JDA Inks More Deals Despite Restructuring

After announcing a company restructuring in December, JDA Software officials are now expressing confidence about the company's prospects for 2005, with record numbers of software deals at the end of last year.

With a record 122 software deals during the fourth quarter of 2004, supply chain vendor JDA Software Group Inc. is well-positioned for further growth, regardless of plans to restructure and challenges that remain in a couple of sales areas, according to CEO Hamish Brewer.

In a Form 8-K filing submitted to the SEC (Securities and Exchange Commission) on Dec. 3, JDA said its restructuring plans include a consolidation of product lines; a workforce cutback of about 13 percent, or 167 associates worldwide; and a reduction in office space.

Officials said JDA is undertaking the reconstruction because software sales in 2004 had been below expectations—and that as a result, JDA had operated at reduced levels of profitability.

But in a recent conference call with financial analysts, Brewer said JDA enjoyed a "surge in business" at the end of last year, as customers started to make more software investments.

JDAs software sales for the fourth quarter of this year amounted to about $20.4 million, compared with $16.4 million for the same quarter last year. Of the $20.4 million, 36 percent came from new customers and 64 percent from existing customers, Kristen L. Magnuson, chief financial officer and executive vice president at JDA, said during the call.

In contrast, during the third quarter of 2003, 30 percent of revenues came from new customers, and 70 percent from existing customers.

Also, according to JDAs 2004 consolidated statements of operations, maintenance services revenues stepped from $18.8 million in the fourth quarter of 2003 to $20.9 million in the comparable quarter last year.

But on the other hand, over the same period, services revenues dropped from $17.6 million to $14.6 million, and reimbursed revenues declined from $1.8 million to $1.5 million.

For the whole year, JDAs revenues for 2004 came to $216.9 million, a slight improvement over 2003 revenues of $207.4 million.

JDA has almost 4,600 retail, manufacturing and wholesale customers in 60 countries worldwide. New customers signed during the fourth quarter of 2004 included The Tile Shop; BCB Max Azria, a womens ready-to-wear and accessory retailer; and India-based Piramyd Retail.

Existing customers that signed new deals during the quarter included BJs Wholesale Clubs Inc., Physicians Formula Cosmetics, the U.S. Marine Corps, Liz Claiborne Europe and United Pipe & Supply Co.

/zimages/6/28571.gifClick here to read about JDA Software and PeopleSoft teaming up to help retailers.

The $20.3 million in deals closed during the fourth quarter of 2004 included 15 multiproduct deals and five agreements valued at more than $1 million each, Brewer said. Of these five large contracts, two were with new customers, and three with existing users. Moreover, three of these five contracts were with Tier One retailers.

"We continue to lead in Tier Two," Brewer told the analysts. But JDA is experiencing increasing success now with Tier One players, "because our competitors have failed to deliver," according to the CEO.

During the call, Brewer expressed optimism that if market conditions continue to be favorable, JDA is well-positioned for 2005, especially with the release of two new products—JDA Portfolio 2005.1 and the .NET-capable PortfolioEnabled—during the current quarter.

In addition, plans are under way for Microsofts sales team to promote JDAs software to its own customers, Brewer said.

But the CEO also acknowledged challenges ahead for JDA in the areas of both consulting revenues and EMEA (Europe, Middle East and Africa) sales. In response, JDA recently made management changes in both divisions, he said.

Moreover, although JDA has been building a "solid pipeline" of potential deals, sales may remain "choppy from quarter to quarter," according to Brewer.

JDA imposed layoffs near the end of 2004, mainly in the areas of sales and product development. But operating revenues for sales and marketing increased from $11.7 million in the third quarter of 2003 to $12.4 million in the same quarter, Magnuson said, citing sales commissions as a factor.

The company took a $3.3 million charge as a result of the restructuring, according to Magnuson. A total of $2 million of this was paid in cash during the quarter, impacting cash flow for the quarter, she said.

JDAs consulting business was affected, too, by the "disruption of restructuring." But with new leadership in place, JDA is confident about achieving improved results from its consulting service going forward, Magnuson said.

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