Mid-market applications vendors experienced mixed fortunes in the first and second quarters of 2002. Revenues at supply chain management software companies Industri-Matematik International (IMI) and Kewill Systems plunged, while sales at business applications vendor Navision – now part of Microsoft – have been growing healthily, rising 16% from the year ago period to EU49.4 million.
Stockholm-based IMI was once a high-profile independent supply chain software vendor, but it has been losing market share since 1999, despite various restructuring efforts. This pattern continued through its 2002 financial year. In its fourth quarter, year-on-year sales fell by 32% – and the all-important product licence revenues fell more than 80% from EU4 million to EU460,000. For the year, licence revenues amounted to EU5.1 million, compared with EU15.4 million in 2001.
AMR Research analyst Mark Gomes says IMI may be "in the early stages of turning things around", having re-hired the original team of people who grew its US business from EU2.3 million to EU63.8 million in 1998. (Since 1998 sales from IMI's Americas unit have almost halved.) But for IMI to execute its turnaround properly, Gomes warns the company needs to improve its sales story.
Sales at supply chain software company Kewill Systems were also disappointing. Like many of its competitors, Kewill sees collaborative commerce as a key to future growth, and considers its Kewill.Net supply chain portal of applications and services as core to its strategy. But US orders for its collaborative commerce technology in the third quarter fell by almost a third against the immediately preceding second quarter. The company says that in its fourth quarter both its collaborative commerce and enterprise resource planning (ERP) businesses were "stronger than anticipated". Kewill sold its midrange ERP business to Dutch rival Exact Holdings for EU19.6 million in May 2002 – a sign of the consolidation that is expected to sweep through the IT business in the coming two years. This will be accounted for in the next set of figures.
The sale of Denmark's Navision to Microsoft was motivated by the latter's desire to build up a midrange applications business, rather than consolidation. The company has bought midrange CRM specialist Great Plains. Navision was doing well enough without Microsoft – sales grew by 16% in its fiscal third quarter. As part of Microsoft, its sales are likely to grow further and, say analysts, the company could go on to dominate the European mid-market and overtake rivals including Sweden's Intentia and International Business Systems. But Microsoft will consolidate the figures, so it won't be so easy to track Navision's performance.
As expected, there were some big revenue falls and heavy losses reported by some of the US leading technology companies in the second quarter. And the same quarter in 2001 was, in most cases, down on the year before.
Even so, the one figure that stands out is the 1400% revenue increase at Divine. This is, of course, entirely due to its continuing spree of acquisitions – which partly, but certainly not wholly, explains its $70.9 million losses.
Three US business intelligence tools suppliers reported first quarter figures. MicroStrategy struggled back to profitability in its fiscal first quarter, after several quarters of losses, thanks to a restructuring and a reining in of costs. But sales continue to shrink. In its fiscal first quarter, revenue fell by 28% year-on-year.
MicroStrategy is betting that better times are ahead, however. In April 2002, it launched its latest release, MicroStrategy 7i. The product, which took 18 months to develop, will take business away from the likes of SAS Institute, Cognos and Business Objects, says MicroStrategy's CEO, Michael Saylor. However, AMR's Kevin Scott is more circumspect: "It helps the company keep pace."
Most BI vendors have been struggling. One of the exceptions has been privately held SAS Institute, albeit reporting a modest growth rate of 1% in 2001. Until this year, SAS, which doesn't release profit figures, has always said it had steady, year-on-year revenue and profit growth.
Sales at data analysis company Informatica, whose roots lie in extraction, transformation and loading (ETL) tools, fell 12% in the first quarter. But SPSS, transformed from a statistics company into an analytical software vendor through restructuring and the acquisition of web analytics company NetGenesis, reported a 12% sales climb in the same quarter. But acquisitions played a part. During that period, SPSS also bought natural language processing and text-mining software company LexiQuest for $2.5million (EU2.6m). The deal seeks to strengthen SPSS's customer relationship management capabilities. It brings SPSS in closer competition with SAS Institute, which also launched text-mining software in 2002.