Manugistics in Play: Decision Due Tomorrow?
On December 22, Manugistics announced its third quarter results for the period ending November 30. The results were dismal-revenue rose just 2% over the year earlier period, software license revenue dropped 33%, and the company reported a net loss of $10.4M. In the conference call with analysts, CEO Bill Gibson said that his company was in "preliminary discussions with other companies concerning a potential business combination."
Once clients began returning to work last week after the holiday season, our phones rang continuously with callers either asking, "Who's buying Manugistics?" or offering insights into the status of the negotiations.
As of this morning, the speculation was that Manugistics would make a decision soon, perhaps as early as tomorrow, January 12. This makes sense given that the company is almost halfway through its fourth quarter and is interested in putting this issue to rest quickly. While Manugistics has not disclosed which companies it is talking to, we believe that the list of potential suitors include SAP, i2 Technologies, and IBM. Given SAP's preference for developing everything internally, its inclusion may come as a surprise to some readers. However, interviews with SAP APO pilot users indicate that the ERP leader's supply chain applications are relatively immature. SAP/Manugistics would be a very powerful combination. We believe the odds of this happening are 2:1.
Given the cultural differences and animosity between i2 and Manugistics, a merger with i2 might seem out of the question. While an acquisition would provide i2 with hundreds of new installations in the Consumer Goods sector, there is also the nightmare of product overlap/redundancy. Yet, i2's market cap is six and a half times that of Manugistics ($2.1B versus $350M). The company could do the deal if only to keep Manugistics away from SAP. Still, it is hard to imagine Sanjiv Sidhu, i2's founder and CEO, giving hundreds of millions of dollars to Manugistics management for finishing second. Odds of an i2/Manugistics deal are 5:1.
IBM could be a wild card. Why? Think about the amount of services required wiring trading communities for full end- to-end collaboration. Software companies tend to be more interested in license sales than service revenue. They want to get in and get out. They don't have the staff or inclination for multiyear consulting engagements. IBM could make this work in that supply chain applications involve a fair amount of customization-many engagements are more services-oriented. Odds of an IBM/Manugistics deal are 8:1.
Who else might be involved? We would bet that J.D. Edwards, Oracle, and PeopleSoft have seen an offering document. PeopleSoft overpaid for Red Pepper. It seems unlikely that it would do the deal, but it could help its initiatives in manufacturing and retail. J.D. Edwards has never done a major acquisition. Oracle is rumored to be looking at another supply chain vendor. We would give 10:1 odds for PeopleSoft, and 15:1 odds for J.D. Edwards and Oracle. As for long shots, Fujitsu and Manugistics have a strong relationship in Japan. Given the ongoing problems in Asia, a Fujitsu/Manugistics deal would have 20:1 odds. Want a bigger long shot? How about America Online? AOL would love a play in B2B (business-to-business) electronic commerce. |
