The following story on manugistics seem on point for IFMX to me. MANU has been one of my best stocks and i did start buying it near the low. I think this is the kind of turnaround IFMX can be under its new mgt.
Manugistics revives itself
By Lisa Meyer
Redherring.com, October 24, 2000
At times, bottom fishing pays off.
Case in point: Manugistics (Nasdaq: MANU). With so many once-high-flying tech stocks plunging and being left for dead, Manugistics, a provider of supply-chain and e-business solutions, came back to life in ways that some might think a miracle -- especially in today's grim market. Since hiring Gregory Owens as CEO in April 1999, the once-money-losing company has skyrocketed more than 1100 percent and returned to profitability.
The stock was languishing at about $12.50 in December 1998, down from a high of $60 earlier that year. It was at that time that Manugistics put itself on the shopping block -- only to pull the "for sale" sign a month later. That resulted in the stock plunging even further, to $6, by April 1999.
Enter Mr. Owens. Parachuting in from Andersen Consulting, where he headed the global supply-chain management unit, Mr. Owens took on the challenge of turning Manugistics around. When he joined the company, it was mired in red ink, having lost $71 million in the quarter that ended February 28, 1999. The stock was down 82 percent since the beginning of 1998 and was rapidly losing market share to competitors.
These figures are a far cry from the company's current success. In the quarter that ended August 31, Manugistics reported revenue of $58.2 million, a 72 percent increase over the same period last year. The company also posted a profit of $1 million, or 3 cents per share, when analysts had been expecting a small loss.
"I saw the supply-chain market as a fast-growing space, gaining importance in many companies," says Mr. Owens. "When I was at Andersen Consulting, I was very high on Manugistics's products; they were the best in the market. But I wasn't high on the executive leadership of the company."
NEW STRATEGIES
So one of Mr. Owens's first points of business with Manugistics was to fire the entire executive management team. He also gave a number of sales employees the boot, prepared the company's product for the Net, and changed Manugistics from just offering software to providing solutions.
Mr. Owens describes the turnaround in terms of a circle. He invested heavily in the company's products and solutions in order to gain market share, which in turn generates a profit that can then be invested back into Manugistics's products and solutions.
"Mr. Owens and his new team secured the financial health of the company so that people are no longer nervous about doing business with Manugistics," says Chris Mortenson, analyst at Deutsche Banc Alex. Brown.
Indeed, since Mr. Owens took the helm, the company's stock has increased over 1000 percent, and Manugistics has won deals with key companies such as Cisco Systems (Nasdaq: CSCO), Texas Instruments (NYSE: TXN), and 3Com (Nasdaq: COMS) -- taking stabs at rival i2 Technologies (Nasdaq: ITWO)'s stronghold in the high-tech and electronics market.
Traditionally, Manugistics's territory had been consumer packaged goods, which currently has less growth than the high-tech and electronics market. But Manugistics hasn't let go of its core business. The company recently announced a deal with Deere (NYSE: DE) to provide the equipment maker with a global transportation network at its Illinois headquarters.
"Since Greg, Manugistics has regained momentum in its core business and had direct wins against i2," says Mr. Mortenson. "This is a big market; not one company will take all. Manugistics will not displace i2 [in the high-tech and electronics market]. But there is plenty of room for a strong No. 2, and Manugistics is going to play that role."
ROBUST MARKET
To be sure, the supply-chain management market is presently one of the hottest. According to AMR Research, a Boston-based market analysis firm, the supply-chain management market will increase to $14.9 billion in 2003, up from $5.4 billion in 2000. Supply-chain management had once existed inside the walls of companies, but the amount of companies rushing onto the Internet has increased demand for this service to such an extent that it has become a stand-alone industry.
In fact, many analysts regard supply-chain management as the hub to all e-business. Such software and solutions allow companies to transact not only with supply-chain customers, but also with end customers. "Its real value comes from the ability of trading partners to collaborate and share information and, as a result, optimize their business operations," says Mr. Mortenson. "It's good to be able to sell off any excess finished-goods inventory. But better not to have the excess in the first place, and that is what supply-chain management does."
The high demand for such services has helped to up the average price Manugistics can charge. For example, Manugistics charged $728,000 for its average software license agreement in February 2000, compared to $956,000 in May 2000 and $1.2 million in August, a 120 percent increase over the same period last year.
One of those licensing agreements came from the government. The federal government is expected to spend $1 billion over the next ten years on supply-chain management and other enterprise resource planning applications, according to AMR Research, and Manugistics recently signed a deal with the U.S. Navy. Manugistics also has increased its international presence by winning a deal with Coty, a manufacturer and marketer of fragrances, for supply-chain management of Coty's European operations. "Our international market will increase to 50 percent of our business over the next couple of years," predicts Mr. Owens. "We opened four new offices in Europe and two in Asia since I began."
But competitor i2 keeps upping the ante. Currently, it is reaching beyond the supply-chain management market by including offerings that will turn the company into a provider of e-business processes, which can include customer-relationship, business life-cycle, and revenue management.
Meeting the challenge, Manugistics recently acquired privately held Talus Solutions, a revenue management consultancy and software vendor. "This acquisition puts Manugistics in the forefront in this area," says Mel Cody, analyst at Sanders Morris Harris. "Such an offering allows companies to increase revenue with little added costs, because if you price your products more effectively, you can increase demand and increase selling price without having to take on various costs that you would generally associate with new revenue streams."
So in the depressed tech market, individual companies may still be shining. And a careful investor may wind up being rewarded immensely by finding bottom fish like Manugistics that have good products and correctable problems. |
