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Manugistics shares fall 14 percent
Thomas Weisel defends firm's ties with Ford Motor
By August Cole, CBS.MarketWatch.com
Last Update: 3:03 PM ET Feb. 28, 20002
ROCKVILLE, Md. (CBS.MW) -- Shares of Manugistics fell 15 percent Thursday as the software company and analysts fended off speculation that business from Ford Motor could deteriorate as the No. 2 automaker holds off on tech spending.
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William Blair analyst Laura Lederman noted that there have been some problems with Manugistics' (MANU: news, chart, profile) work with Ford on vehicle scheduling and auto configuration projects.
"We spoke with the supply chain organization at Ford and learned that it has been working with Manugistics for roughly a year and there have been issues with the aforementioned project. The Ford manager we spoke with said that there have been difficulties with changes in staff and missed deadlines," she wrote in a note to clients Thursday. She noted the selling Thursday was "unwarranted" and upgraded the stock to "buy" from "hold."
The company's top financial executive expressed surprise at the speculation.
"We're kind of perplexed at all of this," said CFO Raghavan Rajaji. He characterized relations with Ford, which has been working with Manugistics for a few years, as "excellent." He declined to comment specifically on the amount of revenue from Ford but characterized it as a "large" customer but not large enough that the company is compelled to detail the numbers.
"Ford has been an excellent client of ours," he remarked.
Shares fell $2.76 to $13.15, the top decliner in the Goldman Sachs Software Index ($GSO: news, chart, profile), with more than 10 million shares changing hands.
Ford couldn't immediately be reached for comment. The Dearborn, Mich.-based automaker has been working to dramatically cut costs in all areas while improving its products as it wrestles with mounting losses and declining market share.
Wall Street weighs in
Analysts were quick to point out in research notes that Manugistics' business shouldn't be overly hurt by a slowdown in technology spending at Ford.
"We believe that several IT projects have been put on hold at Ford (F: news, chart, profile), including more than one opportunity for Manugistics. We do not know the status of these projects going forward, but do not believe they have gone away from Manugistics," wrote Thomas Weisel Partners analyst Robert Schwartz, who reiterated his "buy" rating on the stock.
Schwartz indicated in a note to clients that he had reason to check on the relations between the companies after various inquiries.
"Our checks indicate that Manugistics' relationship with Ford remains strong," he said.
Adding another view, USB Piper Jaffray analyst Tim Klein wrote in a midday note that he understood Manugistics to have had a side project with Ford ended, not any contracts related to the company's primary work.
"Whether MANU's performance in the project contributed in any way to the situation is not yet clear, but the prevailing indication from our sources is that the current suspension in activity is much more related to Ford's current condition than Manugistics' abilities," he wrote. For Manugistics' financial results, he said he expects the company to report a per-share loss of 5 cents and revenue of $74.2 million, inside the consensus view of a 6-cent loss and $73 million.
Klein noted that the selling made shares attractively priced.
The software company also released a statement Thursday indicating a Ford executive planned to speak at an upcoming customer conference.
"Ford has been and continues to be one of our premier clients and we are honored to have Lloyd join these and other impressive and influential business innovators," said Manugistics CEO and Chairman Greg Owens in a statement Thursday announcing Ford executive Lloyd Hansen would speak at the event on May 7.
Manugistics' Rajaji said Hansen is a proponent of the company's work with Ford. |
