Manugistics has said it has broken off negotiations with prospective buyers and now plans to go it alone as an independent software vendor in the supply chain market.
The move follows widespread rumours on Wall Street at the end of last year that the company was on the verge of being acquired by Peoplesoft (see VNU Newswire, 15 December, 1998). Other names in the frame were rival i2 and Oracle.
But the suprise announcement now means that Manugistics intends to re-organise itself in the hope of moving back into profitability. To cut costs, the applications supplier aims to axe 30 per cent of its workforce, or 400 jobs, while Joseph Broderick, executive vice president of client sales and services, and Keith Enstice, senior vice president of global consulting services, have both resigned.
In a prepared statement, Bill Gibson, Manugistics? chief executive (CEO) and chairman, said: "We have carefully considered our performance and the market factors that have affected us and other companies over the last several quarters. Our number one objective is to return to profitability, which we believe we can achieve in the near-term by reorganising the company to improve our execution, and streamlining the business to focus on target markets."
The firm is also looking for a new CEO, although Gibson said he will remain as chairman. Manugistics estimates the overall cost of the reorganisation will be $60 million, appearing as a one time charge in the current quarter, which ends on 28 February.
But analysts believe the reorganisation may have been forced on Manugistics. Jim Shepherd, vice president of research at Boston based AMR Research, said: "When they couldn?t find a buyer, they had no choice."
In statements made before Christmas, however, Gibson had insisted that the underlying value of the business was well above the then trading level of $12, and this could have prevented potential buyers from coming to an agreement over a price.
And according to AMR?s Shepherd, to have taken a figure that failed to reflect Gibson?s view of the firm?s value would have meant Manugistics "would have been faced with a morass of lawsuits."
The supplier?s shares took a pounding in the wake of the announcement, however, falling 32 per cent or $5 to $10.5 as investors took fright, and analysts believe that Manugistics may have signalled the start of a consolidation in a static market rather than simply being a local casualty.
(see analysis section for further details)
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