Struggling software vendor JD Edwards & Co on Monday said it will cut approximately 800 jobs - or about 15 percent of its workforce - as part of an effort to return to profitability.
The Denver-based maker of enterprise resource planning software and other business applications said the restructuring also will save money by reducing office space needs and overhead expenses. The plan also calls for automating the company's purchasing processes through the internal use of its Internet-based procurement software. The layoffs came less than three weeks after JD Edwards warned that it expects to report an operating loss of up to $25 million for its second fiscal quarter ended April 30.
JD Edwards, which plans to announce the second-quarter numbers this week, didn't return calls by publication time. In a statement issued on Monday, CEO C. Edward McVaney said the move to reduce the company's workforce "was a very tough but necessary decision." The layoffs followed "a lot of soul-searching and a careful assessment of our market position," he added.
McVaney, one of the co-founders of JD Edwards, returned to the CEO job in April, 18 months after giving up that position to Douglas Massingill. McVaney remained as chairman, but Massingill - who has now left the company - was in charge of all day-to-day operations until last month's abrupt switch.
According to a report posted by Boston-based AMR Research on its Web site, the layoffs may add more concern about JD Edwards' standing in the applications market.
"Software companies rarely recover from the emotional impact of layoffs, as they scare many valuable employees into fleeing the sinking ship," the AMR report said. However, AMR added that JD Edwards does have a chance to recover if it can put together a compelling plan for selling e-commerce applications.
JD Edwards' annual user conference, scheduled to take place next month in Denver, should provide a strong indication of whether the layoff was a sound move or "a knee-jerk reaction" to the company's problems and a steep decline in its stock price, AMR said.
Gerry Fitzgerald, director of global messaging at pharmaceutical maker SmithKline Beecham in Philadelphia, said the layoffs don't appear to be "particularly worrisome to us." SmithKline Beecham uses JD Edwards' AS/400-based World applications.
"While we're hoping they're going to find their way through (the current situation), it looks like they're focusing on the core of the business we're interested in," Fitzgerald said. The layoffs are "pretty much a nonevent as far as we're concerned," he added.