JBA Holdings has pulled out of the high end ERP market and slashed staff numbers in a bid to return to profitability.
The publicly listed UK developer has been battling falling sales and profits for the past two years and for 1998 fiscal year it posted a pre-tax loss of £1.7 million on sales of £293 million. (see Newswire 31 March)
JBA invested heavily in the high end ERP market earlier this decade but was unable to compete with higher profile heavyweights, such as SAP and Peoplesoft.
Yesterday it announced it had cut its worldwide workforce by at least eight per cent, down to 2,700 and would now focus on mid market customers in the apparel and footwear, food and drink, automotive components and electronics sectors.
These sectors currently account for 60 per cent of JBA's business and the company hopes to grow this figure to 80 per cent within three years.
The cutbacks and refocusing are expected to reduce annual costs by £5 million but JBA may not enjoy a much easier ride in the mid range.
The market is fiercely contested by dozens of financial software developers and is also being targeted by top end vendors like SAP, as multi-million dollar deals dry up at the big end of town.
Research manager at the Butler Group, Mike Thompson, said limiting its focus was a wise strategy for JBA.
"It would seem that [the high end] part of the market is quite tightly controlled by SAP, JD Edwards, Peoplesoft and Baan. JBA have been caught a little, they can't compete at the top level and going mid market seems like a good move," he said.
"Verticalisation is nearly always a good move if you can bring specific templates and expertise. Although market limiting, it does give you a better chance," he added.
Thompson said the ERP market was likely to consolidate, with big players seeking to expand by buying up their smaller struggling rivals.
"Like everything else, the large players will get larger," he said.
By lunchtime on Tuesday the share price had moved upward by five per cent to 132p, in response to the announcement, but is well down compared to an all time high last year of more than 1200p.
Last week JBA Holdings was hit by a claim from US customer Hartmarx for $18.7 million (£11.7m) damages plus costs relating to a supply contract.
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