Manugistics Group Inc., a financially troubled Rockville-based software company, said yesterday that it is laying off 400 workers, nearly a third of its work force. About 120 of the layoffs will come from its Maryland operations.
In addition, Manugistics said it is replacing its chief executive officer and other key executives, changing its market strategy and abandoning its attempts to find a merger partner.
Before the layoffs, Manu- gistics employed more than 1,300, about 600 of whom were based in Maryland. The company said the job cuts will occur "across the board," but will affect mainly the sales and consulting departments.
"We hired many, many people in anticipation of growth in 1998, and that [growth] didn't occur," said Manugistics Senior Vice President Mary Lou Fox.
Manugistics specializes in what is known as "supply chain management," selling software that helps businesses manage their inventories. Several of Manugistics' multinational clients have been affected by economic turmoil in Asia, and the Year 2000 computer glitch has also caused some companies to slow their purchases of Manugistics' products.
However, global economic disturbances don't fully explain Manugistics' difficulties. Analysts and company officials say many of the company's wounds are self-inflicted, stemming from overly aggressive growth and a failed restructuring of sales operations.
"If they didn't do something now where they stopped the cash drain, they would have run out of cash eventually," said Christopher Desautelle of Legg Mason Wood Walker Inc. in Baltimore. "They had to do what they did."
At a time when other high-technology companies have seen stock growth ranging from solid to surreal, Manugistics' shares have been in a severe decline that has mirrored the tumble in the company's fortunes.
Manugistics' share price hit an all-time high closing price of $64.75 April 14 after the company released a rosy fiscal fourth-quarter earnings report that boasted a $6.69 million profit and a near-doubling of revenue.
Since then, though, Manugistics has suffered three quarters of losses. By the end of November, Manugistics shares had fallen to $8.75, an 86 percent decline from the April apex. The stock has enjoyed a modest rally into the teens, but yesterday's grim tidings sent it back down $4.9375 to close at $10.4375.
Manugistics said William M. Gibson had resigned as its chief executive officer and would stay on in the post until a successor is named. The company said it plans to fill the position within three or four months. Gibson, who will remain with Manugistics as the company's chairman, was unavailable for comment.
The other executive resignations announced yesterday were both closely associated with the company's sales force: Joseph E. Broderick was executive vice president of client sales and services, and Keith Enstice was senior vice president of global consulting services.
Manugistics said its self-resuscitation strategy will include a greater focus on businesses that sell consumer goods online.
The announcement that Manugistics was no longer seeking a partner comes less than a month after the company declared that it would try to find a buyer.
"I think they were talking to just about everybody," said Legg Mason's Desautelle. He said companies rumored to be in talks with Manugistics included Oracle Corp., PeopleSoft Inc., SAP AG, and I2 Technologies Inc.
"It's clear they weren't getting the price and/or the terms they were looking for," Desautelle said of Manugistics' merger efforts. "Because if they could do it, they would have probably sold."
Manugistics was approved in June for a $1.75 million state Sunny Day Fund loan to help it buy or lease office space. However, the money was contingent on the company having 1,000 Maryland-based employees and hiring 555 additional workers in the state by the end of 2000. State Department of Business and Economic Development officials said they had not yet seen Manugistics' layoff plans, and that none of the company's Sunny Day money had yet been disbursed.
Pub Date: 1/20/99