Analyzing MAPICS' Further Steps After Frontstep
For the last several months, MAPICS, Inc. (NASDAQ: MAPX), possibly the largest global provider of extended enterprise applications for solving the challenges of discrete manufacturers following the acquisition of its former competitor Frontstep (see MAPICS To Leap Forward In A Frontstep Way), has shown both the signs of significant changes but also a persistence of a number of its historically recognizable invariant tenets of operation. The former steadfast IBM iSeries (formerly IBM AS/400)-based ERP supplier to mid-market manufacturing companies, MAPICS, has since indeed become quite a larger vendor and with a wider choice of products, having recently acquired a Microsoft .NET-based competitor. However, as the customers from both camps have been uncertain of their provider's strategy, given that bigger size brings about the need to rationalize multiple products in the same marketplace, after a few months period of buried heads and brainstorming sessions, MAPICS has lately been engaged in explaining its rationale, as to set many customers' minds at ease.
At the same time, the vendor has continued with a painstaking process of producing a strategy going forward that would pragmatically blend the company's traditional values and success factors with new approaches to stay in tune with market trends. The process had started well before the Frontstep's acquisition, during which time in early 2002 the company was energized with a new functional structure and an expanded executive management team. During the same period of time, MAPICS had evolved its marketing and revamped its solutions to focus on business issues and specific discrete manufacturing verticals and to thereby appeal to existing and prospective customers. Pre-Frontstep MAPICS, indeed, had not been sitting still, as the company had made every effort to avert the relegation to legacy Atlantis' as often speculated by some, and it has therefore lately rebuilt its technologies, reviewed its implementation partners, and thus shored up a notable customer base, and retained profitability and security while doing so (see MAPICS Moving On Pragmatically).
Therefore, MAPICS has never departed from its conservative approach of delivering practical innovations and bulletproof applications for its customers, and from its proverbial fiscal discipline. To that end, on July 31, MAPICS reported GAAP (Generally Accepted Accounting Practice) net income for its third fiscal quarter ended June 30, 2003, of $3.0 million, including an income tax benefit and restructuring costs, compared with GAAP net income of $7.5 million, for the same period in fiscal 2002. More importantly, this was the first quarter that included Frontstep revenues and costs, in which case the return to profitability and reduced and stabilized expenses bear even higher magnitude. Moreover, total revenue for Q3 2003 increased by 51% to $47.1 million versus $31.3 million a year ago, while license revenue was $13.6 million, up 44% from $9.4 million in Q3 2002 (see Figure 1). This was in a sharp contrast to previous MAPICS' quarterly reports featuring flat or often depressed revenues (see Figure 2).
* Primarily represents a goodwill write down of the PivotPoint acquisition
While the majority of revenue continues to come from the loyal existing customers, the vendor has processed nearly 400 license transaction during the quarter, which is threefold the average volume for MAPICS without Frontstep over its last four quarters. Nearly 60 new MAPICS SyteLine (formerly Frontstep SyteLine) customers have reportedly contributed $2.8 million in license revenues. The company still has a comfortable cash amount of nearly $22.6 million, and maintains its acquisitive stance.
The Frontstep acquisition has obviously provided MAPICS with a boost in terms of product choice, having solutions on both leading platforms -- Microsoft and IBM. With MAPICS SyteLine 7, the vendor now boasts a notable application built on a .NET architecture. However, the loyal AS/400 install base should rest assured of MAPICS' continued support for the platform. The big news on the MAPICS ERP for iSeries product side is that the version 7.3, which is slated for December, will feature Double Byte support, and expanded Java 2 Enterprise Edition (J2EE)-based client technology.
Other developments detailed in this note are:
* MAPICS Field Service & Support
* A global partnership with Systems Union
* Primus Knowledge Solution Results (to be covered in Part Two)
* Certified Partner Program (to be covered in Part Two)
* Pacejet Logistics, Inc is Certified Partner (to be covered in Part Two)
* A revised sales strategy (to be covered in Part Two)
Further proving its commitment to delivery of enhancements, in August, MAPICS announced the general availability of its new, integrated MAPICS Field Service & Support solution, aimed at helping manufacturers better manage after-market services personnel, materials, and information, as well as offer customers post-sale support that increases customer loyalty and retention. The new field service solution relies on critical business information resident in MAPICS ERP for iSeries to ensure that users have access to the single master source for order, product and customer information. Integrated to the MAPICS ERP for iSeries solution, Field Service & Support users should benefit from the current business processes associated with materials, resources, contracts, and financial information. The MAPICS Field Service & Support solution consolidates the management of service contracts, warranty claims, task assignment, technician scheduling, Return Material Authorizations (RMA), and service variance analysis.
Hence, this new offering extends the capabilities of the core MAPICS application suite, to encompass manufactured products throughout their life. MAPICS' new Field Service & Support solution creates a comprehensive after-sales service infrastructure to handle a number of service and customer management tasks with inherent benefits, including:
* Automating the administration of service contracts and warranty claims.
* Tracking time and materials contracts for equipment repair not under warranty or service contracts, providing more accurate data for invoicing.
* Integrating service-related material management, financial management, and billing processes, translating into faster service to the customer and maximized uptime on their equipment as well as better-cost control and analysis capabilities for the service provider.
* Providing integrated incident tracking, tech support, and RMA management, improving service efficiency for the customer and at the same time providing data to manufacturing engineering to drive product and process quality improvements.
* Initiating easy remote access capabilities to manage work order information flow to and from remote work locations, speeding repairs.
* Consolidating management of the services resources; people, tooling and parts, to speed the completion of work in the field.
As for bolstering the other part of its bifurcated offering going forward, in June, MAPICS announced a global partnership with Systems Union, provider of SunSystems, one of the leading international financial and business management solutions. The partnership will enable MAPICS to leverage SunSystems' infrastructure to integrate exclusively with the MAPICS SyteLine ERP solution, which should facilitate increasing global access to valuable financial information. SunSystems is the core product range of the Systems Union Group plc, which is quoted on the Alternative Investment Market (AIM) of the London Stock Exchange. The company is one of the largest business software houses in the world, with 21 offices worldwide and some 200 Channel Partners in 76 countries. Products within the SunSystems range are available in 30 languages with over 18,000 customer sites, and 250,000 customer seats in some 194 countries. The software solutions are used extensively by multinationals, whose offices worldwide require an international product with global support infrastructure.
MAPICS and Systems Union plan to integrate their technologies to deliver enhanced global financial management solutions for manufacturers in industries such as industrial equipment, electronics, fabricated metals, automotive, and furniture & fixtures. The integrated enterprise offering this partnership provides should allow MAPICS to better address the ever-increasing financial issues that large multi-national manufacturers face, while continuing to solve their complex manufacturing requirements.
Financial data flow throughout an organization is the livelihood of a company's success and has a direct effect on the bottom line. Large, multi-site and multi-national enterprises that capture financial data using SunSystems have reportedly been better able to make more informed decisions based on immediate access to information. Thus, integrating with SunSytems should allow MAPICS to add commonality and higher value to financial management processes such as accounting, corporate collections, invoicing, reporting and budget management across a manufacturers global operation, through the use of a single tightly integrated solution.