MANU Q1 tomorrow , may shed light on sector's health, say analysts
By Siobhan Kennedy
NEW YORK, June 20 (Reuters) - Wall Street will be looking
to Manugistics Group Inc. <MANU.O> for some good news on
Thursday as the maker of business-to-business software turns in
its first-quarter earnings report.
While the majority of software companies have suffered at
the hands of the slowing U.S economy, missing Wall Street
estimates and cutting staff, Manugistics has stuck out as one
firm which has so far kept its head above the water.
The company, which makes software that lets firms share
their inventory and purchasing data with suppliers over the
Web, beat expectations for its first quarter and is widely
expected to do the same this time round.
"The body language is that the quarter's very strong,"
Edward Wolfe, an analyst with Bear Sterns, said. "Manugistics
is one of the only companies in this space that's been
consistent."
Manugistics reports just days after the world's No.2
software vendor, Oracle Corp <ORCL.O>, posted earnings that
narrowly beat estimates and signaled that its business decline
may have bottomed out, boosting hopes that the worst of the
economic slowdown may have passed.
"With Manugistics reporting so soon after, people are going
to look at them as indicators for how things are fairing out
there," said Tim Klein, an analyst with U.S Bancorp Piper
Jaffray.
At last week's Bear Sterns technology conference in New
York, Manugistics Chief Executive Greg Owens told Reuters he
thought the economy was showing signs of stabilizing.
"I think there's a level of stabilization out there right
now," Owens said. "But whether that turns into heavy pick up
this quarter, I can't really tell."
Wall Street analysts on average are expecting Manugistics
to earn 3 cents a share in its fiscal first quarter, ended May
31, compared with a loss of 4 cents a share a year earlier,
according to Thomson Financial/First Call.
The Rockville, Md.-company is seen reporting first-quarter
revenues of $89.7 million compared with $50.5 million a year
ago, according to First Call.
SMALLER DEALS
One of the reasons Manugistics is successful amid the
current economic climate is that the company isn't as dependent
on large deals as some of its competitors, such as i2
Technologies Inc. <ITWO.O>.
The last few days of the quarter are crucial for software
makers because that's when, after weeks of haggling, the big
deals get done. For companies like i2, who sign multimillion
dollar contracts, not getting those deals signed off can make
or break the quarter.
But the same isn't true for Manugistics, whose average deal
size is typically under $1 million, and therefore much more
likely to get signed off even in harsh economic times, analysts
said. i2's average deal size last quarter was $1.6 million.
In addition, the fact that Manugistics sells its software
into multiple industry sectors is also shielding the company
from the effects of the economy, Klein said.
"They don't have the sector concentration that some of the
others do," Klein said, referring to companies, like i2, that
do a lot of their business in cash-strapped sectors such as
hitech and electronics.
By contrast, Manugistics operates in 13 different industry
segments.
"You do not want 50 percent of your revenues tied up in one
market," Owens said. "You want to be in some oil and gas, and
consumer packaged goods and retail. You've got to be balanced."
SAVING MONEY
The other major factor working in Manugistic's favor is the
company's ability to demonstrate that its software can quickly
help businesses save money.
"There's a lot of value generated by supply chain
applications," said Klein "But the issue becomes can you
structure your solution such that you deliver a return on
investment within 12 months? Because that's what's required in
this environment."
Owens famously boasts that networking giant Cisco Systems
Inc. <CSCO.O> is saving $100,000 a day by using Manugistics
software to reduce the costs associated with dealing with its
suppliers.
"I think there's a sense that these guys are executing
better than i2, so they're taking some market share," Bear
Stern's Wolfe said.
i2 has built a reputation for being more of a marketing
company and not executing, Wolfe added.
Despite the upbeat comments, Klein said he expected
Manugistics to be "cautiously optimistic" on the economic
climate.
"It's still very chippy out there," he said.
((Siobhan Kennedy, New York Newsdesk, 646-223-6194))
REUTERS
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