Did IBM Software Failure Lead Customer to Bankruptcy?

Shades of Hershey's (HSY) infamous ERP disaster here... American LaFrance, a manufacturer of fire engines, is blaming a failed ERP implementation from IBM (IBM) on its going into bankruptcy:

Almost immediately upon the changeover to the ERP System, ALF recognized serious deficiencies with the system that had a crippling impact on ALF’s operations. Some of the problems that ALF encountered in implementing the ERP System included, among others: (i) inability to reconcile data between the Freightliner system and the ERP System; (ii) incorrect or incomplete inventory, purchasing and customer data due to either problems with the Freightliner system or the conversion of the data to the ERP System; (iii) inaccurate or incomplete vehicle configurations loaded in the ERP System; (iv) insufficient training on the ERP System; and (v) missing financial information including accounts payable detail, incomplete or inaccurate accounts receivable data, and inaccurate beginning general ledger balances.

For the next several months following the changeover, ALF attempted to solve the plethora of problems with the ERP system. Despite such efforts, as a direct result of the problems with the ERP System, ALF became unable to complete the manufacture of many pre-ordered vehicles.

It's hard to say whether there's validity to this, though the above link offers some analysis. Actually, it's worth reading the whole thing, cause it goes pretty into depth.

Hmm, there doesn't seem to be a Wikipedia page for the most infamous ERP implementations of all time. Someone get on that, please?

(via RISKS Digest)

More: Ah, the bizarre things that lie in the dark recesses of the brain. I was trying to remember a particular instance when Nike (NKE) blamed an earnings shortfall on a failed software information. Couldn't remember the name of the software provider (though I knew it wasn't SAP (SAP)). What I did remember was that some magazine titled their report on the situation "Flagrant Foul!". Yeah, I know. Turned out it was a Smart Money piece back from 2001, and the software maker was I2 Technologies (ITWO). Read all about it here:

NIKE TELLS THE world that its shoes are great for basketball players, giving them the ability to jump 30 feet into the air, perform a 360-degree slam dunk and land squarely on top of a defender's head, leaving an imprint of the famous swoosh on an opponent's face.

But much to the dismay of I2 Technologies, a maker of business-to-business software working for Nike, the swoosh footprint can also be squished into a teammate's head when the shoe company is in trouble.

On Monday afternoon, Nike announced that it expected its third-quarter earnings to fall at least 28% short of the consensus Wall Street expectation. And, perhaps trying to deflect shareholder wrath, Nike blamed I2 for part of the shortfall. I2 is overhauling Nike's supply-chain system in its footwear division, which provides 57% of the company's overall sales. I2's system, Nike contended, directed the company to stop shipping shoe models that were selling well and produce more shoe models that weren't.

Shareholders left tread marks all over both Nike and I2. Nike was sent down 19.5% to $39.60, while I2 took a 22.3% pounding, falling to $27.56.

Comments

[Roy P.]

Later Nike was found to be liable for its own fault, its CEO Phlilip Kinght blamed the software upgrade still in progress for his own fail execution.

Since then, i2 Technologies has later become Nike's most trusted Supply Chain Management partner and contributed to Nike's great success in leading the sport shoes industry.

Most Wall Street analysts/writers knew about the front part of the headline but unaware of the 2nd part of the story...

[Roy P.]

Most of these Wall Street writers or analysts are just a bunch of brainless mouth-pieces, they look at news headlines and start their wild speculations, blowing a mountain out of a mole hill.

[Roy P.]

i2, 2007 vs 2008

2007 total operating revenue was $257.87 millions, averagely $64.45 millions per quarter and making $0.82 per share.

the bookings of q4-07 was $81.8 millions....

let's assume bookings/revenue to be only $70-75 millions a quarter for 2008.

the 2008 revenue will be $280-$300 million.

assume operating expense per quarter to be $58 millions(it was only $54.5 millions in q4-07).

Non-GAAP earnings for 2008: $48-68 millions eq. to $2.28 - $3.23 per share(using 21 million shares to calculate).

Why sell i2 at this time? anyone?