Smart Money, The Wall Street Journal Magazine of Personal Business, has an interesting article in the May edition on the ERP business, with special focus on JDEC.
Smart Money gives the usual Y2K explanation for the slowdown in the ERP business (some feel that a transition to Internet based products is more significant than Y2K). However, Smart Money notes that the future is bright for ERP: “Analysts say ERP firms have just barely penetrated their markets. AMR Research in Boston, for example, estimates that only 20 percent of the existing prospects for ERP have been tapped”. “Analysts such as Lisa Williams at the Yankee Group expect revenue growth to soon return to a 25 to 30 percent pace.” “We'll start to see this sector revive once the Y2K crunch is over, Williams says.” “Investors shouldn't have to wait too long for this sector to come back to life, considering that the companies most aggressive in attacking Y2K problems are already looking ahead to their next big projects.”
Much of the article is about JDEC and what a wonderful investment prospect it is at its current low valuation. What's most interesting about this is that MAPX looks better than JDEC in just about every way. I've sent the following in an e-mail to the Editors of Smart Money. Who knows, maybe they'll print some of it in a couple of months in their letter to the editors column.
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I thought your May article on the ERP industry, “Sale of the Millennium” gave a good overview of the investment potential of this industry. But in choosing JDEC, are you sure you picked the right company to recommend as an investment? You mention that JDEC has a PE well below SAP, but MAPX has a PE well below JDEC. You mention that JDEC is cheap on a price-to-sales basis ($1 billion in revenue, $1.4 billion market value), but MAPX is much cheaper than this. You mention that JDEC has no debt and a high level of cash on the balance sheet, but MAPX also has no debt, and is using its surplus cash to buy back shares. You mention JDEC's reputation with its customers, but you should also check out MAPX's reputation.
In summary, I think if you do a complete analysis you'll find that MAPX is comparable in quality to JDEC as an investment but is much cheaper on a valuation basis. |
