viability has never been seriously questioned,
this positive quarter must produce a sigh of relief. The company has broadened
its product lines and seems to have responded to most of the recent market
trends. Its functionality footprint, technological innovation and expertise,
and sharp vertical focus should be attractive to the enterprises within
the following industries: automotive, aviation, fashion, food & beverage,
furniture, MRO, paper, retail & distribution, service & rental, and steel.
More
important will be how well Intentia will manage brand recognition and
channel development, and how well it will target the right e-business
issues for the manufacturing and distribution large and mid-market enterprises
and demonstrate benefits to the prospect or customer.
More
comprehensive recommendations for both current and potential Intentia
users can be found in Intentia
Possibly Seeing Daylight.