MANU ($1850-$20.50) PE =N/A Cap=$1.4bil momentum ,Exec highlights what's selling in e-software
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 5:40 PM ET March 27, 2002
SAN FRANCISCO (CBS.MW) -- In Goldman Sachs' weekly software report, supply-chain-software company Manugistics is noted as having upward investor sentiment and business momentum.
Late Tuesday, Manugistics came through after quarterly reporting results that exceeded goals it set forth and guided analysts to expect.
Manugistics grew its software license sales by 70 percent from the prior quarter nearly $38 million, with a 17 percent growth to $81 million for the overall business. The company expects both license sales and total sales to grow by 5 percent in the current quarter to $40 million and $84 million to $85 million, respectively. Manugistics also expects to post flat to positive earnings, excluding certain items. It expects to generate a loss of 2 cents per share. These numbers exceed analysts' expectations.
Manugistics (MANU: news, chart, profile) shares rose 12 percent to $20.45 Wednesday, after tacking on nearly 4 percent on Tuesday. The overall market was lower, along with Manugistics' once-fiercest rival, I2 Technologies (ITWO: news, chart, profile). Shares were down 1.5 percent to $5.09 by the close.
Since November of last year, I2 shares have been flat at $5 while Manugistics' shares have gone from roughly $7 to $20.
Different paths
So, what's happened between the two? I2 Technologies was too busy integrating its acquisition of Aspect Development and failed to focus on delivering a return on investment, suggested Manugistics President Richard Bergmann. As reported in October of last year, I2 said it would take a $4.7 billion write-off for that purchase. Manugistics managed to stay afloat because it remained focused on industries as opposed to going broad, Bergmann suggested. "We take a detailed-industry approach (retail, automotive, chemical, energy) and with that industry diversification, we've come out of this downturn."
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That focus has enabled the company to woo customers away from I2, such as Cingular and Petsmart, and compete effectively with a much larger force, SAP (SAP: news, chart, profile), whose success has much to do with its large client base.
So, what is selling now and what's changed in the past 18 months?
According to Bergmann, companies are buying software that helps optimize pricing. The company's Price Revenue Optimization product, introduced in the past year, is designed to help companies calculate the best price to sell their products and set pricing strategies. Indeed, in the current sluggish environment where competition can create pricing wars, software to decipher the price points is appealing.
This is a change from 18 months ago when companies sought applications to manage orders and shipping, said Bergmann. This also seems to make sense since back then, as demand for goods was high and companies were taking in a lot of orders.
And whatever happened to that buzzword "collaboration?"
Said Bergmann: "Those 'Kumbaya' days for collaboration died down.
Merrill survey of CIOs
Merrill Lynch focused on which software and services chief investment officers are interested in buying. According to the latest survey, released Wednesday, "price is the top criterion in vendor selection." Two-thirds are investing in Web services. A third are investing in enterprise application integration software and two-thirds are investing in application servers. Users are split between J2EE and .Net for their Web foundation. Almost two-thirds think software will be delivered as a service, but it may take up to five years. When demand improves, more users will add full-time workers over consultants. Demand for outsourcing is firmer than systems integration and consulting.
Cable debt
Adelphia (ADLAC: news, chart, profile) fell $3.69, or 18 percent, to $16.70.
Shares of Adelphia Communications plunged Wednesday afternoon after the company declined to fully explain how it is backing $2.3 billion in off-balance sheet debt. See full story.
Oren Cohen, director of high-yield research at Merrill Lynch, raised the debt issue on Adelphia's conference call. Adelphia executives said the debt was used in part to buy cable assets. They were still "reviewing" the level of detail they would disclose to Wall Street. Adelphia has yet to file its 10K. Listen to Cohen on Adelphia call.
Cohen was referring to Adelphia's fourth-quarter release, in which the company disclosed that certain subsidiaries of the company are also co-borrowers, with certain companies owned by the Rigas Family. As of the end of last year, co-borrowing credit facilities balances, totaled about $2.28 billion. "The magnitude of that debt is new to me," said Jea-hun Shim, an analyst at Credit Lyonnais.
Shim is still waiting to hear from the company to get further information about the assets that back that debt. He's also unclear as to what extent Adelphia is liable if the borrowers default. Shim said the company has not gotten back to him. He maintains his "buy" rating on the company, however. Asked why? Shim points to valuation.
Adelphia's senior corporate debt currently has a B-2 rating by Moody's. This rating is four notches below investment grade. See related story: Beware the high-speed cleanup. |
