J. D. Edwards Survives Tough Second Quarter

BOSTON (05/26/2000) - This week capped a difficult second quarter for business software maker J.D. Edwards & Co., which had to deal with a management shuffle, disappointing earnings and hundreds of layoffs.

The Denver-based company reported that it lost $2.3 million for the second quarter, compared with a $10.4 million loss for the same period last year. That announcement came on the heels of a decision to cut 800 jobs from its workforce of 5,400 employees.

Although J.D. Edwards pared its loss considerably since last year, Wall Street had expected a profit.

But there is some good news: Despite the company's difficulties, many customers are rallying behind it.

"The company has always been favorable to us" with its product support, said Dennis Pfeil, director of information systems at Milwaukee Electrical Tool Corp.

Strong customer support isn't necessarily enough to sway financial analysts.

J. C. Simbana, an analyst at American Fronteer Financial Corp. in Denver, said the layoffs and poor second-quarter earnings couldn't come at a worse time for J. D. Edwards, which is struggling to gain sales momentum in the aftermath of the year 2000 problem.

"With these types of events, it's difficult to see a positive impact on the quarters going forward," he said.

At the same time, some analysts remain bullish about J. D. Edwards' future.

"The layoffs send a wrong message, but perhaps they were dead wood," said John Bermudez, an analyst at Boston-based AMR Research Inc. J. D. Edwards' prospects are "pretty good," especially if it's successful in implementing Ariba Inc.'s Tradex Commerce Center platform to develop trading communities for customers, Bermudez said. J. D. Edwards and Mountain View, California-based Ariba inked a reseller agreement in January.

In order to move to the Internet, analysts said, J. D. Edwards will have to aggressively revamp its marketing strategy.

But not everyone is convinced the Internet track is the best avenue for the software maker to take at this point.

"Forget about e-business and look at collaborative business" for customers, said Ed Markowitz, market analyst and editor of "ERP Strategy," an independent newsletter. He said J. D. Edwards needs a strong sense of business processing like that of its rival, SAP AG. Doug Massingill abruptly resigned last month from the CEO position and was replaced by company co-founder C. Edward McVaney.

J. D. Edwards spokesman John Sawyer said the company "has made bold strides" recently by restructuring and repositioning itself in the market. Further positive steps will be taken in the weeks ahead, Sawyer said, including items to be announced at J. D. Edwards' Focus user group next month.

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