2HRS2GO: J.D. Edwards faces hurdles

Weekend ramblings...

Considering how bad the second quarter looks for J.D. Edwards (Nasdaq: JDEC), you might think the stock should be down more than 7.8 percent today. But the company's financial shortfall wasn't that much of a surprise.

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The ERP software vendor's problems were already highlighted by last month's CEO switch. That kind of sudden management change let Wall Street know that this wasn't going to be a happy quarter.

Low expectations were circulating informally for the last few weeks, though they weren't wholly reflected in the First Call estimate. Broad market declines masked the downbeat psychology built into JDEC shares.

Because the stock had already been taken down so far, JDEC actually was a money maker for anyone who bought into today's open. J.D. Edwards shares have walked higher all day. By early afternoon, the stock regained almost half of today's losses.

Forgive me if I retain doubts about the long-term, though.

Bringing back founder Ed McVaney -- who left in the first place because the company wanted someone better attuned to an Internet future -- doesn't bode well for J.D. Edwards' strategy. Even if he fixes whatever execution issues might be lingering, the company (like most of the traditional ERP vendors) still needs to show it can hold its own against the B2B newcomers.

J.D. Edwards touts its products as Web-ready. But even if they are, ERP software these days is just part of a more complete offering. Among the big ERP folks, only Oracle (Nasdaq: ORCL) has quickly generated meaningful revenue from Web-related business, probably because Oracle can package its apps with database and CRM software.

Partnerships help J.D. Edwards a bit, but those can only go so far. Even relatively smaller players in other parts of the B2B space are trying to build some kind of suite offering -- thus, you have i2 Technologies (Nasdaq: ITWO) buying Aspect Development (Nasdaq: ASDV).

J.D. Edwards doesn't seem to be in a position to launch a major acquisition. In the end, it might come down to finding a suitor.

Few companies took bigger hits than Cisco Systems (Nasdaq: CSCO) during the recent market decline. But if today's acquisition of ArrowPoint Communications (Nasdaq: ARPT) is any indication, the tech downturn probably had Cisco rather pleased.

The network equipment behemoth has the war chest to withstand near-term market fluctuations, even as potential acquisitions become cheaper. In the case of ArrowPoint, Cisco saved roughly $700 million compared to ARPT's high of 154 1/2, shortly after the company's recent IPO. That's enough for another decent acquisition.

Conventional Wisdom tends to be everyone's favorite target of scorn, but I think CW is right when it comes to Bob Pittman's role at AOL Time Warner. CW says the proposed organizational chart for the combined company shows AOL's Pittman will be the heir apparent.

Pittman's co-COO, Time Warner's Dick Parsons, would be mostly in charge of old world businesses: trade publishing, film distribution and the movie studio. Parsons does oversee the music group, which is a bit of a surprise, not only because music is being touted as a key element of the new company, but also because Pittman has some background in that field.

On the other hand, Pittman gets reponsibilities include the AOL service itself, the cable system and the TV brands. In other words, everything that matters in the future.

The House Judiciary Committee wants another 5-year ban on Internet taxes, which would please the No-Net-Taxes jihad warriors happy.

Maybe I harbor Socialist sympathies in my subconscious or something, but I fail to see the big deal about Internet taxes. I doubt that a Net sales tax will dent online shopping's appeal, which is based at least as much on convenience and selection as it's on based price. Besides, B2B commerce will generate more than enough dollars to pay for the Web, if market research estimates are anywhere close to being correct.

From a consumer standpoint, if you can afford a few hundred dollars or more for a PC (or a Web appliance or handheld device) to get on the Internet, you can afford a few cents on the retail dollar. Granted, it adds up on big ticket items, but with all due respect, it's probably smarter to buy those kinds of goods in person, anyway.

Gee, shopping in the real world. There's an idea. 22GO>