- The Washington Times - Monday, September 27, 2004

News of falling earnings, layoffs and management changes have pushed shares of Manugistics Group Inc. to their lowest prices in company history.

The Rockville company said last week that its losses grew to $17.1 million (21 cents per share) during the second quarter from $8 million (11 cents per share) a year earlier. Revenue fell 14 percent from $59.7 million to $51.3 million. The company, which makes software to help companies manage their supply chains, said it will lay off approximately 90 workers.

Shares of Manugistics went unchanged yesterday, closing at $2.31 on the Nasdaq Stock Market, tying the lowest closing price this year. Shares have fallen more than $4, or 64 percent, in 2004.

Company managers, including Chief Executive Officer Joe Cowan, said Manugistics is operating in a tough economic environment in which few companies have extra cash to throw at software.

“The market for software solutions has not recovered as suspected and is very challenging,” said Mr. Cowan, who joined Manugistics in July to help turn around the company.

He said Manugistics and some of its customers have been hurt by additional costs tied to compliance with the Sarbanes-Oxley Act of 2002, which was passed in the wake of recent corporate scandals. It created stricter accounting rules, more accountability and more oversight.

But management has insisted that Manugistics is moving in the right direction, after announcing details of a restructuring plan and placing more emphasis on its Pricing and Revenue Optimization business, which helps other companies price their products to get maximum revenue.

Mr. Cowan pointed to 18 software-license deals of more than $100,000 each and three larger than $1 million as proof that the company has a strong base of business.

“Manugistics has a strong foundation on which to grow,” he said.

Mr. Cowan fired President Jeremy P. Coote last month, citing a desire to streamline the management team and be more hands-on. The management changes and layoffs are expected to save the company about $3 million in the third quarter and between $4 million and $5 million in the fourth quarter.

But analysts said those cost cuts may not be enough to prevent a rapid consumption of cash. Tad Piper, vice chairman of the board of Minneapolis brokerage firm Piper Jaffray, said he expects the company to spend about $8.5 million in cash each quarter, even after the restructuring. It now has about $120 million in cash and marketable securities. Mr. Piper does not own Manugistics shares.

Wachovia analyst Kash Rangan said in a report that Manugistics probably will not see a rebound in business before 2006, and said he was concerned that the company and others in its sector had yet to show they can make a consistent profit.

Mr. Rangan, who does not own Manugistics shares, said the company has been smart in using its experience with supply chains to help with pricing optimization, but that the business is still in its infancy.

“PRO may help to energize growth and be a competitive differentiator for Manugistics, but the solution is still in the early stages of customer adoption,” Mr. Rangan wrote.

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