Manhattan Associates Inc (MANH) 2002 Q1 法說會逐字稿

LADIES AND GENTLEMEN, THANK YOU FOR STANDING BY. WELCOME TO THE MANHATTAN ASSOCIATES, INCORPORATED, FIRST QUARTER 2002 EARNINGS CONFERENCE CALL. DURING THE PRESENTATION ALL PARTICIPANTS WILL BE IN THE LISTEN-ONLY MODE. AFTERWARDS WE WILL CONDUCT A QUESTION AND ANSWER SESSION. AT THAT TIME, IF YOU HAVE A QUESTION, PLEASE PRESS THE 1 FOLLOWED BY THE 4 ON YOUR TELEPHONE. AS A REMINDER, THIS CONFERENCE IS BEING RECORDED WEDNESDAY, APRIL 23, 2002. I WOULD NOW LIKE TO TURN THE CONFERENCE OVER TO RICHARD HADDRILL, PRESIDENT AND CEO. PLEASE GO AHEAD, SIR.

THANK YOU, AND WELCOME TO OUR FIRST QUARTER CALL. WE'VE HAD ANOTHER GREAT QUARTER. WITH ME IS TOM WILLIAMS, OUR CHIEF FINANCIAL OFFICER, WHO WILL GIVE YOU SOME OVERVIEW OF OUR FINANCIAL RESULTS. I'LL THEN PROVIDE A LITTLE MORE COLOR ON THE QUARTER AND A LITTLE OUTLOOK ON THE FUTURE, AND THEN WE'LL OPEN IT UP FOR QUESTIONS. TOM.

THANKS, DICK, AND GOOD AFTERNOON, EVERYBODY. HOPEFULLY YOU HAVE RECEIVED OUR PRESS RELEASE BY NOW AND ARE AS EXCITED AS WE ARE. WE ARE HERE TODAY TO REPORT RECORD SOFTWARE AND SERVICES REVENUES AND A CONTINUATION OF OUR STRENGTH OF MEETING OR EXCEEDING CONSENSUS EARNINGS ESTIMATES. OUR SOLUTIONS REMAIN IN DEMAND IN A TOUGH ECONOMIC ENVIRONMENT. OUR EMPLOYEES CONTINUE TO AMAZE US WITH THEIR TREMENDOUS ABILITY TO EXECUTE ON OUR BUSINESS PLANS. LET'S REVIEW THE CAUTIONARY LANGUAGE FIRST. IN OUR STATEMENTS DURING THIS CALL AND DURING THE QUESTION AND ANSWER SESSION, WE MAY MAKE FORWARD-LOOKING STATEMENTS REGARDING FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF MANHATTAN ASSOCIATES. YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEED AS A FUTURE PERFORMANCE AND INVOLVE RISK AND UNCERTAINTIES AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. I REFER YOU TO THE DOCUMENTS THAT MANHATTAN ASSOCIATES FILES FROM TIME TO TIME WITH THE SEC, IN PARTICULAR, FORM S1 REGISTRATION STATEMENT FILED IN FEBRUARY 1998, AND THE REPORT ON FORM 10K FILED IN APRIL 2002. THESE DOCUMENTS CONTAIN AND IDENTIFY IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULT TO DIFFER MATERIALLY FROM THOSE CONTAINED IN OUR PROJECTIONS. ADDITIONAL FACTORS ARE SET FORTH IN SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THE COMPANY'S ANNUAL REPORT ON FORM 10K FOR THE YEAR ENDED DECEMBER 31, 2001. MANHATTAN ASSOCIATES UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES IN FUTURE OPERATING RESULTS. NOW I'LL REVIEW OUR FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31. SALES OF SOFTWARE LICENSES FOR THE FIRST QUARTER OF 2002 WERE A RECORD 9.4 MILLION. THIS REPRESENTS AN INCREASE OF APPROXIMATELY 20% OVER SOFTWARE FEES OF 7.8 MILLION IN THE FIRST QUARTER OF 2001 AND A SEQUENTIAL GROWTH OVER Q4 OF 2001 OF APPROXIMATELY 4%. SERVICES REVENUES FOR THE FIRST QUARTER OF 2002 WERE A RECORD 26.4 MILLION. THIS REPRESENTS AN INCREASE OF APPROXIMATELY 12% OVER SERVICE REVENUES OF 23.5 MILLION IN THE FIRST QUARTER OF 2001 AND A SEQUENTIAL GROWTH OVER Q4 OF 2001 OF, AGAIN, APPROXIMATELY 4%. WE REFER TO SALES OF SOFTWARE LICENSE AND RELATED IMPLEMENTATION, SUPPORT AND CONSULTATIVE SERVICES AS OUR CORE BUSINESS DRIVERS. REVENUE FROM OUR CORE BUSINESS DRIVERS WERE AT 35.8 MILLION FOR THE FIRST QUARTER OF 2002. THIS REPRESENTS AN INCREASE OF APPROXIMATELY 14% OVER CORE BUSINESS DRIVERS OF 31.3 MILLION IN THE FIRST QUARTER OF LAST YEAR, AND A SEQUENTIAL GROWTH OF APPROXIMATELY 4% OVER LAST QUARTER. A FEW ADDITIONAL HIGHLIGHTS OF OUR REVENUE PERFORMANCE. INTERNATIONAL OPERATIONS ACCOUNTED FOR 18% OF CORE DRIVERS AS COMPARED TO 18% OF CORE DRIVERS IN Q1 OF 2001. NEW CUSTOMERS ACCOUNTED FOR APPROXIMATELY 72% OF SOFTWARE FEES. SALES FOR OPTIMIZATION AND COLLABORATION PRODUCTS ACCOUNTED FOR APPROXIMATELY 28% OF SOFTWARE FEES. SALES OF OPEN SYSTEM PRODUCTS ACCOUNTED FOR APPROXIMATELY 49% OF SOFTWARE FEES. RETAIL, CONSUMER GOODS, FOOD AND GROCERY AND DIRECT TO CONSUMER INDUSTRIES ACCOUNTED FOR APPROXIMATELY 82% OF TOTAL REVENUES. BILLABILITY OF OUR SERVICES PERSONNEL APPROXIMATED 69%. NOW LET'S SPEND ABOUT 30 SECONDS ON K-MART, WHICH DICK WILL EXPAND UPON LATER. THERE WERE NO FURTHER ADJUSTMENTS RECORDED DURING THE FIRST QUARTER OF 2002 RELATING TO OUR DEALINGS WITH K-MART PRIOR TO BANKRUPTCY. THIS IS BASED UPON OUR ASSESSMENT OF THE CONTINUING PROGRESS OF OUR ONGOING IMPLEMENTATION PROJECT AND OTHER FACTORS, INCLUDING WHAT WE COULD SELL OUR PREBANKRUPTCY ACCOUNTS RECEIVABLE FOR. OUR PROJECT WITH K-MART CONTINUES FORWARD, AND WORK POST-BANKRUPTCY HAS BEEN PAID WITH OUR OWN TERMS. OKAY. LET'S MOVE ON TO THE FINANCIAL STATEMENTS. COST OF SOFTWARE AND COST OF HARDWARE REMAINED IN LINE WITH HISTORICAL PERFORMANCE AT 4% AND 80% RESPECTIVELY. STAFF ANNOUNCEMENT TOPIC D 103, WHICH BECAME EFFECTIVE JANUARY 1 OF 2002, NOW REQUIRES THAT REIMBURSED TRAVEL AND ENTERTAINMENT EXPENSES BE CLASSIFIED AS REVENUE. WE HAVE COMBINED REIMBURSED TRAVEL AND ENTERTAINMENT EXPENSES WITH THE HARDWARE DUE TO THE NON-STRATEGIC NATURE. Q1 OF 2002 INCLUDES APPROXIMATELY 1.26 MILLION OF REIMBURSED EXPENSES FROM CUSTOMERS. ALL PRIOR PERIODS SHOWN AND THAT WILL BE SHOWN IN THE FUTURE REFLECT THE RECLASSIFICATION FOR COMPARABILITY AS REQUIRED BY THE PRONOUNCEMENT. THE REQUIREMENTS OF D 103 REDUCED OUR GROSS AND OPERATING MARGINS IN THE FIRST QUARTER OF 2002 BY APPROXIMATELY 181 AND 63 BASIS POINTS RESPECTIVELY. THERE IS NO EFFECT OF THIS RECLASSIFICATION ON EARNINGS. COST OF SERVICES FOR THE FIRST QUARTER OF 2002 WAS APPROXIMATELY 44%, YIELDING A SERVICES MARGIN OF APPROXIMATELY 56% THAT IS ABOUT 97 BASIS POINTS BETTER THAN LAST QUARTER. OUR INTERNATIONAL SERVICES BUSINESS HAS GROWN CONSIDERABLY SINCE THE FIRST QUARTER OF 2001. INTERNATIONAL PRICING PRESSURES COUPLED WITH THE USE OF CONTRACTORS AND DOMESTIC PERSONNEL ON INTERNATIONAL ENGAGEMENTS HAS REDUCED OUR SERVICES MARGIN FROM THE APPROXIMATE 58% EXPERIENCED IN Q1 OF 2001. THIS WAS EXPECTED, AND OUR CURRENT PERFORMANCE IS IN LINE WITH OUR LONG-TERM GUIDANCE ON SERVICES MARGINS OF 54 TO 57%. RESEARCH AND DEVELOPMENT EXPENSES FOR THE FIRST QUARTER OF 2002 WERE 4.9 MILLION OR 12% OF TOTAL REVENUES AS COMPARED TO 5.0 MILLION OR 14% OF TOTAL REVENUES FOR THE FIRST QUARTER OF LAST YEAR, AND 4.9 MILLION OR 12% OF TOTAL REVENUES FOR THE FOURTH QUARTER OF LAST YEAR. THE DECREASE AS A PERCENTAGE OF REVENUE FROM THE FIRST QUARTER OF LAST YEAR IS AS PLANNED AND LARGELY DUE TO LESS USE OF CONTRACTED PERSONNEL IN 2002. NO SOFTWARE DEVELOPMENT COSTS WERE CAPITALIZED IN THE FIRST QUARTER OF THIS YEAR, OR LAST YEAR. SALES AND MARKETING EXPENSES WERE 5.8 MILLION OR 14% OF TOTAL REVENUES FOR THE FIRST QUARTER OF 2002 AS COMPARED TO 5.3 MILLION OR 14% OF TOTAL REVENUES FOR THE FIRST QUARTER OF LAST YEAR, AND 5.7 MILLION OR 14% OF TOTAL REVENUES FOR THE FOURTH QUARTER OF LAST YEAR. THE INCREASE IN SALES AND MARKETING EXPENSES IS PRINCIPALLY ATTRIBUTABLE TO TWO FACTORS. THE EXPENSES OF ADDITIONAL SALES AND MARKETING PERSONNEL, AND EXPANDED MARKETING PROGRAMS DUE TO OUR GROWING PRODUCT SUITE. GENERAL AND ADMINISTRATIVE EXPENSES WERE 5.1 MILLION OR 12% OF TOTAL REVENUES FOR THE FIRST QUARTER OF 2002. THIS REFLECTS AN INCREASE IN G&H EXPENSES AS PERCENTAGE OF TOTAL REVENUES FROM 11% IN THE FIRST QUARTER OF LAST YEAR, BUT IN LINE WITH THE 12% IN THE FOURTH QUARTER OF LAST YEAR. WE CONTINUE TO BUILD OUR INFRASTRUCTURE AS NEEDED TO ACCOMMODATE OUR GEOGRAPHIC EXPANSION AND [INAUDIBLE] GROWTH OF OUR BUSINESS. OPERATING INCOME FOR THE FIRST QUARTER OF 2002 EXCLUDING AMORTIZATION OF ACQUISITION-RELATED INTANGIBLES WAS 9.1 MILLION OR 21.6% OF TOTAL REVENUES AS COMPARED TO OPERATING INCOME OF 7.5 MILLION OR 20.2% OF TOTAL REVENUES ONE YEAR AGO. WE CONTINUED TO MONITOR AND MEASURE OUR BUSINESS EFFICIENCIES. WE WILL DO SO IN THE FUTURE. WE HAVE MAINTAINED OUR FINANCIAL FUNDAMENTALS AND ALLOCATED OUR RESOURCES WELL IN A VERY TOUGH BUSINESS CLIMATE. INTEREST AND OTHER INCOME PERFORMANCE CONTINUES TO LAG, BUT THE FACTORS AFFECTING THIS LINE ITEM ARE SOMEWHAT OUT OF OUR CONTROL. CASH CONTINUES TO INCREASE, YET INTEREST RATES ARE EXTREMELY LOW. WE HAVE TAKEN ONE ACTION HERE, AND IN APRIL WE PAID OFF THE 5.25 MILLION OUTSTANDING NOTE PAYABLE TO INTREPA PLUS ALL ACCRUED INTEREST OUTSTANDING. WE WERE PAYING INTEREST ON THE NOTE AT ABOVE CURRENT MARKET RATES. LIKEWISE, WE EXPERIENCED A FOREIGN EXCHANGE LOSS DURING Q1 OF ABOUT $150,000, PRINCIPALLY DUE TO CURRENCY VOLATILITY WITHIN THE GEOGRAPHIC MARKETS WE OPERATE. THERE IS ABOUT A $500,000 DIFFERENCE BETWEEN OUR ACTUAL PERFORMANCE AND ANALYST ESTIMATES, OR APPROXIMATELY ONE CENT OF EARNINGS PER SHARE. ADJUSTED NET EARNINGS FOR THE FIRST QUARTER OF 2002 WERE 5.8 MILLION OR 19 CENTS PER FULLY DILUTED SHARE. ADJUSTED NET EARNINGS EXCLUDE THE AMORTIZATION OF ACQUISITION-RELATED INTANGIBLE ASSETS. THIS REPRESENTS AN INCREASE OF APPROXIMATELY 15% OVER ADJUSTED NET EARNINGS OF 5.1 MILLION OR 17 CENTS PER FULLY DILUTED SHARE IN THE FIRST QUARTER OF LAST YEAR. NOW LET'S TALK ABOUT OUR FINANCIAL CONDITION AS OF MARCH 31. OUR BALANCE SHEET AS OF MARCH 31 REFLECTED CASH AND SHORT-TERM INVESTMENTS OF 113.9 MILLION. THIS REPRESENTS AN INCREASE IN CASH AND SHORT-TERM INVESTMENTS OF APPROXIMATELY 9.7 MILLION SINCE DECEMBER 31 OF 2001. CASH FLOW FROM OPERATIONS FOR THE FIRST QUARTER OF THIS YEAR WAS APPROXIMATELY 7.6 MILLION. AS MENTIONED PREVIOUSLY, WE PAID OFF THE OUTSTANDING $5.2 MILLION NOTE PAYABLE IN APRIL. BASE SALES OUTSTANDING AT MARCH 31 STOOD AT 65 DAYS. THIS IS DOWN FROM 72 DAYS AT MARCH 31 OF 2001, BUT UP APPROXIMATELY SEVEN DAYS FROM DECEMBER 31 DUE TO THE IMPACT OF THE ACCOUNTING FOR K-MART IN THE FOURTH QUARTER. THAT INCLUDES THE RESERVE AS WELL AS THE ALLOWANCE FOR REVENUES AS WELL AS THE PAYMENT OF A SUBSTANTIAL AMOUNT OF HARDWARE THAT OCCURRED IN Q4. IT'S MY PLEASURE TO SAY THAT OUR ACCOUNT MANAGERS AND OUR COLLECTION TEAMS CONTINUE TO DO A GREAT JOB IN THIS SOFT ECONOMY. I'LL WRAP UP WITH THREE COMMENTS. NUMBER 1, THE MULTIFACETED VALUE PROPOSITION OFFERED BY MANHATTAN ASSOCIATES IN ITS SOLUTIONS CONTINUES TO SUSTAIN US. NUMBER 2, OUR BUSINESS AND SALES PIPELINES ARE AS HEALTHY AS EVER AS WE ENTER Q2 OF 2002. DICK WILL EXPOUND UPON THIS MOMENTARILY. NUMBER 3, OUR PEOPLE CONTINUE TO RAISE THE BAR OF PERFORMANCE, LEADING US TO FURTHER PROMINENCE IN OUR MARKETS AND SUCCESS AGAINST OUR COMPETITORS. THANKS, AND I'LL RETURN THE CALL BACK OVER TO DICK.

THANK YOU, TOM. WE ARE OBVIOUSLY VERY PLEASED WITH OUR RESULTS, ESPECIALLY IN LIGHT OF THE CHALLENGING TECHNOLOGY ENVIRONMENT. AND I WOULD LIKE TO BEGIN MY COMMENTS BY REITERATING TOM'S COMPLIMENTS ABOUT OUR GREAT PEOPLE. OUR TEAM CONTINUES TO GET STRONGER, THUS FURTHER DRIVING OUR INDUSTRY AND LEADERSHIP POSITION. AS OF MARCH 31, THIS MANHATTAN ASSOCIATES TEAM CONSISTED OF 824 FULL-TIME PEOPLE VERSUS 791 AT DECEMBER 31 AND 751 PEOPLE ONE YEAR AGO. DIRECT SALES AND ACCOUNT MANAGEMENT PERSONNEL WERE 55 AT MARCH 31 VERSUS 51 AT DECEMBER 31. WE ARE CURRENTLY ADEQUATELY STAFFED IN SALES; HOWEVER, WE WILL CONTINUE TO LOOK FOR EXCEPTIONAL TALENT AND PEOPLE FOR GEOGRAPHIC EXPANSION. DURING THE QUARTER, WE OBTAINED A FANTASTIC LIST OF NEW KEY CUSTOMERS, INCLUDING OLYMPUS, THE CAMERA COMPANY, COLUMBIA HOUSE, THE RECORD COMPANY, CHICO'S, IN WOMEN'S APPAREL, AND REI, THE OUTDOOR GEAR COMPANY. BURBERRY'S [INAUDIBLE] U.K., TNT LOGISTICS, ONE OF THE PREMIER 3PO COMPANIES. DISCOUNT DRUG, INGRAM BOOK, A LARGE BOOK DISTRIBUTOR, AND HONDA IN THE UNITED KINGDOM. WE ALSO OBTAINED SEVERAL OTHER LARGE BRAND NAME COMPANIES, ONE IN OFFICE PRODUCTS, ONE IN TELECOMMUNICATIONS, AND ONE IN FOOD. WE HAD TWO LICENSE FEE DEALS DURING THE QUARTER OVER $1 MILLION, AND OUR AVERAGE DEAL SIZE FOR THE QUARTER WAS SLIGHTLY LOWER THAN LAST YEAR'S AVERAGE. OPEN SYSTEMS LICENSE REVENUES WERE APPROXIMATELY 49% OF TOTAL LICENSE REVENUES ABOVE LAST YEAR'S AVERAGE OF 43%. OUR INTERNATIONAL REVENUES WERE 18% OF CORE REVENUES CONSISTENT WITH THE FOURTH QUARTER OF LAST YEAR. NOW, THE SOFT ECONOMY CONTINUES IN EUROPE WITH A LESS ROBUST PIPELINE THAN WE HAVE IN THE U.S. AND WITH SOME PRICING PRESSURES. NEVERTHELESS, OUR SERVICES REVENUE IN EUROPE CONTINUES STRONG AND WE EXPECT THE OVERALL EUROPEAN ECONOMY TO IMPROVE SOMEWHAT BY THE FOURTH QUARTER. I SHOULD NOTE THAT THE SALES PIPELINE IN THE U.S. REMAINS VERY STRONG. ALTHOUGH CLEARLY TOO EARLY TO TELL, WE ARE ENCOURAGED BY OUR INITIAL ACTIVITIES IN JAPAN LED BY OUR CHAIRMAN AND FOUNDER ALAN DABBIERE, WHO WILL LIKELY EXTEND HIS STAY IN JAPAN THROUGH MUCH OF THIS YEAR. WE ALSO EXPECT TO ACQUIRE A SMALL TEAM OF PEOPLE IN AUSTRALIA DURING THE NEXT 60 DAYS TO EXPAND OUR PRESENCE IN THAT COUNTRY. WE WERE VERY PLEASED WITH OUR USER CONFERENCE WHICH WAS HELD LAST WEEK, WITH 664 PEOPLE IN ATTENDANCE. DESPITE THE SLOW ECONOMY, THIS ATTENDANCE WAS DOWN ONLY SLIGHTLY FROM A YEAR AGO. ALSO, I SHOULD ADD WE NOW HOLD AN ANNUAL EUROPEAN CONFERENCE, THE LATEST OF WHICH HAD APPROXIMATELY 190 ATTENDEES. THERE WAS A VERY POSITIVE ATTITUDE AMONGST OUR CUSTOMERS AT THE CONFERENCE, WHICH IS ENCOURAGING FOR FUTURE BUSINESS. WE HAD A NUMBER OF SUCCESSFUL CUSTOMER GOAL LINES DURING THIS QUARTER INCLUDING TRANSWORLD ENTERTAINMENT, HIBBIT SPORTING GOODS, WORLD DUTY FREE AND PACIFIC SUNWEAR. AS TOM SAID, SERVICES MARGINS WERE STRONG AT 56%. SERVICES REVENUES FOR THE SECOND QUARTER ARE OFF TO A GOOD START HERE IN APRIL. DURING THE QUARTER WE MADE VERY GOOD PROGRESS WITH INFOLINK, WITH SOME EXCELLENT GOAL LINES AND STRONG VALUE PROPOSITIONS FOR OUR CUSTOMERS. WE SIGNED SIX NEW COLLABORATION CUSTOMERS DURING THE QUARTER AND ARE BEGINNING TO SEE THE OPPORTUNITY TO INCREASE THE DEAL SIZE FOR INFOLINK AS WE GAIN GREATER REFERENCES IN FUNCTIONALITY INTO THE PRODUCT. FURTHER, TWO OF OUR INFOLINK CUSTOMERS ARE STARTING TO ROLL OUT INFOLINK INFORMATION PACKAGES TO THEIR SUPPLIERS. WHAT I'LL CALL THE PACMAN EFFECT OF SUCCESSFUL COLLABORATION. THIS GENERATES ADDITIONAL LEADS FOR US. OUR TOTAL NUMBER OF INFOLINK CUSTOMERS IS NOW 32, AND THE PIPELINE FOR INFOLINK CONTINUES TO INCREASE. REGARDING PRONTO, THE SALES REORGANIZATION WE DID IN JANUARY IS PROVING EFFECTIVE AT BOTH CLEANSING AND STRENGTHENING THAT SALES PIPELINE, AND WE REMAIN OPTIMISTIC ABOUT PRONTO GOING FORWARD. HOWEVER, I WAS DISAPPOINTED THAT WE ONLY CLOSED THREE PRONTO DEALS DURING THE QUARTER, WHICH WAS PARTLY DUE TO THE SALES REORGANIZATION. HOWEVER, WE ALMOST ACHIEVED OUR REVENUE TARGETS FOR PRONTO DUE TO THE ABILITY TO COMMAND SLIGHTLY BETTER PRICING THAN WE HAD EXPECTED. BOTH THE INFOLINK AND THE PRONTO BUSINESS UNITS APPROACHED BREAK-EVEN DURING THE FIRST QUARTER WITH EACH BUSINESS UNIT COSTING US ABOUT $100,000 OF CONTRIBUTION MARGIN DURING THE QUARTER. NOW, REGARDING ALLIANCES AND PARTNERSHIPS. ABOUT 60% OF OUR NEW LICENSE REVENUES WERE POSITIVELY INFLUENCED BY OUR LICENSE -- EXCUSE ME, BY OUR ALLIANCE PARTNERS DURING THE QUARTER. OUR RELATIONSHIPS WITH SYSTEMS INTEGRATERS REMAIN STRONG AND MORE POSITIVE THAN EVER, AND WE ARE ENTHUSIASTIC ABOUT THIS RECENT JDA PARTNERSHIP WHERE WE HAVE ABOUT A DOZEN JOINT ACTIVE SELLING ENGAGEMENTS IN PLACE. THE STRATEGIC INTERFACE WITH JDA SHOULD BE COMPLETED LATER THIS YEAR. A LITTLE BIT MORE ON K-MART. AS MENTIONED IN OUR LAST CALL, K-MART DID GO LIVE IN FEBRUARY OF THIS YEAR WITH THE FIRST OF FOUR SITES OF OUR PKMS PRODUCT. THEY CONTINUED TO PROCEED WITH FOUR OTHER SITES, OF WHICH WE EXPECT TWO TO GO LIVE LATER THIS YEAR AND TWO EARLY NEXT YEAR. K-MART IS CONTINUING TO INVEST IN MANHATTAN ASSOCIATES SOLUTIONS AND CONTINUING TO SPEND AT THE LEVELS WE EXPECTED. IF ANYTHING, WE FEEL THAT OUR POSITION HAS STRENGTHENED TODAY RELATIVE TO OUR REPORT TO YOU TWO AND A HALF MONTHS AGO. AS TOM SAID, THERE WAS NO IMPACT ON OUR Q1 INCOME STATEMENT FROM THE PREBANKRUPTCY AMOUNTS, AND WE BELIEVE, IF ANYTHING, A NET RECOVERY IS MORE LIKELY IN THE FUTURE THAN A NET LOSS. NOW REGARDING CURRENT BUSINESS CONDITIONS. OUR EXPERIENCE IN EUROPE HAS BEEN CONSISTENT WITH OTHER SOFTWARE COMPANIES IN THAT THE SLOWDOWN THAT STARTED IN THE SECOND HALF OF LAST YEAR CONTINUES. IN THE U.S. WE SEE STEADY STRENGTHENING AS EVIDENCED BY GREATER BUDGET CLARITY IN THE SALES PIPELINES, INCREASED INQUIRIES FROM EXISTING CUSTOMERS, AND AN OVERALL VERY STRONG SALES PIPELINE. NOW, I SHOULD CAUTION THAT WE'RE CONTINUING TO SEE THE MULTIPLE APPROVAL PROCESSES, PRESSURES ON COSTS AND TO DO SMALLER PROJECTS COMPARED TO TWO YEARS AGO, AND THIS CONTINUES TO MAKE FORECASTING A CHALLENGE. IN SUMMARY, I GUESS THE U.S. FEELS LIKE A NORMAL COMING-OUT-OF-RECESSION EXPERIENCE. NOW, WE DO BELIEVE THAT COMPARED TO OTHER TECHNOLOGY COMPANIES, WE WILL CONTINUE TO DO RELATIVELY WELL IN THIS OVERALL SLOWER I.T. SPENDING ENVIRONMENT. AFTER ALL, WE'VE GOT A LOT TO BE EXCITED ABOUT. FIRST, OUR SOLUTIONS MAKE A STRONG CONNECTION WITH OPERATIONS PERSONNEL, AND ARE NOT JUST SUBJECT TO I.T. BUDGETS. SECOND, OUR SOLUTIONS OFFER A RELATIVELY QUICKER AND MORE TANGIBLE RETURN ON INVESTMENT THAN MANY I.T. PROJECTS. THIRD, WE HAVE AN EXPANDED PRODUCT OFFERING. BOTH INFOLINK AND PRONTO ADDRESS NEW MARKETS AND ARE NOW PROVEN PRODUCTS. ALSO, WE ARE SEEING OUR FIRST LARGE OPTIMIZATION DEALS, ONE OF WHICH CLOSED FOR GREATER THAN $1 MILLION IN THE FIRST QUARTER. WE CONTINUE TO EXPAND GEOGRAPHICALLY. OUR PRESENCE IN CONTINENTAL EUROPE AND ASIA IS RELATIVELY RECENT. FIFTH, WE HAVE STRENGTHENED OUR PARTNERSHIPS AS EVIDENCED BY THE HIGHER PERCENTAGE OF DEALS THAT ARE POSITIVELY INFLUENCED BY PARTNERS IN RECENT QUARTERS. SIXTH, WE HAVE STRONG RELATIONSHIPS WITH EXISTING CUSTOMERS AS EVIDENCED BY CONTINUED CUSTOMER BUYING AND OUR RECENT POSITIVE USER CONFERENCE. AND SEVENTH, OUR CONTINUED MARKET SHARE GAINS, AND WE HAVE A VERY FRAGMENTED COMPETITIVE ENVIRONMENT OUT THERE. EIGHTH AND LAST, THE OPPORTUNITY TO ADD ACQUISITIONS INTO OUR LARGE CUSTOMER BASE AND TO OUR WELL-TUNED INFRASTRUCTURE. NOW, REGARDING THE REMAINDER OF 2002 AND THE SECOND QUARTER OUTLOOK, WE CURRENTLY EXPECT ADJUSTED EARNINGS PER SHARE IN THE RANGE OF 83 CENTS TO 93 CENTS PER SHARE FOR THE YEAR 2002. NO CHANGE FROM OUR PRIOR GUIDANCE. AND IN THE RANGE OF 19 CENTS TO 22 CENTS FOR THE SECOND QUARTER. IN SUMMARY, THE UPS AND DOWNS FOR THE QUARTER. FIRST THE DOWNS. I WAS RELATIVELY DISAPPOINTED IN THE NUMBER OF NEW LICENSE SALES IN EUROPE, ALTHOUGH OUR SERVICE CONTINUES STRONG IN Q1 AND INTO Q2. AND SERVICES GROWTH WAS PARTICULARLY GOOD IN EUROPE. AND PRONTO DID NOT QUITE LIVE UP TO MY EXPECTATIONS DURING Q1, BUT I STILL REMAIN VERY OPTIMISTIC FOR Q2 AND BEYOND. ON THE POSITIVE SIDE, MANY THINGS. WE GENERATED 10 MILLION OF CASH AND OVER 7 MILLION OF THAT WAS FROM OPERATIONS WHILE WE STILL REDUCED OUR YEAR-END ACCRUED LIABILITIES BY $5 MILLION. I'M VERY PLEASED WITH OUR PROGRESS WITH INFOLINK. OUR SERVICES, REVENUES AND MARGINS HAVE BEEN VERY GOOD AND OUR EXPENSES REMAIN WELL CONTROLLED. AND OVERALL THE U.S. SALES ORGANIZATION AND SALES PIPELINE IS VERY STRONG. I'M ALSO PLEASED WITH OUR STRING OF SUCCESSFUL QUARTERLY PERFORMANCE INCLUDING ACTUALLY ONCE AGAIN EXCEEDING CONSENSUS EARNINGS ESTIMATES FOR EACH OF TWO CONSECUTIVE QUARTERS. WITH THAT, AMY, I WOULD LIKE TO OPEN IT UP FOR QUESTIONS.

THANK YOU. LADIES AND GENTLEMEN, IF YOU WISH TO REGISTER A QUESTION FOR TODAY'S QUESTION AND ANSWER SESSION, PLEASE PRESS THE 1 FOLLOWED BY THE 4 ON YOUR TELEPHONE. YOU WILL HEAR A THREE-TONE PROMPT TO ACKNOWLEDGE YOUR REQUEST. IF YOUR QUESTION HAS BEEN ANSWERED AND YOU WISH TO WITHDRAW YOUR REQUEST, PRESS THE 1 FOLLOWED BY THE 3. IF YOU ARE USING A SPEAKER PHONE, PLEASE LIFT YOUR HANDSET BEFORE ASKING YOUR QUESTION. ONE MOMENT FOR YOUR FIRST QUESTION. ALAN WEINFIELD WITH [INAUDIBLE] PARTNERS, PLEASE GO AHEAD.

CONGRATULATIONS, GUYS.

THANK YOU.

ONE THING THAT WAS MADE PRETTY CLEAR TO ME AT THE USER CONFERENCE WAS THE BREADTH AND DEPTH OF YOUR MANAGEMENT TEAM DOING MANY MULTIPLE PROJECTS OF ONES AND SUCCEEDING. HOW EARLY DO YOU THINK WE COULD SEE A MOVE BY MANHATTAN INTO AN ADJACENT SPACE SUCH AS SUPPLY CHAIN PLANNING OR IN MORE LOGISTICS AREAS BESIDES THE CORE FOCUS CURRENTLY OF THE COMPANY?

ALLEN, THANKS FOR THE COMPLIMENTS, AND I AM REAL PROUD OF OUR TEAM AND THE FOLKS BENEATH THE TEAM AS WELL. I FEEL LIKE DURING THE LAST COUPLE OF YEARS WITH THE SLOWER ECONOMY IT'S BEEN A GREAT EXPERIENCE FOR US TO CONTINUE TO STRENGTHEN THE TEAMS. IN THAT REGARD, WE ARE CONSTANTLY LOOKING FOR OPPORTUNITIES, SO I'LL OPENLY SOLICIT THEM IN THE CALL IF PEOPLE ARE SEEING INTERESTING COMPANIES THAT WOULD BE SYNERGISTIC WITH MANHATTAN. WE ARE CLEARLY LOOKING FOR THE BEST SYNERGIES. WHEN YOU MENTION PLANNING, THERE ARE SOME ISSUES THERE. WE'VE GOT PARTNERSHIPS WITH [INAUDIBLE] AND WE ALSO FEEL THERE ARE CERTAIN DIFFERENCES IN THE SELLING PROCESS OF PLANNING VERSUS EXECUTION. BUT A NUMBER OF OTHER AREAS ARE HIGH ON OUR LIST, INCLUDING TRANSPORTATION, REVERSE LOGISTICS, ORDER MANAGEMENT, AND MORE THINGS IN COLLABORATION AND SUPPLY CHAIN EVENT MANAGEMENT. IN PARTICULAR, PRODUCT ACQUISITIONS THAT WE COULD FIT INTO THE TOOL KIT AND INFRASTRUCTURE QUICKLY. SO I BELIEVE WE WILL DO ONE OR TWO ACQUISITIONS BETWEEN NOW AND THE END OF THE YEAR, AND IN THOSE AREAS WOULD BE THE HIGHEST PROBABILITY, and WE WELCOME YOUR ADVICE.

COULD YOU GIVE US ANY GUIDANCE ON LICENSE TRENDS, HOW THEY LOOK FROM NOW UNTIL THE END OF THE YEAR? YOU KNOW, FROM YOUR CRYSTAL BALL OF TODAY'S PLAN. WITH REGARD TO OUR EARNINGS PER SHARE GUIDANCE, WE WOULD EXPECT LICENSE REVENUES TO GROW ON AVERAGE DURING THE REST OF THE YEAR TO ACHIEVE THAT GUIDANCE, AND OUR SALES PIPELINES ARE VERY STRONG, AND WE DO SEE THE OPPORTUNITY TO CONTINUE TO GROW GEOGRAPHICALLY AS WELL. SO ALTHOUGH WE'RE NOT GIVING ANY SPECIFIC GUIDANCE ON REVENUE LINES AT THIS POINT IN THIS ECONOMY, WE DO FEEL CAUTIOUSLY OPTIMISTIC THAT LICENSE FEES WILL CONTINUE TO GROW.

THANKS A LOT. GOOD LUCK.

THANK YOU.

YOUR NEXT QUESTION WILL COME FROM ROBIN ROBERTS WITH STEPHENS AND COMPANY. PLEASE GO AHEAD.

HI. CONGRATULATIONS FOR A GREAT QUARTER. DICK AND TOM, WOULD YOU COMMENT ON THE POSSIBLE IMPACT FROM A CONTINUING SOFTNESS IN EUROPE ON YOUR FULL YEAR'S LICENSE REVENUE?

WELL, THAT'S -- HERE'S THE GOOD NEWS AND THE BAD NEWS ABOUT INTERNATIONAL. THE GOOD NEWS IS WE'VE ACTUALLY BEGUN SOME INITIATIVES IN LATIN AMERICA AND HEIGHTENED AND EXPERIENCE LATIN EXPERIENCE JOINED US IN THE LAST COUPLE OF WEEKS WITH GOOD RELATIONSHIPS ACROSS LATIN AMERICA. WE ALSO ARE BEGINNING TO SEE SOME INTEREST IN JAPAN. WE'VE GOT THE TEAM IN AUSTRALIA AND SOME LEADS ELSEWHERE IN ASIA THAT COULD BE POSITIVE. SOME OF THE ISSUES WE HAVE IN EUROPE ARE OUR RELATIVELY NEW SALES TEAM IN BENALUX [PHONETIC] AND GERMANY AND FRANCE AND BUILDING THOSE PIPELINES. AND MAKING SURE THAT WE HAVE THE SAME HIGH WIN RATE, ONE OF THE ADVANTAGES OF HAVING THE U.S. IS A GREAT REPUTATION. WE ALSO HAVE A GREAT REPUTATION IN THE U.K. IN SOME OF THE NEWER MARKETS WE'RE BUILDING THAT REPUTATION AND WE'RE FINDING NEW SALES FORCE, NEED TO GET REFERENCES IN THOSE LOCATIONS. SO ON THE POSITIVE SIDE, WE HAVE A LOT OF SERVICES WORK IN EUROPE FROM BOTH U.S. CUSTOMERS AND PRIOR SIGNED EUROPEAN CUSTOMERS, AND THE PIPELINES IN EUROPE ARE OKAY, THEY JUST DON'T INCLUDE A LARGE NUMBER OF BIG DEALS. SO I BELIEVE THAT BY THE FOURTH QUARTER WE'LL SEE THE TYPICAL END-OF-YEAR POSITIVE IMPACT IN EUROPE, AND WE'LL SEE SOME OF THE BIGGER COMPANIES IN EUROPE THAT WE'VE BEEN TALKING TO WHO HAVE BEEN SITTING ON THE FENCE BEGIN TO MOVE. BUT IN THE NEXT SIX MONTHS I'M EXPECTING EUROPE TO BE OKAY BUT NOT GREAT.

OKAY. ANY CORRELATION BETWEEN THE SOFT DEMAND IN EUROPE VERSUS THE CONTRIBUTION OF 3PO INDUSTRY TO YOUR REVENUE? WE'VE GOT A LOT OF GOOD THINGS GOING WITH SOME 3PO CUSTOMERS INCLUDING A NUMBER IN EUROPE. THOSE CUSTOMERS ARE ALSO SEEING SLOWER SIGN-ON CYCLES FOR THEIR NEW CUSTOMERS, WHICH IS PART OF THE IMPACT. 3PO WAS REASONABLY GOOD THIS QUARTER, I THINK 12% OF REVENUES, SO COMING BACK FROM WHAT WE SAW LAST YEAR. AND IN GENERAL, I THINK EUROPE'S ECONOMY IS JUST SIX MONTHS BEHIND THE U.S. SO I'M EXPECTING US TO BEGIN TO SEE SOME IMPROVEMENTS THERE PRETTY QUICKLY, BUT ONCE AGAIN, MAYBE NOT RESULTING IN REAL LICENSE REVENUES OR SIGNIFICANT UPTICK UNTIL Q4 FOR US.

AND THAT 82% OF REVENUE FROM RETAIL AND RETAIL-RELATED INDUSTRIES, WHAT'S THE BREAKDOWN BETWEEN RETAILERS AND RETAIL SUPPLIERS?

YEAH, ROBIN, THE AMOUNT WAS 82%. IT WAS RETAIL, CONSUMER GOODS, FOOD AND GROCERY AND DIRECT TO CONSUMER. AND RETAIL WAS THE LARGEST ONE FOR US, AND APPROXIMATELY -- I DON'T HAVE THAT STATISTIC RIGHT HERE, BUT I'D SAY 65% AND 70% WERE SUPPLIER RETAIL.

OKAY. AND DOES THAT PERCENTAGE KEEP GOING UP, GOING FORWARD?

I THINK THAT THE WAY WE'VE SEEN IT IS THINGS HAVE REMAINED RELATIVELY STEADY ALONG THOSE LINES EVEN THROUGH 2001. THAT IS WHERE OUR MAJORITY OF REVENUES WERE COMING THROUGH OUR VERTICALS INDUSTRIES WHERE WE HAD HISTORICAL STRENGTH. THAT'S KIND OF HOW WE SEE IT AS WE LOOK AT THE BUSINESS TODAY. DICK DID SAY THAT THIRD-PARTY LOGISTICS WAS 12% IN Q1 VERSUS 8% OF OUR LICENSE FEES LAST YEAR.

OKAY -- GO AHEAD.

LET ME JUST ADD THAT, TOO, THAT WE TEND TO DISCLOSE THAT TOTAL REVENUES OUR LICENSE REVENUES WHICH ARE SOMEWHAT OF A LEADING INDICATOR ARE A LOWER PERCENT THAN 82%, IN OTHER WORDS, SOME OF THE OTHER INDUSTRIES STUDIED UPTICK IN THE LICENSE CATEGORY DURING Q1.

OKAY. AND ALONG THOSE LINES, WITH YOUR RELEASE OF LOG PRO. SHOULD WE EXPECT MORE REVENUE CONTRIBUTIONS FROM OTHER INDUSTRIES OTHER THAN RETAIL AND [INAUDIBLE] SUPPLIERS?

YES, WE DO EXPECT THAT PERCENTAGE OF NON-RETAIL RELATED TO GROW AS THE YEAR GOES ON. WE WOULD EXPECT SOME RECOVERY IN THE HIGH TECH SECTOR, FOR EXAMPLE. AND THE SALES PIPELINES, WE SEE SOME PRETTY GOOD INTEREST IN INDUSTRIAL AND WHOLESALE SECTORS. THEN WE DO BELIEVE 3PO WILL CONTINUE TO MAKE SOME COMEBACK LATER AS THE YEAR PROGRESS.

A LAST QUESTION. NOWADAYS WHEN YOU GO OUT AND SELL A CUSTOMER EITHER A WAREHOUSE OR COLLABORATION PRODUCT, HOW MANY INSTANCES OR PERCENTAGE INSTANCES WHERE YOU SELL A BUNDLED PRODUCT THAT INCLUDE THE CORE FILLED PRODUCT AND ONE OR TWO MODULES, EITHER OPTIMIZATION OR COLLABORATION?

I WOULD SAY OVER 50% OF OUR DEALS INCLUDE SOME OTHER MODULE, BUT I WOULD SAY CLEARLY LESS THAN 50% OF THEM TODAY ARE INCLUDING COLLABORATION. WE'RE BEING PRETTY SELECTIVE ABOUT INCLUDING COLLABORATION IN THOSE DEALS BECAUSE WE FEEL BY OBTAINING A NEW CUSTOMER, SAY ON PKMS, AS WE BUILD MORE FUNCTIONALITY INTO COLLABORATION AND THEY HAVE A GOOD EXPERIENCE WITH US, WE CAN COME BACK TO THEM LATER ON WHEN THEY ARE READY TO DIGEST MORE AND HOPEFULLY COMMAND A HIGHER PRICE FOR INFOLINK SIX MONTHS, 12 MONTHS FROM NOW THAN WE MIGHT GET FROM IT TODAY.

IN OTHER WORDS, THE CORE PKMS OR OTHER OPEN SYSTEMS -- I MEAN THE PKMS ON OPEN SYSTEMS IS STILL LEADING THE SALES? IS THAT RIGHT? PKMS IS LEADING THE SALES, AND CLEARLY WE HAVE A MIX, I THINK, OF OPEN SYSTEM REVENUES. I THINK WE'RE ABOUT 49% OF LICENSED REVENUES THIS QUARTER VERSUS I SERIES.

OKAY. THANK YOU.

YOUR NEXT QUESTION WILL COME FROM ED WOLF, BEAR STEARNS. PLEASE GO AHEAD.

HI DICK, HI TOM.

ED.

CAN YOU GIVE A SENSE SORT OF THE LINEARITY OF THE QUARTER AND HOW IT FEELS IN APRIL? I MEAN THE SENSE THAT I WAS GETTING FROM YOU GUYS IN LATE FEBRUARY, EARLY MARCH WAS THAT MAYBE WE'RE STARTING TO SEE AN UPTICK IN SPENDING AT LEAST THE WAY IT FELT FROM YOUR STRONG POSITION WITHIN THE MARKET, AND IT FEELS LIKE OVERALL MAYBE THE WORLD IS TAKING A STEP BACK IN THE END OF MARCH, APRIL. IS THAT FAIR ASSESSMENT, OR ARE YOU NOT SEEING THAT STEP BACK?

WELL, ON LINEARITY, OUR FIRST QUARTER WAS WITHIN OUR HISTORICAL NORMS WITH RESPECT TO LICENSE FEES WHICH WOULD BE 40 TO 60% OF LICENSE FEES CLOSED IN THE LAST MONTH OF THE QUARTER. AND Q4 WAS SORT OF THE ONE EXCEPTION WE'VE HAD IN THE LAST COUPLE YEARS WHERE WE WERE MORE TAIL-END LOADED. WE WOULD EXPECT OUR LINEARITY IN Q2 TO BE CONSISTENT WITH OUR HISTORICAL NORMS FOR LICENSE FEES OF 40 TO 60% IN THE THIRD MONTH OF THE QUARTER, AND OUR VISIBILITY ON SERVICE IS PRETTY GOOD AT THIS POINT IN THE QUARTER. SO I DON'T THINK WE'VE SEEN ANY DRAMATIC FLUCTUATIONS IN BUSINESS ACTIVITY OVER THE LAST FOUR MONTHS. IF ANYTHING, AS I ALLUDED TO EARLIER, OUR PIPELINES ARE TAKING A NICE JUMP BETWEEN OUR FEBRUARY CALL AND TODAY.

IF SERVICE FEELS GOOD SO FAR YEAR TO DATE IN THE QUARTER, IS LICENSE SORT OF IN LINE OR FEEL GOOD FEEL OR FEEL A LITTLE WEAK OR HOW WOULD YOU QUANTIFY IT?

I ADDRESSED THE WHOLE AREA OF VISIBILITY WHICH HAS SO MANY MOVING PARTS THAT IT'S DIFFICULT TO GIVE YOU MORE THAN A GOOD JUDGMENT CALL. AS WE SIT HERE IN THE QUARTER, WE'VE GOT EXCELLENT PIPELINES, WE'VE GOT A GOOD NUMBER OF VERBAL WINS THAT ARE IN THE CONTRACT PROCESS, AND ALL OF THAT LEADS US TO BELIEVE WE'LL BE IN OUR NORMAL RANGE OF LINEARITY AND HAVE A GOOD QUARTER. ALSO IF YOU LOOK AT OUR HISTORY, ALTHOUGH I DON'T THINK WE HAVE TREMENDOUS AMOUNT OF SEASONALITY, WE'VE HAD PRETTY GOOD Q2s THE LAST COUPLE OF YEARS.

ADDITIONALLY, ED, THERE HAVE BEEN A FEW DEALS THAT HAVE CLOSED ALREADY AS WELL.

ABSOLUTELY.

IF I LOOK AT DEFERRED REVENUES, THEY WERE UP 9 OR 10 PERCENT SEQUENTIALLY WITH TOTAL LICENSE BEING DOWN SEQUENTIALLY AS THE SEASONALITY YOU WOULD THINK THEY MIGHT BE. IS THERE SOMETHING IN THOSE DEFERRED REVENUE? DOES THAT GIVE US HOPE SOMETHING IS PICKING UP, OR IS THAT SOMETHING TO THAT? WELL, ED, AS WE HAVE TALKED IN THE PAST, MAJORITY OF DEFERRED REVENUE FOR US IS MAINTENANCE ON OUR SOFTWARE. RENEWALS OF MAINTENANCE CONTRACTS ON A GROWING INSTALLED BASE. ALL OF THE INTREPA CUSTOMERS ARE RENEWED ANNUALLY, IN WHICH CASE IN THE VERY FIRST QUARTER WE RENEW ALL THOSE CONTRACTS. SO THAT'S WHAT TYPICALLY WILL PROMPT THE MOVEMENT IN THE FIRST QUARTER OF DEFERRED REVENUE. IF YOU GO BACK AND CHECK IT LAST YEAR, IT'S VERY SIMILAR.

AND I DON'T WANT TO BEAT A DEAD HORSE, BUT ON K-MART, WAS THERE ANY LICENSE REVENUE AT ALL IN THE QUARTER FROM K-MART?

NO.

AND YOUR FORMER ESTIMATE, IF I REMEMBER, FOR SERVICE REVENUE FOR THE YEAR WAS SORT OF TWO TO THREE MILLION. HOW DO YOU FEEL ABOUT THAT A QUARTER INTO THE YEAR? WE DO FEEL AS THOUGH SERVICE REVENUE FROM K-MART POST-BANKRUPTCY THIS YEAR SHOULD BE IN THAT RANGE OF $3 MILLION PLUS OR MINUS A MILLION. AT NORMAL MARGINS.

AND DICK MENTIONED THAT YOU ARE GOING TO IN THE NEAR TERM ACQUIRE SOME SALESPEOPLE IN AUSTRALIA. HOW IS THAT BEING PAID FOR? IS THAT AN ACQUISITION OF SOMETHING? IS IT JUST SOMETHING THAT'S GOING TO BE EXPENSE GOING FORWARD, OR HOW DO WE LOOK AT THAT IN TERMS OF CASH FLOW?

WELL, IT'S A SMALL DEAL, SMALL NUMBER OF PEOPLE, AND THE DEAL ISN'T QUITE FINAL SO DON'T PIN US DOWN TOO MUCH. IT'S BASICALLY SOME FOLKS THAT HAVE BEEN WITH A PARTNER THERE THAT THE PARTNER IS NOT COMFORTABLE CONTINUING IN THAT MARKET. WE LIKE THE PEOPLE VERY MUCH SO WE BELIEVE WE CAN REACH TERMS WHERE WITH A SMALL UPFRONT PAYMENT AND US ASSUMING THEIR SALARIES ONGOING. I GUESS WE HAVEN'T FIGURED OUT THE ACCOUNTING FOR THE SMALL UPFRONT PAYMENT, BUT IT'S PRETTY SMALL AND WE'LL FIGURE IT OUT HERE OVER THE NEXT COUPLE OF WEEKS WHEN WE GET THE DEAL CLOUDS.

IT'S NOT SIGNIFICANT, ED.

REVENUE IN WITH THEM?

I'M SORRY? DID THEY BRING ANY REVENUE IN WITH THEM?

NO, OTHER THAN ANYTHING THAT WOULD COME ALONG IN THE PIPELINES THAT THEY'VE BEEN WORKING. AND A VERY SMALL AMOUNT OF SERVICES REVENUE.

THANKS A LOT FOR THE TIME, GUYS.

YOUR NEXT QUESTION, PETER COLEMAN, BANK OF AMERICAS SECURITIES. PLEASE GO AHEAD.

HI, THIS IS ACTUALLY TERRY [INAUDIBLE] FOR PETER COLEMAN. NICE JOB, GUYS, ON ANOTHER SOLID QUARTER. I WANTED TO ASK YOU ABOUT, IT LOOKS LIKE THERE'S SOME LARGER DEALS OUT THERE IN THE [INAUDIBLE] BASE THESE DAYS, AND I'M CURIOUS HOW YOU SEE THAT CAUSING ANY IMPACT ON LINEARITY, OR POTENTIALLY AS WE LOOK FURTHER OUT SEVERAL QUARTERS DOES THAT CREATE GREATER VOLATILITY IN SOFTWARE LICENSES AS SOME OF THESE LARGER DEALS SEEM TO EVOLVE?

YEAH, AND THANK YOU, TERRY. YOU KNOW, WE SO FAR, I GUESS, IN THE LAST EIGHT OR TEN QUARTERS HAVE HAD ONE OR TWO DEALS BETWEEN ONE AND THREE MILLION DOLLAR LICENSE FEES IN EACH QUARTER. AND YEAH, WE ARE OPTIMISTIC THAT MORE AND MORE BIG COMPANIES ARE REALIZING THAT CUSTOM SOLUTIONS AREN'T THE WAY TO GO, AND WE SPECIFICALLY ARE BEGINNING TO TARGET BIGGER COMPANY OPPORTUNITIES. AND I ALSO BELIEVE THAT T.O.s ARE SEEING SUPPLY CHAIN [INAUDIBLE] AS A BIT MORE STRATEGIC. ALL THAT SAID, I THINK IT'S TOO EARLY TO TELL IS THAT GOING TO CAUSE US TO HAVE ANY MORE VARIABILITY IN QUARTERLY PERFORMANCE. CLEARLY WE WOULD LIKE TO STRIKE RELATIONSHIPS THAT GIVE US VISIBILITY AND PREDICTABILITY. AT THE SAME TIME, WE DON'T WANT TO WALK AWAY FROM A NEAR-TERM OPPORTUNITY. AND WE'RE ALSO NOT AFRAID TO GET A CUSTOMER, AS YOU SEE THE LIST OF COMPANIES EVEN THIS QUARTER AND SOME THAT I, TO RESPECT CONFIDENTIALITY TO THE CUSTOMER, DIDN'T MENTION, ARE SOME SIZABLE COMPANIES. WE'RE NOT AFRAID TO GO IN WITH A SMALLER DEAL FIRST AND EARN THEIR CONFIDENCE AND GET THE BIGGER DEALS OVER TIME OR REPEAT BUSINESS OVER TIME. SO THERE'S LOTS OF VARIABLES THERE. AT THIS POINT I'M NOT OVERLY CONCERNED WE'LL HAVE A LOT OF CHOPPINESS TO OUR QUARTERLY PERFORMANCE.

OKAY.

LET ME ADD ONE THING TO THAT. THE WAY OUR SALES FORCE IS ORGANIZED AND HOW WE MOTIVATE OUR SALESPEOPLE, IT ACTUALLY LEADS TO A -- SOME BIG DEALS AS WELL AS A WIDE VARIETY OF KIND OF MID-SIZED DEALS SO THAT WE GO TO EXTRAORDINARY LENGTHS TO MAKE SURE THAT WE HAVE A LOT OF RELATIVELY -- AS WE SAY, SWEET SPOT DEALS IN OUR PIPELINE SUCH THAT WE DON'T RUN INTO QUITE THAT SITUATION.

OKAY. IF WE LOOK AT INFOLINK, IT SOUNDS LIKE THAT WAS A PRETTY IMPRESSIVE WIN THERE WITH A MILLION DOLLAR DEAL ON THE QUARTER. CAN YOU GIVE A LITTLE COLOR ON WHEN YOU ARE LOOKING AT SPECIFIC INFOLINK OPPORTUNITIES, IS THERE ANY SALES CYCLE DIFFERENCES WITH THAT AND THEN YOUR CORE PKMS PRODUCT?

YEAH, LET ME CLARIFY, TOO, THE MILLION DOLLAR LICENSE DEAL ON THE QUARTER WAS AN OPTIMIZATION DEAL, WHICH WAS THE FIRST OPTIMIZATION-ONLY DEAL THAT WE HAD OVER $300,000. SO IT WAS NOT INFOLINK WHICH WE CALL COLLABORATION. I HOPE I WAS CLEAR ON THAT. ON INFOLINK, I AM OPTIMISTIC OVER THE NEXT 12 MONTHS WE'LL GET A MILLION DOLLAR INFOLINK DEAL BECAUSE OF THE GROWING VALUE PROPOSITIONS WE BUILT MORE FUNCTIONALITY IN THAT PRODUCT AND AS WE HAVE MORE REFERENCEABLE CUSTOMERS WITH THAT FUNCTIONALITY. THE SALES PIPELINE OR THE SALES PROCESS FOR INFOLINK IS A LITTLE DIFFERENT. NUMBER 1, IT DOES SELL NICELY TO THE PEOPLE THAT BUY PKMS. AT THE SAME TIME, THERE IS ANOTHER AUDIENCE WITHIN MOST OF OUR CUSTOMERS THAT ARE INTERESTED IN INFOLINK THAT MAY NOT BE DIRECTLY INTERESTED IN PKMS. THE SALES CYCLE TENDS TO BE ABOUT THE SAME IN DURATION, PERHAPS JUST A LITTLE BIT SHORTER, BUT NOT MUCH. AND SO FAR THE DEAL SIZES IN INFOLINK ARE QUITE A BIT SMALLER THAN PKMS, BUT WE ARE SEEING THE OPPORTUNITY -- IN THE LATEST QUARTER WE DID SIGN ONE FOR $200,000 LICENSE FEE, FOR EXAMPLE, WHICH IS OUR BIGGEST LICENSE FEE FOR INFOLINK. WE ALREADY BILLED OUR MILLIONTH DOLLAR ON OUR LARGEST INFOLINK CUSTOMER IN TOTAL LICENSE FEE AND SERVICES DURING THE QUARTER. SO THAT WAS AN EARLY CUSTOMER THAT, YOU KNOW, BOUGHT THE LICENSE FEE INEXPENSIVE AND IS ROLLING IT OUT ON A BROADER BASIS AND ENJOYING THE PRODUCT.

OKAY. AND LOOKING AT YOUR TMS PRODUCT, WERE THERE ANY STAND-ALONE DEALS IN THE QUARTER?

YES, BUT NONE SIZABLE.

ONE LAST QUESTION ON INFOLINK. WERE ALL OF THE INFOLINK LICENSES IN THE QUARTER, WERE THEY WITH THE SOURCE PRODUCT?

NO.

NO. THE MAJORITY OF THEM WERE.

OKAY, THANKS GUYS. AGAIN, NICE JOB.

YOUR NEXT QUESTION FROM BRENT TRILL WITH CS FIRST BOSTON. PLEASE GO AHEAD.

NICE JOB, GUYS. CAN YOU GIVE US MORE -- I KNOW EARLIER YOU SAID THERE WAS NO SPECIFIC GUIDANCE ON LICENSE. IS IT FAIR TO ASSUME THE GUIDANCE YOU GAVE IN Q4 FOR LICENSE TO BE UP SEQUENTIALLY STILL WOULD HOLD FOR Q1 INTO Q2.

LIKE YOU SAID, BRENT, I'M NOT GIVING YOU SPECIFIC LINE ITEM GUIDANCE, BUT OUR HOPE IS AND CERTAINLY TO MAKE OUR NUMBERS OVER THE YEAR WE WOULD EXPECT LICENSE REVENUES TO GO UP. SO CERTAINLY WE HOPE IT WILL AND WE DON'T SEE ANY REASON WHY IT SHOULDN'T, BUT WE ARE NOT GIVING ANY INDIVIDUAL LINE ITEM GUIDANCE.

OKAY. ON THE SERVICES SIDE, CAN YOU JUST GIVE US A SENSE, HAS THERE BEEN ANY CHANGE IN THE DURATION OF THOSE SERVICES ENGAGEMENTS OVER THE LAST YEAR? HAVE THEY BEEN LONGER, SHORTER? BECAUSE A NUMBER OF THE DEALS SEEM TO BE POTENTIALLY MULTI-QUARTER TO MULTI-YEAR ENGAGEMENTS THAT YOU ARE DEPLOYED WITH. CAN YOU GIVE US A SENSE IN THE SERVICE ARM TODAY, WHAT'S THE AVERAGE CONTRACT THAT YOU WOULD HAVE WITH A CUSTOMER?

YEAH, GOOD POINT THERE. WE DO HAVE A HANDFUL OF LARGE ROLLOUTS THAT ARE VERY POSITIVE FOR US AND FOR THE COMPANY THAT HAS BEEN GOING ON FOR MANY MONTHS, AND, YOU KNOW, OVER A PERIOD OF TIME SITES ARE ROLLING OUT, CAN RUN WELL OVER A YEAR IN DURATION. ON THE OTHER HAND, A TYPICAL SWEET SPOT DEAL HASN'T CHANGED MUCH, WHICH WOULD BE THAT THREE OR $600,000 LICENSE FEE AND DOING THE ROLLOUT OVER A THREE- TO EIGHT-MONTH PERIOD. THAT'S STILL PRETTY NORMAL. WE HAVE GOT THIS HANDFUL OF BIGGER DEALS, AND WE HOPE TO CONTINUE TO GET MORE OF THOSE. SO IN TERMS OF AN AVERAGE, IT JUST HASN'T CHANGED VERY MUCH. OBVIOUSLY AS WE DO MORE PRONTO DEALS, THOSE ARE QUICKER SIGNALS. WE DID DEVELOP ABOUT A YEAR AGO OUR QUIKSTART PROGRAM WHICH ALLOWS COMPANIES TO GET LIVE WITH FEW MODS AND LIMITED CONFIGURATION ON PKMS WITHIN TWO MONTHS. AT THE SAME TIME, WE'VE GOT SOME OF THESE BIGGER DEALS THAT HAVE BEEN ROLLING OUT FOR A YEAR, YEAR AND A HALF OR MORE. ON AVERAGE, I DON'T THINK IT'S CHANGED MUCH.

SO A RANGE OF THREE-MONTH PERIOD? WHAT WOULD BE A TYPICAL [INAUDIBLE] PERIOD THE THREE 600 DEAL ON THE SERVICES SIDE?

BRENT, IT CERTAINLY VARIES, BUT ON A SWEET SPOT DEAL IT WOULD PROBABLY BE BETWEEN .7 AND 1.2 TO 1.3 TIMES THE LICENSE FEES THAT WOULD GO OVER THAT THREE- TO EIGHT-MONTH PERIOD AS DICK MENTIONED. ONCE YOU GET INTO BIGGER DEALS, DEPENDING ON THE LEVEL OF MODIFICATIONS THAT THE CUSTOMER MAY WANT TO MAKE TO ACCOMMODATE THEIR NEEDS, IT COULD GO AS HIGH AS, SAY, TWO TIMES THE AMOUNT OF THE SOFTWARE. BUT AGAIN, THAT -- WE'RE WORKING HARD TO TRY TO MINIMIZE THOSE TYPES OF THINGS SO THAT IT'S MUCH EASIER TO SUPPORT THOSE CUSTOMERS ON A LONGER TERM BASIS.

AND ONE OTHER FACT TO STIR IN THE MIX, OUR INSTALL BASE, AS YOU KNOW, WILL DO UPGRADE. WE'VE SEEN A LOT OF INTEREST IN THAT HERE RECENTLY AS THE ECONOMY STARTED TO TURN A BIT, AND THAT ALSO DRIVES SERVICES REVENUES. WHERE THERE IS NOT A LICENSE FEE TYPICALLY WITH AN UPGRADE, BUT THERE CAN BE ADDITIONAL SERVICES REVENUE FOR THE INTERFACE WORK FOR CONFIGURATION MODIFICATION THROUGH THE LATEST VERSION OF THE PRODUCT.

LAST QUESTION. IF YOU COULD GIVE US A SENSE ON THE COMPETITIVE LANDSCAPE, RECAP WHAT YOU ARE SEEING AND WHAT YOU SAW IN Q1?

YEAH, REALLY NOT MUCH CHANGE. WE STILL HAVEN'T SEEN ANY ONE COMPETITOR IN MORE THAN 15 OR 20% OF THE DEALS. AND I WOULDN'T SAY WE'VE SEEN ANY SURGE OR BLOWUP BY ANY ONE OF THE COMPETITORS Q1 VERSUS PRIOR QUARTERS. AND SAME THING IN THE INFOLINK ARENA. STILL A VERY FRAGMENTED BUNCH OF COMPANIES THAT WE PROBABLY DON'T SEE ANY ONE MORE THAN TWO DEALS IN A QUARTER. SO NO REAL SIGNIFICANT CHANGE THERE.

NICE WORK IN A SOFT ENVIRONMENT.

THANK YOU.

THANKS.

YOUR NEXT QUESTION WILL COME FROM CHRIS ROWEN WITH SUNTRUST ROBINSON HUMPHREY.

HIGH GUYS. NICE QUARTER.

THANK YOU.

MOST OF MY QUESTIONS HAVE BEEN ANSWERED. ON THE K-MART, NOT TO BEAT A DEAD HORSE AGAIN, BUT YOU MENTIONED FOUR SITES LIVE, FOUR SITES IN PROCESS. DO YOU KNOW WHERE THE OTHER NINE STAND?

AT THIS POINT K-MART IS WORKING THROUGH THEIR DEBTOR IN POSSESSION FINANCING, AND THEREFORE THEY ARE REALLY ONLY FORECASTING OUT WITH US AT LEAST ON -- INTO EARLY NEXT YEAR. SO THEY STILL HAVE PLANS, THEY TELL US, FOR THE OTHER SITES, BUT THEY HAVEN'T PUT DATES ON THEM. SO I THINK THE SOONEST WE WOULD EXPECT THAT WOULD BE THE SECOND HALF OF NEXT YEAR OR MAYBE STARTING SECOND QUARTER NEXT YEAR AT THE VERY EARLIEST.

OKAY. ON THE SERVICES, AS THE SERVICES REVENUE GROWS IN ABSOLUTE TERMS, ARE YOU FINDING A NEED TO CHANGE ANY KIND OF THE MANAGEMENT STRUCTURE? IS THERE A POINT WHERE IT GETS, YOU KNOW, BIGGER THAN YOUR CURRENT MANAGEMENT STRUCTURE CAN HANDLE AND IS THERE INFLUXION POINT LOOMING THERE?

YOU KNOW, WE'VE BEEN FORTUNATE TO HAVE VERY LOW TURNOVER IN OUR SERVICES PERSONNEL THE LAST COUPLE OF YEARS AND HAVE AN EXCELLENT TEAM OF PEOPLE. AND I FEEL VERY GOOD ABOUT THE TEAM OF PEOPLE WE HAVE IN SERVICES RIGHT NOW TO CONTINUE TO SCALE THAT ORGANIZATION. THAT SAID, WE HAVE SAID THAT WE MAY WANT TO HIRE SOME INDUSTRY SPECIALISTS TO CONTINUE TO BUILD OUT FURTHER INDUSTRY SPECIALIZATION AT A MID LEVEL OR SENIOR LEVEL SO THAT YOU COULD SEE US DO THAT. BUT OTHERWISE I THINK WE CAN SCALE PRETTY WELL WITH THE TEAM WE HAVE.

OKAY. THANKS A LOT.

YOUR NEXT QUESTION WILL COME FROM PATRICK SNELL WITH ROBERT W. BAIRD. PLEASE GO AHEAD.

YEAH, COULD YOU -- A LOT OF QUESTIONS RELATED EARLY ON TO THE VERTICAL INDUSTRY FOCUS AND THE CONCENTRATION IN RETAIL CPG, ET CETERA. BUT I'M CURIOUS AS TO HOW MUCH DO YOU HAVE TO DO ON THE PRODUCT DEVELOPMENT SIDE, IF ANYTHING, TO MODIFY YOUR SOLUTIONS FOR VERTICALS THAT YOU WANT TO INCREASE YOUR PENETRATION IN AND IS THERE ANY SIGNIFICANT R&D PROJECTS TAKING PLACE RIGHT NOW ON THAT FRONT?

WELL, PAT, FIRST I SHOULD SAY TOO IN THIS RETAIL AREA, IN THE LAST SEVERAL QUARTERS OUR FOOD SUBSECTOR RETAIL HAS DONE VERY WELL AND THERE ARE SOME UNIQUENESSES THERE THAT WE'VE BEEN BUILDING OUT AND DOING VERY WELL WITH. THERE ARE A COUPLE OF THINGS IN HIGH TECH WE'RE BUILDING OUT NOW IN ANTICIPATION OF THE HIGH-TECH TURN-AROUND. ON COUPLE THINGS IN 3PO WE THINK WILL STRENGTHEN OUR COMPETITIVE POSITION THERE. I WOULDN'T SAY THEY ARE DRAMATIC. IN HEALTH CARE WE'VE HAD SOME NICE WINS WITH SMALLER COMPANIES. BEEN A COUPLE OF NEW F.D.A. REQUIREMENTS WE MAY WANT TO BUILD INTO THE PRODUCT TO CONTINUE TO FOCUS ON THAT MARKET. I BELIEVE IT'S MORE AN ISSUE OF US GETTING MARKET RECOGNITION AND MARKETING INTO THOSE MARKETS THAN IT IS A PRODUCT ISSUE.

ARE THERE ANY PARTNERS, INDUSTRY-SPECIFIC PARTNERS SUCH AS BOUTIQUE S.I.s OR ANY OTHER CHANNELS YOU CAN GO THROUGH TO INCREASE YOUR MARKET RECOGNITION?

YES, AND FIRST LET ME SAY, TOO, THAT I THINK THE RETAIL-RELATED SPACE HAS BEEN ONE OF THOSE AREAS WHERE WE'VE TAKEN WHAT THE MARKET HAS GIVEN US OF ALL THE SECTORS THAT HAS TENDED TO BE RELATIVELY STRONG IN THIS ECONOMY AND THAT'S PART OF IT TOO. I DON'T WANT TO BLAME OUR MARKETING TOO MUCH. AT THE SAME TIME, I DO THINK YOU SHOULD LOOK FOR US OVER IN NEXT SIX TO 12 MONTHS TO DO MORE INDUSTRY INITIATIVES AND LOOK TO SOME PARTNERSHIPS THAT CAN HELP US FURTHER PENETRATE SOME OF THESE INDUSTRIES. AND THAT'S SOMETHING WE'VE GOT IN THE WORKS NOW, BUT IT'S TOO EARLY TO DISCUSS.

GREAT. THANKS. NICE JOB.

THANK YOU.

THANKS, PAT.

YOUR NEXT QUESTION WILL COME FROM IAN MORTON WITH JP MORGAN. PLEASE GO AHEAD.

LET ME ADD MY CONGRATULATIONS AS WELL. DICK, ONE QUESTION JUST IN TERMS OF PRICING AND HOW YOU SEE THAT PLAYING OUT HERE OVER THE NEXT COUPLE QUARTERS WITH JUST TRENDS IN THE MARKET AND NEW PRODUCTS COMING ON. I KNOW YOU HAD TALKED ABOUT PRICING BEING DOWN ON A YEAR-OVER YEAR BASIS. HOW DO YOU THINK THAT TREND RUNS OUT IF YOU LOOK OUT TWO OR THREE QUARTERS?

SURE, AND I WOULD SAY THAT THE AVERAGE DEAL SIZE DURING Q1 WAS SLIGHTLY LOWER THAN LAST YEAR. I DON'T THINK IT WAS SO MUCH DUE TO PRICING PRESSURE AS IT WAS TO THE MIX OF THE DEALS. WE ARE PUSHING PRONTO, GETTING SOME INFOLINK STAND-ALONE DEALS. THOSE ARE SMALLER. THE ONLY PLACE I FEEL LIKE WE'RE SEEING SOME PRICING PRESSURE OR AT LEAST MORE PRESSURE TO DO SMALLER DEALS IS IN EUROPE RIGHT NOW, BUT I THINK THEIR PRICING IS OKAY IN THE U.S. SO I'M NOT OVERLY CONCERNED ABOUT PRICING IN THE U.S. IN EUROPE IT'S A LITTLE TIGHTER. I THINK THAT WILL IMPROVE LATER IN THE YEAR. IT OBVIOUSLY IMPROVES FOR US, TOO, AS WE GAIN MORE REPUTATION IN THE MARKET OR OUR ABILITY TO GET GOOD PRICING IN THE U.S. OR U.K. WHERE WE CAN DEMAND A PREMIUM IN SOME OF THE NEWER MARKETS WE'RE IN.

AS THE NEWER PRODUCTS COME ON, DOES THAT EXTEND DOWN BECAUSE THEY HAVE LOWER ASPs OR IT'S ACTUALLY MORE SOLUTIONS FOR MANHATTAN AND THAT OFFSETS IT BECAUSE YOU ARE BUYING A BIGGER BUNDLE?

YEAH, WHAT WE'VE SAID OVER THE LAST SIX MONTHS AND I THINK IT'S STILL ACCURATE, OUR PIPELINE HAS GONE FROM BEING VERY MUCH A BELL-SHAPED CURVE AROUND THIS 3 TO $600,000 SWEET SPOT LICENSE DEAL TO AT FLATTER WHERE WE'RE SEEING MORE DEALS IN THE 1 TO 300,000 RANGE WITH PRONTO AND INFOLINK STAND-ALONE. MORE STAND-ALONE OPTIMIZATION AS WELL AS MORE DEALS ON THE BIG END. OVER A MILLION DOLLARS. SO WHAT WILL HAPPEN IF WE'RE SUCCESSFUL WITH PRONTO WILL BE THAT THE AVERAGE DEAL SIZE MAY COME DOWN JUST A LITTLE BIT. BUT I THINK THE NUMBER OF LARGE DEALS SHOULD ALSO GO UP.

GREAT. THEN THE ONE NUMBER I MISSED, MAYBE IF YOU COULD REPEAT IT, WAS THE INDIRECT CONTRIBUTION.

WELL, IT'S NOT SELLING THROUGH CHANNELS SO MUCH, BUT WE DID HAVE 60% OF OUR NEW LICENSE FEES THIS QUARTER WERE DRIVE THROUGH A POSITIVE REFERENCE OR POSITIVE IMPACT FROM ALLIANCE PARTNERS.

ANY ONE PARTICULAR PARTNER STANDING OUT MORE THAN OTHERS OR IS THAT STILL A BLEND?

STILL A BLEND.

AND I DID MENTION, I THINK OUR PIPELINE WE'RE KIND OF ENTHUSED, BUT WE'LL WAIT TO SEE WHAT THE RESULTS ARE. THE JDA DEAL WE HAVE ABOUT A DOZEN DEALS IN THE PIPELINE AND WE JUST ANNOUNCED THAT AND ROLLED IT OUT IN JANUARY. THAT HAS THE POTENTIAL TO BE QUITE POSITIVE. BUT THESE PARTNERSHIPS, YOU GOT TO SEE HOW THEY PLAY OUT. SO FAR WE'RE FEELING GOOD SYNERGY AND MOMENTUM WITH THAT.

GREAT. THANK YOU.

NEXT QUESTION FROM JIM MENDLESON WITH SOUNDVIEW TECHNOLOGY GROUP.

MY QUESTIONS HAVE BEEN ANSWERED. THANK YOU.

THANKS, JIM.

YOUR NEXT QUESTION WILL COME FROM FRED WELLER WITH COLBRECK CAPITAL. PLEASE GO AHEAD.

I'LL AD LIB SINCE EVERYTHING HAS BEEN ANSWERED. I'M CURIOUS THAT -- HOW YOU FEEL ABOUT THE MARKET. YOU KNOW, THE EXTENT TO WHICH YOU SAY GAINED SHARE DURING THE QUARTER AND HOW ARE THE -- COULD YOU GO A LITTLE MORE IN DEPTH ON THE COMPETITIVE LANDSCAPE? ARE YOU SEEING ANY OF THE PRIVATE COMPANY AND DEALS AND WHICH TYPES OF DEALS WOULD YOU SEE THEM IN AND DO YOU SEE ANY CORRELATION BETWEEN, YOU KNOW, THE CYCLES FOR SPENDING FOR SUPPLY CHAIN PLANNING SOFTWARE FROM I2 MENU AND WHEN YOU COME IN, YOU KNOW, INTO PARTICULAR DEALS? THAT'S -- I'M ALSO CURIOUS ABOUT THE PREPETITION AMOUNTS FROM, YOU KNOW, K-MART, JUST HOW -- YOU KNOW, HOW YOU ARE DEALING WITH THAT. AND OKAY, WE'LL LEAVE IT AT THAT.

OKAY. THE FIRST ON THE COMPETITIVE LANDSCAPE, AGAIN, THERE ARE LITERALLY HUNDREDS OF COMPETITORS. WE HAVE MANY SMALL COMPANIES IN EUROPE AND THE U.S. AND IN ASIA. AND IT IS A VERY FRAGMENTED MARKETPLACE, WHICH IS A GREAT OPPORTUNITY FOR US. SO THERE IS NO ONE COMPANY OUT THERE. I MEAN WE WORRY ABOUT ALL OF THEM. EACH OF THEM COMPETES WITH US IN DIFFERENT WAYS, WHETHER IT'S BY INDUSTRY OR CERTAIN PRODUCT FUNCTIONALITY OR A CERTAIN CONNECTION THEY MIGHT HAVE WITH THAT CUSTOMER OR CERTAIN REFERENCE THEY MIGHT HAVE. SO IN ANY INDIVIDUAL SITUATION, ANY COMPETITOR CAN BE PARTICULARLY TOUGH. AND I THINK WE HAVE A GOOD HISTORY OF KNOWING HOW TO COMPETE AGAINST DIFFERENT COMPANIES, BUT THEY ARE TOUGH OUT THERE, AND ALTHOUGH OUR WIN RATE IS GOOD AND WE ARE GAINING MARKET SHARE, WE BELIEVE WE DON'T TAKE ANY OF THEM LIGHTLY AND YET WE DON'T SEE ANY ONE THAT WE FEEL IS THREATENING US IN THE LEADERSHIP POSITION AT THIS TIME AND NO ONE COMPANY THAT WE SEE EMERGE IN Q1 IN ANY SIGNIFICANT WAY.

ON THE PLANNING SIDE, BECAUSE WE ARE OFTEN SELLING TO OPERATING PEOPLE, PLANNING PEOPLE MORE OFTEN SELLING TO THE CIO SIDE OF THE HOUSE, IT'S FAIRLY RARE FOR A COMPANY TO BUY PLANNING AND EXECUTION AT THE SAME TIME. OCCASIONALLY, BUT NOT ALWAYS. SO IT'S HARD FOR ME TO HAVE ANY MEANINGFUL IMPACT OR MEANINGFUL INSIGHT ON PLANNING. YOU KNOW, WE REALLY HAVE AN OPPORTUNITY, FOR EXAMPLE, TO SELL INTO MENUS INSTALL BASE AND TO OURS WE HAVEN'T CAPITALIZED ON THAT PARTNERSHIP WE ANNOUNCED LAST YEAR, BUT I THINK THAT IS SOMETHING THAT WE COULD AS THE ECONOMY NOW IMPROVES, WE WOULD HOPE TO BUILD ON THAT WITH MANUGISTICS [PHONETIC] MORE. AND OCCASIONALLY WE'VE JOINED WITH I32. BUT ONCE AGAIN, A VERY LOW PERCENTAGE OF OUR SALES ARE TO COMPANIES BUYING PLANNING EXECUTION AT THE SAME TIME. ON THE PREPETITION AMOUNTS, THE TOTAL AMOUNT OF THE TIME K-MART FILED FOR BANKRUPTCY WAS JUST OVER $5 MILLION. WE HAVE BEEN ABLE TO REDUCE THAT LIABILITY SOMEWHAT THROUGH WORKING WITH ONE OF OUR RESELLER PARTNERS. SO IT'S SLIGHTLY UNDER $5 MILLION NOW THAT WE HAVE AT RISK. OUR CONTRACT, AS I MENTIONED IN THE FEBRUARY CALL, IS WORDED SUCH THAT WE BELIEVE AND HAVE BEEN ADVISED BY OUTSIDE COUNSEL THAT SHOULD K-MART CONTINUE TO USE OUR SOFTWARE AT THE TIME THEY EMERGE FROM BANKRUPTCY, THEY WOULD NEED TO ASSUME THE ENTIRE CONTRACT AND THEREFORE PAY US FOR BOTH THE LICENSE FEES AND THE SERVICES AND PAY TUESDAY FULL AMOUNT. SO WE DON'T SEE ANY SIGNIFICANT ADDITIONAL EXPOSURE FROM K-MART AND WE DO THINK AS ISSUES GET RESOLVED THERE'S THE POSSIBILITIES OF RECOVERY IN PART OR IN FULL OVER THE NEXT 12 TO 15 MONTHS.

OKAY. AND DO YOU FEEL THAT THE GROWTH GOING FORWARD IS MORE BASED ON GOING INTO GEOGRAPHIES THAT YOU ARE NOT CURRENTLY CONCENTRATED IN OR DO YOU THINK IT'S MORE IN DOING PARTNERSHIPS LIKE JDAs OR DO YOU FEEL THAT IT'S -- YOU KNOW, I DON'T KNOW, COULD YOU PRIORITIZE IN TERMS OF JUST, YOU KNOW, HOW YOU WOULD CATEGORIZE WHERE YOU THINK THE GROWTH WILL COME FROM?

WELL, FIRST, I WOULD LIKE TO SAY SOMETHING WE SAID BEFORE. WE DO SEE LICENSE FEES GROWING AT A FASTER RATE THAN THE OTHER COMPONENTS OF OUR BUSINESS. OVER THE LONG TERM WE DO EXPECT THAT TO CONTINUE. WE DO BELIEVE THAT THE COLLABORATION PRODUCTS SUITE HAS TREMENDOUS POTENTIAL OVER THE NEXT TWO OR THREE YEARS TO CONTRIBUTE TO EARNINGS GROWTH. AND WE BELIEVE THAT THINGS LIKE THE OPTIMIZATION SUITE DEVELOPED UNDER ADDITIONAL NEW PRODUCTS AND ACQUISITION OF NEW PRODUCTS WILL BE SIGNIFICANT DRIVES TO OUR GROWTH INTO OUR EXISTING CUSTOMER BASE WHICH ARE GENERALLY SATISFIED CUSTOMER BASE. THE GEOGRAPHIC EXPANSION WE ALSO ARE EXCITED ABOUT. WE HAVE SOME 17% OF OUR REVENUES NOW OR 185 COMING OUTSIDE OF NORTH AMERICA, AND AS YOU KNOW, A NUMBER OF SOFTWARE COMPANIES INCLUDING SOME OF OUR COMPETITORS WILL DRIVE 40% OUT OF NORTH AMERICA. WE HAVE A TARGET OVER THE NEXT THREE YEARS TO GET OVER 305 OF OUR REVENUES OUTSIDE OF NORTH AMERICA AND THAT'S AN EXCITING GROWTH OPPORTUNITY FOR US. WE'RE KIND OF PICKY. WE WANT TO DO IT IN A WAY THAT IS CUSTOMER CENTRIC AND REASONABLY PROFITABLE, AND NOT JUST TO SAY WE'VE GOT REVENUES THAT RESULT IN UNHAPPY CUSTOMERS OR LOSSES.

THANKS VERY MUCH. I APPRECIATE IT.

THANK YOU, FRED.

LADIES AND GENTLEMEN, AS A REMINDER, TO REGISTER A QUESTION, PLEASE PRESS THE 1 FOLLOWED BY THE 4 ON YOUR TELEPHONE. ED WOLF, PLEASE PROCEED WITH YOUR FOLLOWUP. MR. WOLF, YOUR LINE IS OPEN.

I THINK WE'LL EITHER WRAP UP OR TAKE ONE MORE QUESTION, IF THERE IS ONE MORE.

NO QUESTIONS AT THIS TIME, SIR.

GREAT. WELL, THANK YOU FOR YOUR INTEREST IN MANHATTAN ASSOCIATES. WE APPRECIATE YOUR COMMENTS AND QUESTIONS.