J.D. Edwards, Baan Look for Silver Lining
- 26 May, 2000 12:01
SAN MATEO (05/26/2000) - Two struggling middle-tier ERP (enterprise resource planning) players -- J.D. Edwards & Co., which cut its global workforce by 800 last week, and Baan Co. NV, said to be headed for bankruptcy -- may get second chances in a sluggish ERP market, according to industry analysts.
The J.D. Edwards layoffs came because the vendors' cost structures have been out of line with future growth estimates, company officials said.
But analysts noted that J.D. Edwards could pull out in front of midlevel competitors such as Baan, which is fighting its way out of a difficult financial period.
Baan's troubles were brought on by bad management, said John Kilgore, an analyst at the Plant-Wide Research Group, in North Billerica, Massachusetts.
But Baan has a new management team and a better business plan in place, Kilgore said. There were also rumors at press time that an unnamed financial savior was waiting in the wings, but Baan officials declined to comment on the matter.
Savior or not, Baan's new direction combined with its installed base could lead Baan to a profitable first quarter of 2001, Kilgore said, bucking conventional wisdom on the company's prospects.
Like Baan, J.D. Edwards has been hit by a lull in ERP sales, reporting flat revenues for the second quarter of fiscal 2000, which ended April 30. Although license fee revenues were up, they were absorbed by the costs in place before the layoffs, according to company officials.
The layoffs came from middle management, training services, and the company's operations in Germany -- where SAP dominates -- and Japan, which is a weak market for ERP.
Calling it "a very tough but very necessary decision," C. Edward McVaney, president, CEO, and chairman of J.D. Edwards, said that those idled by the layoffs would get outplacement training.
Although company representatives have said they want to reinvent J.D. Edwards as an e-business, the company has decided against providing hosting services for business-to-business trading exchanges.
By rejecting the strategy of hosting services for business-to-business trading communities, executive management was signaling a return to the company's core businesses, company officials said. "That's not our business; not our cup of tea," McVaney said of the exchanges.
Despite the workforce cuts, J.D. Edwards could come out of this period as the leader in the middle-tier ERP realm if the company can execute its strategy, said Scott Phillips, a director at CIBC World Markets, in New York.
The weak second-quarter results were caused in large part by J.D. Edwards' poor marketing and a bloated cost structure, Phillips said.
J.D. Edwards will be able to call upon its strengths in supply-chain management via its Numetrix acquisition and its Ariba Inc. and Tradex reselling agreements, which are moving J.D. Edwards into strong growth areas, Phillips said.
J.D. Edwards & Co., in Denver, is at www.jdedwards.com. Baan Company N.V., in Barneveld, Netherlands, and Herndon, Virginia, is at www.baan.com.