The recent spate of earnings releases shows one clear trend: The bigger the vendor, the better the chance of faring well in a down economy, according to market analysts Greg Girard and Geoff Grande of AMR Research.
"Second-quarter earnings from enterprise application vendors, retail application and technology service vendors, and other sectors such Warehouse Management Systems (WMS) show the big getting stronger and the small holding on until the economy improves," Girard and Grande conclude.
Big enterprise vendors like SAP and PeopleSoft are faring well so far in the down economy, including in niche markets like Retail. The same trend is evident in the WMS market. Market share leader Manhattan Associates recently turned in strong 2Q01 results, which included two license deals for more than $1M. The second largest vendor in this space, EXE Technologies, signed 36 deals in the quarter. But smaller vendors are the ones suffering the most, Girard and Grande say. Catalyst International, for example, reported a 29% drop in 2Q01 revenues to $7.8M, led by an 83% decline in license revenue. The company will eliminate 15% of its workforce. Robocom Systems International shed a significant portion of its workforce, including its CEO and CFO, and was recently delisted from NASDAQ.
"In today’s uncertain market, most companies have adopted a risk-averse position in the way they operate their businesses, which applies to software selection as well," Girard and Grande explain. "Mid-year financial results show that while there is still considerable demand for products, end users are scaling back and are more comfortable awarding deals to the market leaders. While there are examples of smaller, private vendors growing revenues and running profitable businesses, vendor size and viability have become of paramount importance in most end users’system selection exercises. Operating from a position of size and strength is a tremendous asset in this uncertain market."
Have your say
We won't publish or share your data