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Analysts and investors hammered


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Friday, one day after the company reported a surprising decline in license revenue, more staff cuts and the departure of its president.

Shares of the supply-chain software maker dove $1.24, or 32.2%, to $2.61 in heavy trading. The company's bad news also dragged down competitor

i2 Technologies


, whose shares declined 4 cents, or 5.6%, to 60 cents in recent trading.

At least three analysts downgraded their ratings on Manugisticsfollowing its second-quarter

earningsreport. Thomas Weisel analyst Robert Schwartz lowered his rating to market perform from attractive, citing no near-term catalysts forenterprise applications as well as difficulties surrounding the company's reorganization. His firm expects to receive or intends to seek compensation from Manugistics in the next three months.

UBS Warburg analyst Ken Carey and Deutsche Bank Securities analyst Tim Dolan downgraded Manugistics to hold from buy. Carey wrote in a note that he does not expect to see any meaningful uptick in business this year. "We think it will be dead money at least until the company stabilizes its revenue run rate," Carey wrote. His firm hasn't done banking business with Manugistics.

Dolan said he still believes Manugistics could be a takeout candidate, given its position as a best-of-breed vendor, large customer base, broadproduct suite and diversified vertical industry presence. His firm has donebanking business with Manugistics in the past year.

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Rockville, Md.-based Manugistics reported a net loss of $47.7 million, or 68 cents a share, for the second quarter, as calculated by generallyaccepted accounting principles. That compared with a net loss of $21.7 million, or 32 cents a share, in the same period a year earlier, and a net loss of $27.1 million, or 39 cents a share, in the previous quarter.

Manugistics said that excluding charges, it had a pro forma net loss of$13.1 million, or 19 cents a share, in the second quarter, compared with a pro forma net loss of $10.7 million, or 16 cents a share, a year earlier and a pro forma net loss of $18.4 million, or 27 cents per share, in the first quarter. Wall Street was expecting the company to lose 20 cents ashare in the fiscal second quarter, which ended in August, according toThomson Financial/First Call.

Manugistics registered second-quarter revenue of $69.9 million, which was down 5.6% from $73.8 million a year ago and down sequentially by 6.3%. That fell slightly short of the $70.8 million in revenue that analysts were expecting.

Several analysts noted that Manugistics' second-quarter license revenueof $18.1 million missed estimates, which generally hovered around $20 million. License revenue declined 27% from a year ago and 26% sequentially.

Greater-than-expected revenue from services and maintenance, partiallyfrom two acquisitions, enabled Manugistics to make total revenue estimates.

No Big Deal

The decline in license revenue stemmed in part from a drop in averagedeal size by roughly 40% sequentially to a little more than $600,000. Dolanalso noted that the number of seven-figure deals -- down to four from 10 inthe first quarter -- was at the lowest level in the past three fiscal years.

Manugistics and other supply-chain companies such as i2 have been particularly hard hit in the software arena because of their heavier dependence on larger deals and stiffer competition from enterprise software makers.

"Supply-chain is generally considered expensive, complex and time consuming at a time when customers are looking for products that are quick to implement and carry small price tags," Dolan wrote. He also said he expects competitive pressure on Manugistics from large enterprise softwarevendors, particularly


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, to increase, now that their products have become more competitive.

Analysts on Friday also pointed out deterioration in Manugistics' balancesheet. Cash and equivalents declined to $198 million, down 7% sequentially,while deferred revenue declined 11% sequentially to $40 million.

W.R. Hambrecht & Co. analyst Rich Petersen said the company expects toburn through about $40 million in cash this quarter and to end the quarter with $155 million in cash. "The benefit of the reduction in operating cost structure is hard to get excited about when license revenues are declining, but it does buy the company more time to last into a possible recovery period for software," wrote Petersen, who maintained his hold rating on Manugistics. His firm hasn't done banking with Manugistics.