Manugistics Group Inc, the struggling supply chain management software house, has reported disastrous third-quarter losses which were well in excess of market expectations. For the three months through November 30, the net loss was $10.4m, compared with a profit last time of $3.8m on revenues up just 2.1% at $43m. Manugistics results have now shocked analysts for three quarters in a row, with nine month losses mounting to $24.9m. This time around, the loss per share was $0.85, compared to an expected loss of just $0.06 per share. In a statement, chief executive William Gibson said, new competitive forces, and some market factors affecting our clients and prospects had resulted in clients making decisions more slowly than in the past. Gibson added that the same clients and prospects which had been slow were now re-engaging with us. But potential future sales do nothing to help a company’s current figures and the already depressed share price fell nearly 7% to around $12 on Wednesday. Total revenues were up in the period but excluding services, Manugistics showed a fall in core license fee revenues for the nine-month period of 10.7% to $58.6m. Chris Elliott, Manugistics’ marketing manager for Northern Europe, blamed the large overall loss on poor performance in the US, saying that prospective customers there were directing funds towards Y2K preparations which meant they were reluctant to invest in other areas. Elliott claimed that European revenues had increased by 85% compared to the nine-month period for last year, but could give no precise figures. Elliott also claimed that a lot of potential deals lay in the pipeline for next year and that one major deal, worth over $10m, had not been included in this quarter’s figures because of changes to accounting regulations in the US. The ‘major deal’ would not have put Manugistics in the black, Elliott said, but would have significantly reduced losses and brought the company’s figures closer to market expectations. Manugistics is also eating up its cash, which fell from around $82m at the end of February this year to $33m at the end of November, and Elliott agreed that the company could not survive for long on current performance. If the company cannot turn its sales around, Elliott said it would have to either re-structure its business by focusing on core technology and selling off loss-making divisions, or seek cooperative agreements with other companies. Sure enough, Manugistics announced Tuesday a co-marketing agreement with Real World Technologies, a Chicago-based supplier of NT-based Manufacturing Execution Systems that control information on the factory floor. And a takeover is not out of the question either, because with Manugistics’ shares trading at around $12 a piece – one-fifth of their 52 week high – Manugistics comes at a bargain price. IDC analyst Dennis Byron says he read the cryptic company statement which accompanied its quarterly figures which said the company has been and continues to be in preliminary discussions with other companies concerning a potential business combination as meaning that Manugistics was looking to be acquired. According to Elliott, Manugistics’ developers have been working closely with SAP AG to achieve interoperability between their software for 2 years, saying that SAP developers know its software well, but did not suggest that SAP had ever considered buying the company. It is true that SAP has been promising its anxious customers home-grown supply chain management software for some time, but SAP does not have an acquisitive history in the same way that rivals such as PeopleSoft do. Byron also pointed out that an acquisition would not have to come from such a narrow industry sector. Though the IDC analyst was very keen to stress he was not making predictions, he said service providers such as Federal Express and Sabre have shown a trend in combing services with automation using enterprise software. Manugistics has never openly welcomed the idea of being acquired and Gibson maintains that his vision is to be in control of the world’s largest supply chain management software company, a position that seems absurd in the shadow of the company’s latest results. Manugistics’ immediate problem is to convince jittery investors that it can turn around its performance in the next twelve months. And the only way the company can do this is to convince new customers that it will be around long enough to net the elusive IT budgets that are currently being diverted towards year 2000 issues.
