JDA Completes Manugistics Deal, Warns of Weaker Second Quarter Results

Published: July 20, 2006

by Timothy Prickett Morgan

Midrange retail software specialist JDA Software has completed its acquisition of supply chain software provider, and former darling of Wall Street and the dot-com boom, Manugistics. At the same time, JDA pre-announced its financial results for the second quarter to give Wall Street a warning that the numbers would be below estimates.

JDA said that it ended up paying $213 million in cash for Manugistics, a few million bucks more than it had planned for because of the fluctuations in the company's stock price. In this contentious application software market, where size appears to be everything, it is somewhat surprising that another company did not make a hostile counteroffer for Manugistics, but for all we know, someone is doing math on an envelope somewhere to see if acquiring the new JDA makes sense. With about $375 million in sales for the prior 12 months and over 5,500 customers, JDA might be a ripe target for SSA Global, Infor, or Lawson Software, which are all trying to grow through acquisitions to better compete with SAP and Oracle, the top two application software suppliers in the world.

JDA says that it will complete the integration of the JDA and Manugistics products over the next 18 to 24 months, and hopes to cut $25 million to $30 million of costs out of the combined companies. In the wake of the merger, venture capitalist Thoma Cressey pumped $50 million into the company and got a seat on the JDA board of directors. JDA has also secured a $300 million senior debt facility through Citigroup and UBS Investment Bank, including a $175 million term loan, a $50 million revolving credit facility (which is undrawn), and a $75 million accordion credit facility (also undrawn).

For the second quarter ended June 30, JDA estimated that it would have sales of between $50.9 million and $51.8 million, with software license sales of around $10.4 million. In the second quarter of 2005, the company booked $15.3 million in software sales and $54.9 million in overall sales. JDA is expecting that net income will be between 1 cent and 3 cents a share, compared to 12 cents a share a year ago.

Hamish Bewer, JDA's chief executive officer, performed the usual act of contrition to Wall Street that any company that misses numbers has to do and held out the prospect of better quarters to investors. "While we are disappointed with our results for second quarter 2006, our expectations for our business entering the second half of 2006 are positive, especially with the successful close of our Manugistics acquisition yesterday," Brewer said in a statement. "With the additional scale, new verticals and expanded reach up the supply chain that our Manugistics acquisition delivers, we are confident in our prospects for significant earnings expansion in 2006 and accordingly, are providing updated guidance for fiscal year 2006 this morning." The company said for the full year, it would have sales of $290 million to $299 million, with earnings of 30 cents to 54 cents.

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