Event
Summary
Supply Chain Management (SCM) software vendor, Manugistics Group, Inc.,
recently reported unaudited results for the first quarter of fiscal 2001,
which ended May 31, 2000. Total revenue for the quarter was $50.5 million,
an increase of 16% from revenue of $43.7 million for the fourth quarter
of fiscal 2000 and an increase of 29% from revenue of $39.2 million for
the first quarter ended May 31, 1999. License fees topped $26.0 million,
the best showing since the company's heyday of fiscal 1998. Licenses exceeded
services revenue for the second consecutive quarter, but their ratio remains
little more than unity. Despite the increase in revenue, heavy investment
in sales and marketing resulted in a net loss for the quarter of $1.9
million, or $0.04 per diluted share. [Figure 1].
Figure
1.
Figure
2.
Fueling
Manugistics' increase in license fees were wins at several new clients
including Amazon.com, ASMe (Advantage Sales and Marketing e, LLC), Bradlees
Stores, Inc., Minnesota Corn Processors, Inc., Publix Supermarkets, Inc.,
Tnuva Ltd. and YKK (USA), Inc. Sales of additional licenses to existing
clients included BP Amoco plc, Canadian Tire Corporation (CTC), Rohm &
Haas Company, and Staples, Inc.
Manugistics
also found acceptance for its ExchangeWORKS, trading exchange empowerment
software with wins at Commerx, Inc., eConnections, and The National Transportation
Exchange.
Market
Impact
Manugistics' recent rise in license revenues can be attributed to the
company's aggressive sales and marketing initiatives implemented by CEO
Greg Owens and his new management team. Though successful in achieving
some key wins, Manugistics' investment forced it into the red with $52.7
million in total operating expenses, $23 million of which paid for sales
and marketing in the first quarter. As in past quarters, the bulk of new
license revenue was derived from traditional software products, not hosted
application subscriptions or ExchangeWORKS, which require a much longer
timeframe to yield appreciable results.
Among
its new clients, Manugistics has a wealth of opportunity for strengthening
its position as a leading SCM vendor while demonstrating its proficiency
in the world of e-commerce. Amazon.com is an important proving ground
for Manugistics' ability to supply profit-saving IT infrastructure to
the negative-margin Internet retailing industry. If, as a result of installing
NetWORKS, Amazon achieves a significant reduction in inbound and outbound
shipping charges, Manugistics will have obtained tangible evidence of
the viability of its products. Manugistics will need all the marketing
help it can muster if it is to survive as an independent company alongside
formidable competitors like i2, SAP, and now Oracle.
User
Recommendations
Users evaluating supply chain management vendors should remember that
the core competencies of Manugistics' NetWORKS suite remain in process
manufacturing for consumer goods, but it has captured significant wins
in other verticals like high tech electronics (Compaq Computer) and chemicals
(DuPont). Clients of its new bstreamz.com marketplace tools are still
few and users would do well to consider other vendors such as Ariba or
i2 for marketplace connectivity in addition to Manugistics.