Manugistics decides to go it alone

Software vendor breaks off merger talks and looks to implement a reorganisation, axing 30 per cent of its staff.

Manugistics has broken off all negotiations with prospective buyersorganisation, axing 30 per cent of its staff. and plans to remain as an independent software vendor in the supply chain market.

The move followed widespread rumours on Wall Street at the end of last year that the company was on the verge of being acquired by Peoplesoft.

Other named potential suitors were rivals i2 and Oracle.

The announcement will force Manugistics to reorganise in a bid to regain profitability. To cut costs, the applications supplier aims to axe 30 per cent of its workforce. Both Joseph Broderick, executive vice president of client sales and services, and Keith Enstice, senior vice president of global consulting services, have resigned.

In a prepared report, Bill Gibson, chairman and chief executive of Manugistics, said: 'We have carefully considered our performance and the market factors that have affected both ourselves and other companies over the last several quarters. Our main objective is to return to profitability, which we can achieve in the short term by reorganising the company to improve our delivery, and streamlining the business to focus on target markets.' Manugistics estimates the cost of the reorganisation will be $60 million, appearing as a one-time charge in the current quarter, ending 28 February.

But analysts believe the reorganisation could have been forced on Manugistics.

Jim Shepherd, vice president of research at AMR Research, said: 'When it couldn't find a buyer, it had no choice.'

In press 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.

The supplier's shares took a heavy pounding in the wake of the announcement last week, falling 32 per cent as investors took fright and analysts believed Manugistics could have signalled the start of a consolidation in a static market, rather than simply being a casualty.

Chris Elliott, marketing director of EMEA at Manugistics, said the company had been hit by a number of factors over the past 18 months. 'We started to invest in people to create products outside our core consumer goods skills just at the time SAP made similar announcements. The cutbacks are all in areas of R&D that no one knew about, where we thought there was an opportunity. In Europe, the hit is under five per cent,' he added.