J.D. Edwards expects loss for Q3

J.D. Edwards & Co. warned today that it expects to post revenue of about US$200 million for the quarter ended July 31. That would be the lowest quarterly revenue figure for the company since the first quarter of 1998, when it reported $178 million.

Last year's third-quarter revenue topped $261 million.

The Denver-based business application vendor also said it expects to lose 10 cents per share from "normalized operations" in the current quarter. Analysts had expected a profit of 4 cents per share, according to an average of nine forecasts compiled by First Call/Thomson Financial.

The estimated loss doesn't include one-time charges for acquisitions and restructuring.

In a statement issued this morning, Chairman, President and CEO C. Edward McVaney blamed the revenue drop on a "worse-than-expected slowdown in the economy and in technology spending."

The U.S. manufacturing and distribution markets were particularly hit hard, Chief Operating Officer Hank Bonde said in the statement, resulting in the deferral of several million dollars of software transactions. The company said it remains confident in its sales, marketing and overall strategies.

At least one analyst urged caution to users considering installing some of the company's more advanced supply chain and collaboration software.

"I would be very cautious about additional investments in them," said Lance Travis, senior analyst at Boston-based AMR Research Inc. Even so, it's still unlikely users will "wake up and [find] their strategic vendor is out of business. They still have a solid, central core enterprise resource planning application."

However, the firm has been struggling to deliver add-ons such as product lifecycle management modules, which assist companies in designing products. Users might want to go with a best-of-breed approach for their supply chain applications rather than buying them from J.D. Edwards.

The company's current situation may actually give users addition leverage, as "it will be in their best interests to do everything they can to keep their existing customers happy."

"This company goes from bad to worse," said Joshua Greenbaum, analyst at Enterprise Applications Consulting in Daly City, Calif. "They still haven't really been able to articulate a turnaround strategy and execute on it. I'm not the least bit suprised."

The company's core installed base is in the mid market manufacturing sector, which is very appealing to software companies, even in this poor economic climate. "They're the company to beat and it looks like they're getting beat."

"I wouldn't worry about its viability as a company, they've been around a very long time," said Robert McCullough, analyst at Framingham, Mass.-based Hurwitz Group Inc. He added that the current leadership has set a good course catering to the mid-market. The company appears to be in an interim phase right now, waiting for users to start accepting its newer supply chain scheduling products, which might be a little bit ahead of the market.

He noted that the biggest issue J.D. Edwards is a general slowdown in activity in the manufacturing sector, which is having a ripple effect on the software industry that sells to it.

In May, the company said it had cut about 8 percent of its workforce in a "revitalization" effort. Final numbers for this quarter are scheduled to be released Aug. 22.

J.D. Edwards stock was initially down about 18 percent in midmorning trading today, to $9.15.

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