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To: AD who wrote (25066)	12/17/2000 12:44:15 AM
From: AD	Respond to of 49816

more on MANU TECH INVESTOR By Jerry Knight Washington Post Staff Writer Thursday, November 9, 2000 ; Page E04 With its stock selling for almost five times what it went for just five months ago and hitting one new high after another, Manugistics Group Inc. yesterday announced a two-for-one stock split. Stock splits often cause stock prices to rise, but Manugistics investors had seen this one coming and it was already factored into the price of the stock, which hit an all-time high of $132.13 yesterday before the split was announced. (remember folks, MANU split 2:1 recently) By the end of the day, the shares had dropped back to $110 but were still up more than 350 percent since their low of $24 in June. Speculation that a stock split was coming has been floating for weeks on the Internet, where Manugistics is one of the few technology stocks still flying high enough to generate controversy. With tech stocks so fragile, investors have been arguing over whether the spectacular run-up in Manugistics stock is too much, too soon. Short sellers, who try to make money by spotting overpriced stocks and betting that their prices will fall, have been losing their shirts on Manugistics, as the stock has continued to climb. This week the short sellers tried using TheStreet.com to make their case that Manugistics stock has gone too high. A column by Herb Greenberg on the widely read, pay-to-view investor Web site took a shot at Manugistics' accounting on Monday, trying to pick apart the software company's latest earnings report. The accounting attack, in which Greenberg cited the accusations of anonymous short sellers, only seems to have enlivened the Manugistics bulls, who the next day bid up the stock to the $130 high. The short sellers argue that Manugistics' third-quarter earnings of 3 cents a share--its first profit in five quarters--was augmented by accounting practices. The company would have made a penny less if it had not used an accounting technique called "capitalizing software development expenses," the column contended. Manugistics' investor-relations director, Nate Wallace, doesn't argue with the point about the extra penny resulting from the accounting treatment. But Manugistics has been using that method of accounting for the cost of creating software since before its initial public offering seven years ago, he said. Some software companies deduct the money they spend creating new programs as an expense on their quarterly financial statement. Manugistics spreads that cost over two years, which is called "capitalization" in accounting jargon. "We've been capitalizing it for years. When we went public in 1993, all software companies were capitalizing software costs," Wallace said. Since then the industry practice has changed because writing off the expense of new software upfront more accurately reflects what a company is spending to create new products, he said. Manugistics hasn't changed to the newer accounting method because doing so would require the company to take "a huge hit" to its profit at the time the change is made. No company that's trying to turn itself around is likely to do that. TheStreet's Greenberg, citing unnamed short sellers, also claimed Manugistics' quarterly earnings increased 2 cents a share because of a decision that a reserve set up some time ago for possible losses was no longer needed. The company took the write-off for the reserve two years ago when it laid off some employees and was no longer using the office space rented for them. But instead of being stuck with paying to get out of the lease on the office as expected, Manugistics was able to rent it to someone else. So the reserve was "reversed" and the write-off restored to the company's profits. Yes, that did help Manugistics' earnings, Wallace said. But it happened last year. "It had no bearing on this year. Blaming that on another 2 cents of earnings is ridiculous." The latest numbers from the Bloomberg News database show only about 700,000 shares out of 22.8 million have been sold short. Short sellers borrow stock and then sell it, hoping that the value of the shares will decline so they can repurchase them at a lower price when it comes time to replay their loan. The 12 Wall Street analysts who follow Manugistics stock unanimously rate it as a "buy," but some investment managers argue for selling Manugistics stocks simply because it has gone up so much. The stock has rebounded since the company brought in a new president, Gregory Owens, who revamped management and shifted strategy. Traditionally a maker of software that allows manufacturing companies to manage their stocks of raw materials and finished products, Manugistics adapted its offerings to help companies do business with each other over the Internet.