J.D. Edwards impresses investors with gains but needs to gain speed

After undergoing some restructuring and cutting of costs,J.D. Edwards is back in the black and running past Wall Street expectations of its performance.

The Denver-based firm, which does a great deal of business in Canada’s supply chain market, rebounded from the troubles plaguing many technology firms of late with revenues of $216.7 million for its latest quarter results. More importantly for its backers, net income rose to
$2.9 million, or 3 cents a share, compared to a loss of $9.6 million, or 9 cents a share, in 2Q00. Wall Street analysts were expecting a loss for the quarter, according to technology sector think tank AMR Research.

“While a return to profitability is a step in the right direction, it’s not all that needs to be done. Cost cutting to regain profitability is not a long-term fix, but selling software is, and license revenue fell $19.0 million to $62.3 million during the quarter from $81.7 million the second quarter of last year,” comments Tom Cook of AMR Research. “The results show that restructuring of sales and marketing
organizations has yet to affect execution.”

More cuts, including the elimination of 400 jobs, is expected to save
$75 million by mid-2002, but until license revenue climbs,
it’s just a temporary patch,” Cook adds.

J.D. Edwards needs to gain momentum selling its OneWorld and supply chain applications by the end of its fiscal year.

“Its restructuring is in place. It’s got the pieces in order. Now is the time to execute,” Cook says.

One area the company will need to act on is Customer Relationship
Management (CRM) and e-procurement. Partnerships with Ariba and Siebel have been slow to generate revenue, according to Cook’s analysis of the situation. And he adds that J.D. Edwards is going to need to come up with more definitive plans for the two increasingly important pieces of an Enterprise Commerce Management (ECM) plan.

One bright spot is in services. Service revenue climbed $5 million to $154 million for the quarter while the cost to perform the services dropped $8 million, a sign that J.D. Edwards has created an efficient services organization, which is now a lot more centralized.