Event
Summary
Manugistics
Group announced their quarterly revenues and earnings for the period ended August
31, 1999. Total revenues for the company were $33.8 million, of which $10 million
were derived from new licenses and the remainder from services and support.
Net loss for the quarter was $3.4 million, or $0.13 per share. In a related
news story, Chief Financial Officer, Peter Repetti will step down while Greg
Owens and the rest of the senior management team search for a replacement.
Market
Impact
After the small
profit reported in their first quarter ended May 30, 1999, one might have assumed
that Manugistics had put their financial troubles behind them. However, for
those who read TEC's note on Manugistics "Manugistics
Faces Uncertain Future ", these latest events should come as no surprise.
The significant headcount reduction accomplished during the last quarter of
fiscal 1999 resulted in a drop in operating expenses, enabling Manugistics to
post a small profit in their first quarter of $0.4 million or $0.01 per share.
"Restructuring" alone, however, cannot return a company to long term profitability.
The 30% revenue from new licenses stands in stark contrast to the 62% figure
achieved by growth-oriented i2 Technologies, Manugistics' primary competition.
Manugistics has only recently cleared itself of allegations brought forward
in a series of class actions lawsuits in June 1998. Investors who purchased
shares of Manugistics earlier this year, attracted by the prospects of new management,
a new product suite, and cost cutting measures, may cause more problems for
the company if it fails to return their investment.
While Manugistics
is not the only enterprise applications vendor to face financial upheaval in
recent quarters, their decline could have a significant effect on the marketplace.
Manugistics was a pioneer in the advanced planning and scheduling market, in
operation before such market even existed. Originally founded in 1969 as Scientific
Time Sharing Corporation, a division of Continental Telecom, the company became
independent under then CEO, William Gibson, through a leveraged buyout in 1986.
Renamed Manugistics Group, Inc. in 1992, the company established a dominant
position in the advanced planning and scheduling and transportation planning
markets through successful integration of acquired technologies (such as ROVER
Technology in 1991). More recent acquisitions such as ProMIRA and Tyecin Systems
have proven unprofitable. Manugistics' large customer base (~900) will enable
it to persist independently for at least a few quarters. However, if Manugistics
fails to demonstrate that it can build new license revenues and reverse its
bottom line, then acquisition is very likely, especially given the current rapid
enterprise market consolidation.
User
Recommendations
This event
underscores the need for users to investigate thoroughly the financial strength
of a vendor in addition to product features and functionality. News of Manugistics'
poor earnings and top management turnover will hardly be included in their product
brochures or corporate profiles, yet these events serve as important indicators
for their ability to deliver solutions to the marketplace and support their
clients over the long term. Users who are considering Manugistics as a software
provider should not assume that its future stability as an independent company
is certain.