Analysts Stunned by J. D. Edwards Shake-Up

FRAMINGHAM (04/11/2000) - Eighteen months ago, J.D. Edwards & Co. co-founder C.

Edward McVaney gave up the CEO job that he had held since the Denver-based business applications vendor was founded in 1977. Yesterday, he took it back.

In a move that stunned software industry analysts and caused a sharp drop in the company's stock price, J. D. Edwards announced that McVaney, 59, is returning as president and CEO.

Doug Massingill, 42, who replaced McVaney as CEO in late 1998, has resigned from the company and its board of directors. McVaney had stayed on as chairman since the earlier management change, but Massingill was in charge of all operations at J. D. Edwards.

A J. D. Edwards spokesman said the company's board decided "that it was time for a change, and that (McVaney) was the guy to lead this ahead," because of his technical experience. Massingill, who has a marketing and sales background, "is a great business executive," the spokesman said. "But we just see that we need stronger product leadership, and that's McVaney's strength. He's more of a product visionary."

Nevertheless, Jim Shepherd, an analyst at AMR Research Inc. in Boston, said he was "shocked and disappointed" by the move. "I think there's no way to interpret this other than (a) founder's ego," Shepherd said. "The only thing I can conclude is that (McVaney) wasn't comfortable in retirement and wanted back in. There's no (business) rationale for this at all."

Like other vendors of enterprise resource planning applications, last year was tough for J. D. Edwards, as demand softened because of the approaching year 2000 deadline. J. D. Edwards lost $74.5 million in its fiscal year, which ended last October, and its revenue was virtually flat, at $944.2 million. But the company beat Wall Street expectations in its latest quarter, reporting a $3.6 million profit instead of a forecasted loss.

However, David Dobrin, an analyst at Benchmarking Partners Inc. in Cambridge, Mass., said J. D. Edwards hasn't taken full advantage of an increased sales force that Massingill built at the company. Sales have "lurched along, and McVaney apparently got unhappier and unhappier about it," Dobrin said. He added that J.D. Edwards needs to do a better job of positioning itself for e-commerce and other Internet-based applications.

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