By Siobhan Kennedy
Troubled supply chain software vendor Manugistics Inc officially put an end to months of takeover rumors yesterday with the announcement that it intends to go it alone and restructure the company rather than look for a potential buyer. Under the reorganization, the company’s CEO, William Gibson, has been forced to step down and a replacement is expected to join the company in the next few weeks. Gibson will stay on as chairman. The company also announced a number of changes in the senior management line up, including the resignation of Joseph Broderick, executive VP of client sales and services and Keith Enstice, senior VP of Manugistics’global consulting services. The move comes just weeks after the company confirmed it was in talks with two firms about the possibility of a buy-out (CI No 3,570). But speaking to ComputerWire yesterday, a spokesperson for Manugistics claimed the talks were abandoned after it was established that neither suitor had the necessary money to invest in new projects that Manugistics had already started developing. The spokesperson said Manugistics had been looking at expanding its product portfolio into several new markets, including developing supply chain solutions for the heavy metal processing and pulp and paper industries. As part of those plans, it had taken on several hundred staff and invested millions of dollars in R&D, but had made no public statement of its plans. But last summer, increased competition from giant enterprise resource planning vendor, SAP AG and supply chain rival i2 served to slow down sales growth and Manugistics was forced to rethink its future. Revenues were growing at 85% in Europe annually, when we expected 120%, while revenue growth in the US was flat, he said, we toughed it out for another quarter, till September, then we said to ourselves, ‘do we go find a friend to enable us to follow our vast expansion plans, or do we go back to our core competence?’ The result was to engage in talks with two companies, but in the end Manugistics decided neither suitor would enable the company to achieve its goal. The revenue stream was coming in for them, but it wasn’t enough to support our growth in other areas.
Going it alone
So the only way forward was for Manugistics to ditch its expansion plans and concentrate on building and nurturing its core markets, the spokesperson said. As part of the announcement yesterday, the company said it was reducing its workforce by 30%, or 400 staff; but the vast bulk of these were new recruits, hired in the last year or so, to work on Manugistics’ expansion plans, he added. We’ll still have the same number of support, operations, sales and service staff as usual. Furthermore, he said the $60m restructuring charge, which the company said it would take in the quarter ending February 1999 as part of its reorganization, was equivalent to the amount of money lost on the speculative expansion plans. This isn’t a market where you can easily generate products. We used a lot of money on an area that hasn’t borne fruit. We thought we could do it, but we failed, he conceded. Now the company will focus on e-commerce opportunities, grouped under the new marketing term e-Chain. The aim is to develop user-friendly, front-end software, linked directly to the back end supply chain application, to enable companies to sell more products. But analysts were skeptical. Bruce Richardson, VP, research strategy at AMR Research told ComputerWire: If Manugistics thinks it’s possible to go it alone, it’s delusional. No-one can cut that deep, staff wise, and expect to make a turnaround….it’s never been a forthright organization, he said. Richardson, quoting various conversations with sources close to Manugistics, said he believed that Oracle and PeopleSoft were approached at the beginning, but that the final suitors actually ended up being SAP and I2. He dismissed Manugistics’ explanation of events, saying that the real truth was that the company realized SAP was taking deals off the table and it thought it would team up with one of the other big ERP vendors to prevent it taking any more of the market out from under its feet. He said the talks undoubtedly fell through because the prospective buyers probably considered the price was too high. But he added that, with yesterday’s restructuring announcement, Manugistics was now more ripe than ever for the picking. It’s more attractive now for a suitor to come in as they don’t have to do the layoffs and the stock price will plummet. Manugistics closed yesterday down 32.11% at $10.4375.
