Manugistics shares spurt $8.80, or 19.2%

Manugistics Group Inc., a Rockville-based software provider dogged last year with layoffs and management woes, saw its stock price jump 19.2 percent yesterday on speculation that it is in the running for a large defense contract.

Manugistics declined to comment, saying only that it had made the U.S. General Services Administration's list of approved vendors. That means it can compete for government contracts for its supply-chain software, which now helps companies such as Harley-Davidson and manage inventory.


"Obviously, it's a big market; the government spends a lot on information technology," Jeff Holmes, Manugistics' senior vice president of strategic solutions, said in a telephone interview from London.

Manugistics' shares rose $8.80 to $54.63 yesterday.


Being included on the list of government-approved suppliers would not be expected to cause such stock movement. Analysts said the 19.2 percent spurt was the result of speculation that Manugistics will win the contract.

"The stock price reaction somewhat surprised me," said Josephthal & Co. analyst Bert Hochfeld. He estimated the main contract for which Manugistics is competing at up to $100 million.

The company has been guarded even with its analysts about the deal. James F. McNatt, a technology analyst with Legg Mason Wood Walker, said company officials told him the deal would be Manugistics' largest contract.

Four companies are in the running for the contract, and McNatt said all of them have chosen Manugistics as their software provider.

"No one that I've talked to can quite understand why the GSA announcement has had such a big effect, unless a big group of investors thought [the contract] was a rumor before and now think it's less of a rumor ... this seems to be a step toward confirmation." McNatt said.

Manugistics has been emerging from a period of turmoil. Early last year, the company announced that it would lay off 400 workers - nearly one-third of its sales force. It blamed the layoffs on aggressive hiring in anticipation of growth that didn't occur.

The layoffs came after three quarters of losses that sent its stock into a tailspin. But Manugistics regrouped. It ushered in a new management team, with Gregory J. Owens as its new president and chief executive officer.

Its recent quarterly reports show growing revenues and narrowing losses. Its staff is now up to 1,000.


"There is a new management team leading a renaissance at the company," said Bob Austrian, a software analyst with Banc of America Securities in San Francisco.

Austrian said the surge in the stock price is more about the management team than about the "monster deal" in the pipeline - though he added the prospects for the deal are "smelling better every day."

Landing on the GSA list will also put Manugistics in the running for other lucrative defense contracts.

A recent report by Frost & Sullivan, an engineering and consulting firm, identified Manugistics as one of the companies poised to capitalize on the growing need for automation in the aerospace and defense industry.

Few know that better than Manugistics' Holmes, a 20-year military veteran who worked in the Army's Defense Logistics Agency before retiring as a lieutenant colonel.

"We're in a very unique position," he said.


"We're tailor-made for this kind of environment."