THE DAY AHEAD: Manugistics delivers despite downturn

COMMENTARY--Manugistics obviously didn't get the memo about the technology spending slowdown. While a host of technology companies are issuing profit warnings, Manugistics met expectations and stuck to its outlook for its upcoming fiscal year.

Of course it took 40 minutes for Manugistics (Nasdaq: MANU) officials to give the company's outlook on a conference call, but who's complaining? Certainly not me. I'm growing weary of all this bad stuff.

The company, which makes supply-chain management software, sounded like it was stuck in a time warp. Manugistics was optimistic about the future. It had visibility into future quarters. Average selling prices for the company's software actually rose. And Manugistics is still hiring. It was all just so early-2000.

"Despite all the market hysteria, we at Manugistics continue to see strong, robust demand, and we continue to execute according to plan," Manugistics CEO Greg Owens said during a conference call with analysts. "Supply-chain management is as recession-resilient as any I know."

In its fourth quarter, Manugistics reported adjusted earnings of 5 cents a share on sales of $89.1 million. Earnings met First Call estimates, and revenue was better than expected. The company also stuck to its first-quarter and fiscal 2002 targets.

For the first quarter, First Call consensus currently predicts a Manugistics profit of 3 cents per share on first-quarter revenue of $86.4 million. That revenue total is likely to be bumped up since Manugistics said first-quarter sales would have a "moderate sequential increase."

Manugistics also predicted a fiscal 2002 profit of 26 cents to 27 cents per share, with revenue growth of slightly more than 50 percent. That's in line with the fiscal 2002 profit of 26 cents per share on revenue of $397.3 million expected by analysts.

Why is Manugistics holding up well? Supply-chain management software helps manufacturers plan and schedule production and related operations such as raw materials procurement and product delivery. When the economy goes sour and company's have to cut costs, becoming more efficient on your supply chain is imperative.

Owens said supply-chain software spending is the last to go as information technology spending slows. He rattled off a host of phrases to describe Manugistics' quarter, but it's summed up with "banner success." "We were closing deals all the way through the quarter," Owens said.

Look for analysts to cheer the results. "In these uncertain economic conditions, where companies are either missing current numbers or lowering guidance for the rest of the year, Manugistics still reaffirmed its prior guidance," said Banc of America analyst Bob Austrian, who upped his revenue estimates for the company.

Austrian also called Manugistics one of his "favorite small-cap names." Other analysts also reiterated "buy" ratings on Manugistics. Analysts acknowledged that Manugistics shares aren't cheap, but said investors will pay a premium for companies that can deliver in a downturn.

Other Manugistics tidbits worth noting:

• Owens said he's seeing two main rivals in the field: i2 Technologies (Nasdaq: ITWO) and SAP (NYSE: SAP). Manugistics competes with i2 on about 35 percent of its accounts, and with SAP on about 17 percent. In a thinly veiled reference to i2, Owens noted that performance issues at competitor accounts are helping Manugistics.

• Average selling prices moved up to $1.3 million in the fourth quarter, the company said. That's up from $1.2 million last quarter. Owens said he's seeing no evidence that customers are putting off big purchases.

• Days sales outstanding (DSO), which measures revenue yet to be collected, fell to 82 from 93 in the third quarter. Manugistics analysts cited DSOs as one of the key metrics to watch this quarter.

Ready, set, warn
I'm beginning to think that these communications chipmakers like to coordinate their bad news.

It's funny--or not so funny--how companies are just so synchronized these days. On Monday PMC-Sierra (Nasdaq: PMCS) issued a warning for its current quarter, and Conexant (Nasdaq: CNXT) quickly followed. TranSwitch (Nasdaq: TXCC) rounded out the warning brigade.

Coincidence? I doubt it. All three companies probably had the warnings ready to fly. PMC-Sierra started the parade and its rivals figured they might as well take the plunge. After all, investors were already dumping shares of Conexant and TranSwitch because they compete with PMC-Sierra. TDAIN

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