By Siobhan Kennedy
Is Manugistics Inc up for sale or will the company go it alone and attempt to get back on its feet through internal reorganization? Rumors about the struggling supply-chain software vendor, who last month posted a third quarter loss of $10.4m, have been circulating for some time and a final decision as to the company’s fate will be announced next week, a spokesperson said yesterday. Speaking to ComputerWire Wednesday, Chris Elliot, Manugistics’ marketing director, Northern Europe, confirmed the software vendor was in talks with two prospective buyers, although he said he did not know who the companies were. Industry reports favor Oracle Corp as the most popular contender, but other software giants, such as SAP, PeopleSoft, IBM and JD Edwards could also be in the running, analysts say. The other option, Elliot said, is for Manugistics to go it alone and attempt to return to profitability through internal restructuring. When he announced the company’s third quarter results, Manugistics chairman and CEO, William Gibson blamed the problems on issues with execution, new competitive forces and some market factors affecting our clients and prospects. Specifically, Elliot said yesterday that sales in Europe were still very strong, largely down to the fact that companies weren’t delaying purchases because of Year 2000 fears. Moreover, he said there are more people coming to product open days than ever before. But the opposite is true in the US, where businesses are focusing on their millennium projects and putting other software purchases on the backburner. Rivals like i2 and SAP have managed to succeed in the US market because they wax lyrical about their vision and future, which is what US companies are keen on, he said, while European businesses are more concerned with the actual product; hence Manugistics’ success there. But Elliot did concede that competition from the likes of SAP, had definitely taken its toll. Since SAP announced its intentions to get into the supply chain market, Manugistics has seen its share price drop from a high of $66 to about $12, while its market capitalization dropped from nearly $2bn to a sixth of that amount. It might sound perverse, but we just wish SAP would finally release its supply chain product and then users can decide for themselves, he said.
Who will buy?
One analyst, Bruce Richardson, VP of research strategy at AMR Research, said of all the possible contenders, it makes most sense for SAP to buy Manugistics, but he said he thought there was only a 50:50 chance of the company actually doing so. SAP needs them the most, especially with its revenues predicted to slip next year, he said, it’s own product, APO (Advanced Planning Optimizer), is already late and it will have huge chunks missing anyway. Richardson said the union would give SAP the ideal supply chain solution. It could offer Manugistics software to its R/3 customers, with SAP’s Business Information Warehouse product on top. It’s a perfect supply chain suite. But he doubts it will happen. A US company would do it like a shot, but SAP’s German and much more reserved. It wants to do everything for itself. Next to SAP, Richardson, like most industry observers, points to Oracle Corp as the leading contender. The database giant wants to get ahead in the supply chain sector but as yet has no software of its own. But despite the obvious gap in its portfolio, Richardson said a purchase of this size (he valued Manugistics at around $1bn) wouldn’t be like Oracle. It’s not the sort of stuff that Larry Ellison cares about, he said. I2, Manugistics main rival, would also love to get its hands on the company’s installed base of around 500 to 600 customers, but Richardson reckoned that union would also be unlikely. It would be like putting a cocker spaniel in a cage with a boa constrictor. The two corporate cultures are so different. i2 is extremely focused and aggressive in its closing of deals, whereas Manugistics is a lot more product focused. Other contenders include JD Edwards and PeopleSoft. Both companies stock has recently been hit by competition, principally from SAP, in the ERP market and both have yet to deliver supply chain offerings of their own. But JD Edwards has never acquired anybody and PeopleSoft is unlikely since it doesn’t have many manufacturing installations which are the primary users of supply chain software, Richardson said. Large services companies, like IBM or even EDS, might also be in the running, he added, since supply chain software implementation can take anywhere between six and nine months. If your primary business is service, you could generate a lot of revenue that way, software companies just want to get in a get out, he said. As wild cards, Richardson also threw in Fujitsu, with its Glovia ERP arm, and AOL, who could use the software to offer a whole range of business to business services, he said. The announcement is expected early next week.
