Rockville dot-com fires its president

Move at Manugistics made by turnaround specialist

Software company fell after bust

August 31, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Manugistics Group Inc., once a technology high-flier that saw its fortunes fall after the dot-com bust, announced yesterday that it fired its president a month after bringing in a turnaround specialist to reorient the Rockville company.

The firing of Jeremy P. Coote, president of the company, which develops supply-chain software, takes effect today, the company reported in a filing with the Securities and Exchange Commission.

Joe Cowan, a veteran supply-chain executive brought in as chief executive July 21, made the decision after assessing the company's needs, a spokeswoman said yesterday.

"He's very hands-on," said Sheila Blackwell, a company spokeswoman. "His background is sales, marketing and engineering, and he has operational experience. In the short-term, Joe, being hands-on, does not require a president."

The news didn't surprise analysts. They expect Cowan to act quickly to turn around a company whose shares have lost 63 percent of their value this year. Known for turning around software companies, Cowan is expected to position the company to either sell itself outright or sell off noncore pieces.

"Mr. Cowan was brought in because they see that dramatic changes are necessary," said Jeff Woods, a New York-based principal analyst at Gartner Inc., a technology consulting firm. "He was brought in to ... make this a positive investment from the investors' perspective. Mr. Cowan is a very opinionated individual, and he knows what needs to be done, and he goes out and does it."

Gartner said the likely options include selling Manugistics or a piece of it to a company such as Oracle Corp., PeopleSoft Inc. or Germany's SAP, known as "suite solution providers," which offer a number of different applications as opposed to a single focus, or to sell pieces to specialist vendors.

Manugistics has suffered years of net losses - a cumulative total of $585 million since 1998. Revenue has declined each year since fiscal 2002. Net sales were $243 million for the year that ended Feb. 29, down from net sales of $272 million in fiscal year 2003 and from $319 million in fiscal year 2002.

The company's stock rose as high as $65 in late 2000, but by 2002 the company had to begin laying off hundreds and require employees to take a week of unpaid leave. The company employed 865 workers as of May 31 - the company's most recent disclosure - but has laid off nearly 500 employees since fiscal 2003.

The stock closed down 1 cent to $2.31 yesterday on the Nasdaq stock market.

"Manugistics is in a tough space right now," said John Moore, vice president and general manager of ARC Advisory Group, an industry analyst firm in Boston. "Customers are looking to consolidate the number of software suppliers they're working with. There is increasing competition ... that is creating increasing pressure on sales."

Cut into business

In particular SAP, the world's largest business applications vendor, has cut into Manugistic's consumer goods business in the food and beverage industry, Woods said.

Because of the quiet period required before the release of Manugistics' second-quarter earnings, expected out in the third week of September, Cowan and other executives were unavailable for comment yesterday.

Blackwell said Coote was not available at the Rockville headquarters yesterday. He did not return a telephone call to his home.

Manugistics once counted itself among the top providers of software that links businesses to their suppliers by allowing users to control and monitor the flow of products from raw materials to finished goods. But the company's software sales began to slip in 2001 when the recession hit and companies began scaling back investment in technology.

`Dot-com boom fizzled'

"The B-to-B [business to business] dot-com boom fizzled, and everyone stepped back and said where do they really need to invest," Moore said. "The market has changed, and where companies are choosing to buy their software is changing."

Manugistics specialized in serving complex supply chains, he said, "but there was only so much of that, and 80 percent of the market did not need [something] that complicated."

In its most recent earnings announcement for the fiscal 2005 first quarter, which ended May 31, the company reported a net loss of $7.7 million, or 9 cents per share, compared with a net loss of $18.5 million, or 26 cents per share, in the first quarter last year.

Total revenue for the quarter plunged 21 percent, to $51.6 million from $65.6 million, while software revenue fell 48 percent, to $10.4 million from $19.9 million, in the first quarter a year ago.

Specialist picked in July

Last month, Manugistics said it selected Cowan, the former president and chief executive of EXE Technologies, to guide the company through a challenging market, cut costs and position the company for growth.

Cowan also has served in executive positions for British firm Invensys PLC and its subsidiaries Wonderware and Baan. He was a director of sales and marketing for Texas Instruments throughout the 1980s.

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