Markets end on a subdued note

Markets ended the lacklustre session on a soft note on account Eid holiday and investors turning to sidelines after three consecutive days of gains which pushed the market up 4.6%.

Markets opened flat at 5468 on back of weak cues from Asia and United States. The Nifty traded in a narrow 38 points range, touching an high of 5498 and a low of 5460. T he 50-stock S&P CNX Nifty ended at 5482, up 1 point and the Sensex closed at 18,306, up 32 points.

Other markets in Asia ended on a mixed note, exporter shares gained in Japan on weakening Yen and markets in China surged marginally after latest inflation eased concerns of further tightening in Beijing. Japan's Nikkei Stock Average ended up 0.6%, China's Shanghai Composite Index gained 0.9% and Hong Kong's Hang Seng Index was up 1.1%.

Earlier in the day, Prime Minister Manmohan Singh defended himself in an interview with TV Editors that the government was trying to bring justice in India's largest corruption scandal. However markets were unmoved by PM's rare roundtable interview with TV editors.

This year market men do not expect a major pre-budget rally and forsee a populist budget. Vivek Mahajan, Head Research, Aditya Birla Money said, "the relevance of budget is reducing by the year. However, with nearly five states going to the polls post the Budget, we may expect a populist budget." Mahajan expects subsidies to remain high and also expects a possibility of rollback of the economic stimulus package. "The impact of the budget is likely to be neutral to marginally negative," Mahajan added.

Given the current market conditions, Mahajan recommends investors to accumulate stocks with a long-term perspective and restructure the portfolio. "Use volatility to accumulate fundamentally sound stories with good corporate governance," said Mahajan.

From Individual stocks, Tata Steel was the top gainer on Nifty, up 3% after net profit doubled on back of robust demand and pricing power. However surge in raw material costs weighed on the margins.

Cement stocks also ended higher, JP Associates surged 3%, Ambuja Cements zoomed 2.1%.

On the other hand, auto shares were among the top losers, Mahindra and Mahindra fell 2.8%, Tata Motors and Maruti were off over 1% each. Financials also ended in the red, IDFC dipped 4.3% after clocking three days of gains, HDFC declined 3.2% and Kotak Bank was down 2%.

Technology shares were also weak, TCS, Wipro and HCL Technologies were down 0.8%-0.9%.

Hindalco, down 1.7%, Reliance Communication, down 1.6% and DLF, down 1.2% were the top losers on Nifty. Jindal Steel, up 2%, Sun Pharma, up 1.5%, Ranbaxy, up 1.1% and Larsen and Tourbo, up 1.2% were the prominent gainers.

Broader markets outperformed the benchmark, the midcap and smallcap index were up 0.5% and 1% each.

Market breadth was positive, 1683 stocks advanced for 1098 stocks that declined.

Weekly Report: Markets have a wobbly time

The markets had another shaky week on account of the lingering issues on the macro-economic front, concerns of a slowdown in corporate profit growth and the burden of technical factors. The BSE Sensex swung in a range of 885 points between a high of 18,810 and a low of 19,295 before ending the week at 17,728, down 279 points or 1.5%, and the Nifty ended at 5310, down 86 points. The midcap index ended at 6475, lower by 258 points or 3.8% and the smallcap index shut shop at 7808, down 522 points or 6.2%.

The benchmark indices had started the week on an encouraging note, with the Sensex ending above the psychological 18k mark, post the previous Friday's battering and the gyrations witnessed through the course of the past week. But from thereon, the markets were back to their bearish ways, as has become the norm in this calendar year. The poor IIP data, the inability of the all-party meet to break the imbroglio on the opposition demand for a JPC probe into the 2G scam, and the concomitant, a smooth parliamentary budget session and additional scams tumbling out of the beleaguered government's closet, took the headwinds off the markets midway through the week. It was only the combination of short-covering and value buying that resurrected the markets from the marass on Friday. The weekly closing was not so bad, considering that we were staring down the barrel at one point, with the Nifty hurtling towards the crucial 5000 mark.

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The next week would tell whether we have some kind of a temporary bottom in place. Atleast the start of the upcoming week should be good, given the return of normalcy in Egypt after the unceremonious exit of the besieged Egyptian President Mubarak late on Friday. In fact, stocks rose in the US and NYMEX crude oil futures fell to near $85 dollars a barrel in the aftermath of the news development. The upcoming Union Budget and an oversold situation, by virtue of the Indian bourses being the worst performer among the emerging markets, are also reasons that could extend Friday's pullback rally. News reports that the Finance Minister Pranab Mukherjee may introduce the much-delayed bill to roll out the GST regime, may also be a positive.

Meanwhile, the IIP data for the month of December came in at a disappointing 1.6% compared to 2.7% in November. The manufacturing sector growth stood at 1% compared to 19.6% during the previous year, electricity sector grew by 6% versus 5.4% and the capital goods sector growth came in at 13.7% versus 42.9%. There were re-assuring voices from the government side though. Sticking to its projection of over 8.5% GDP growth this fiscal, the Planning Commission Planning Commission Deputy Chairman Montek Singh Ahluwalia said that the monthly variations in industrial output numbers should not be a cause of concern. And while expressing disappointment at the low industrial output growth in December, the finance minister Pranab Mukherjee said the monthly numbers do not reflect correct picture of the economy.

The Finance Minister and government's main trouble-shooter Pranab Mukherjee was unable to get an obstinate opposition to give up its demand for an immediate constitution of a joint parliamentary committeee to look into the 2G case. And two additional instances of suspect spectrum allocation only added to the market's discomfiture. As per reports, the government is probing the Indian Space Research Organisation (ISRO) for a 2005 allocation of mobile internet spectrum without a proper bidding process that may have cost the exchequer up to Rs 2 trillion. The government is also reportedly investigating whether the state-run telecom company BSNL appointed franchises for broadband wireless access without charging any upfront payment.

On the positive side, though, the government estimated the GDP for the 2010/11 fiscal year to grow at 8.6% and was optimistic that India would move up in global GDP rankings to within the top 10 economies. The farm output may grow 5.4%, industrial growth should reach 6.2% and the service sector is projected to grow by 11% in the current fiscal ending in March, the government statement said. India's economy has grown at 8.9% for two consecutive quarters in the current financial year.

And there was a heartening decline in food inflation, which eased in end-January due to the moderating prices of fruits and vegetables. The food price index rose 13.07% and the fuel price index climbed 11.61% in the year to January 29. In the prior week, the annual food and fuel inflation had stood at 17.05% and 11.61% respectively. The primary articles price index was up 16.24% in the latest week, compared with an annual rise of 18.44% a week earlier. But the annual headline inflation in January is still expected to remain high. Headline inflation was 8.43% in December as the food inflation had reached a one-year high then.

The ADAG pack had a topsyturvy week to emerge as the top the losers list on the BSE. Reliance Infrastructure and RCom were hammered nearly 20% in Wednesday's session on rumours that the CBI could question or even arrest senior officials of the group in connection with the 2G scam. A statement by the Reliance ADA Group that it had identified stock brokers sending "baseless sensational charges" against the group and a denial by the ADAG group about Reliance Infra and RNRL receiving a notice from auditing regulator ICAI with regard to the consent settlement reached by the two companies with Sebi, led to a bounceback on the two counters. The announcement of a board meeting on February 14 to mull buyback of equity shares further aided the rebound in Reliance Infrastructure. RCom still ended the week down 15% at Rs 97 and Reliance Infra lost 9% at Rs 615.

The realty stocks had a terrible week as the sword of Damocles hung over their head post the arrest of the managing director of DB Realty, Balwa, by the CBI. Parsvnath Developers crashed by 37% at Rs 26, Unitech slumped by 19% at Rs 34 after being named by the CBI as one the beneficiaries of cheap spectrum allocation in 2008 and Orbit Corporation lost 15% at Rs 50. DB Realty ended marginally lower by 0.1% at Rs 139. However, DLF retraced its intra-week losses to actually end at the top of the BSE gainers charts. Metals also took it on the chin, with Hindalco tanking 10.8% at Rs 211 and Tata Steel losing 6.4% at Rs 595.

Among individual stock losers, ONGC gave up 6.7% at Rs 277 after turning ex-bonus and ex-stock split. The company's board had earlier declared the sub-division of each equity share of Rs 10 each fully paid-up into two equity shares of Rs 5 each and issue of bonus shares in the proportion of one new equity bonus share of Rs 5 each for every one existing share of Rs 5 each and had fixed February 09 as the record date for the purpose. Index heavyweight RIL retraced from 52-week lows of Rs 885, but still ended down 0.9% at Rs 910. And Tata Motors recouped its early losses to end marginally down by 0.4% at Rs 1144. Announcing its results at the fag end of Friday's trading session, Tata Motors posted a 272.92% jump in Q3 consolidated net profit at Rs 2,424 crore versus Rs 650 crore (YoY) and its consolidated net sales leaped from Rs 26,043 crore to Rs 31,510 crore.

On the other hand, the financials had a decent week; HDFC strengthened by 2.6% at Rs 620, HDFC Bank gained 2% at Rs 2060 and ICICI Bank added 0.5% at Rs 1001.

In the midcap space, Parsvnath Developers crashed by 37% at Rs 26, Bombay Dyeing collapsed 24% at Rs 297 and BEML lost 22% at Rs 616. And the smallcap space saw the likes of Allied Digital sliding by 38% at Rs 78, MIC Electronics shedding 32% at Rs 19 and Sujana Metal losing 23% at Rs 9.

Stock markets in a downhill mode

The latest downtrend in stock prices is attributed to large selling by the foreign institutional investors. They are flocking back to the developed markets, especially the U.S. given the serious problems of perceptions about India, it is going to take a while before they return.

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Why are the stock markets suddenly losing their sheen? Are they in one of the defining moments in which they will fall quite sharply before rallying back, if at all? Sharp swings in share prices are by no means uncommon but the precipitous drops of the type seen last in January 2008 when the market valuations plunged by an amazing two-thirds are, of course, rare and more relevantly difficult to predict.

To answer the questions, one has to look at the peaks and troughs of stock prices over a fairly recent period. The week ended February 4 was especially noteworthy. After recording some marginal gains from the middle of the week, the indices recorded heavy losses on the close of the week. Sensex lost 441 points (about 2.5 per cent) to close just above 18000. Nifty fell below the psychologically significant 5400-mark. To view over a slightly longer period, the markets started rising strongly in August, 2010, to peak at 21005 on November 5. The fall by 3,000 points (14.28 per cent) since then until February 4 is significant. What is worse is that seemed to presage the worse things to come.

The gloomy forecasts seemed to come true sooner than anticipated. Stock prices dropped sharply on Tuesday last. Sensex traded below 18000 and Nifty around 5350 in the forenoon session. The fall in stock prices continued into the following week (February 7 to 11).

A sense of deep pessimism has permeated the markets. All of a sudden, uncertainty seems to have engulfed the markets. Barely two weeks before the presentation of the Union budget, the downward movement of stock prices has acquired a distinct, negative connotation of its own. Will the two major worries of the government — inflation and the burgeoning current account deficit — invite strong fiscal measures in addition to what the Reserve Bank of India has been doing?

There is no doubt at all that inflation and the current account deficit (expected to be around 3.7 per cent of the GDP) are the major concerns. But they have been so for quite some time. The reasons why stock markets latched on to the bad news all of a sudden ignoring the good ones need to be looked at from the totality of circumstances.

India's growth story has by no means derailed. According to the Central Statistical Organisation's advance estimates for 2010-11, the GDP growth will be at a respectable 8.6 per cent. This is below the upper-end of the government's expectations of between 8.5 and 8.75 per cent but slightly above the RBI's 8.5 per cent.

In each of the first two quarters of this year, the economy has grown by 8.9 per cent. Hence, the estimate of 8.6 per cent for the whole year suggests a slowdown in the third and fourth quarters. Besides, when final figures come, a deceleration in manufacturing during the second half of the year will be seen. During the first two quarters, manufacturing grew by 13 per cent and 9.8 per cent, respectively. Such a performance is unlikely to continue during the rest of this year. However, the CSO' estimate of manufacturing growth during the whole year at 8.8 per cent is the same as what was achieved last year.

Inflation and the widening current account deficit are the major macro economic concerns. But India faces even greater problems of perceptions — corruption and in governance especially.

The India story may be substantially on track but the reasons why the stock markets apparently do not think so is to be seen in the actions of global investors, especially the foreign institutional investors (FIIs), who have come to occupy such an important place in the Indian markets. Their large investments are for short-term and often volatile but they are considered necessary to bridge the current account deficit. There is an obvious preference for the more stable FDI (foreign direct investment) but it has been going down this year as reported by the RBI at the time of the last review.

The fall in equities in the past few weeks is mainly attributed to large scale selling of stocks by FIIs. According to official figures, they sold Rs.9,339-crore worth of stocks this year up to February 4. It is likely that they share the concerns of domestic investors, with inflation and the widening current account deficit topping the lists. As pointed out, such concerns have weighed with investors in the past too but in the aggregate they were positive on India. (This was seen by the steady rise in stock prices.)

However, at the present juncture, FIIs are pulling out but do not seem to be coming back soon. Ominously, emerging markets as a class seem to have suddenly fallen out of favour with global investors. There could be many reasons: turmoil in Egypt, rising inflation and specific to India fiscal deficit, co-existing with current account deficit. In just one week (ended February 4), investors took out $7 billion, with the biggest outflows coming from China, India and Indonesia. There have been only two occasions in the past — March 2007 and January 2008 — when the volume of outflows was more than the $7-billion. In March, 2007, the investors returned fairly soon. But the exit in January, 2008, was hardly a retreat. Many emerging markets, including India, took a long time to find the bottom after losing over 60 per cent of their valuations. What is worse is the Indian markets are underperforming when compared with other emerging markets. The developed markets are now attracting investors on the basis of a better than expected performance in the latter part of 2010, especially the U.S.

Indices end mix: Pro-market budget may boost trade

Indian markets closed on a quiet note despite receiving positive global cues. The 50-share NSE Nifty settled at 5,481.70, up 0.7 points, while the 30-share BSE Sensex closed at 18,300.9, up just 27.10 points. As far as impact of the upcoming budget is concerned, most experts have expressed a neutral opinion.

Mehraboon Irani, Principal and Head-Private Client Group Business, Nirmal Bang Securities, feels that the next few days will be very crucial for the markets. "They may still falter because the headwinds are very much there but pockets of opportunities are also available in the market. Investors need to select stocks very carefully as the markets are still very negative. He continues to be quite confident of seeing a new high in 2011 itself.

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According to Jai Bala, Chief Market Technician, cashthechaos.com, the markets are very close to the end of the collective rise and looking at the historical trend, markets have never corrected more than 16% all through the current rise from the lows seen in 2009. In Bala’s opinion, markets are not underpinned by fresh buying interests for people trying to add new stocks to their portfolio.

Talking about the Nifty’s rally, he said, "It is not going to exceed 5,565 as another round of selling is due. My suspicion is that markets have got one more leg of downside. It will be slightly below the lows it made a few days ago."

Will markets be more stable post budget?

As far as budgetary impact is concerned, Bala feels that if the government is able to show some urgency to address the fiscal problem and meet the investor expectations, the markets will be happy. However, he feels the market should not be too affected by the budget.

Ambreesh Baliga of Karvy Stock Broking feels that it is good for the markets if they are consolidating before the next move. "I see Nifty in the 5,500-5,600 band, and over the next couple of days we could touch those levels of closer to 5,600." He quickly added that we cannot rule out the panic in the markets, however, assuming that there is no other adverse news on scam or other front; the markets should be in the range closer to 5,500-5,600, at least before budget.

Reacting on the Prime Minister’s interaction with media, Baliga appreciated PM’s approach of addressing the market issues on a sentimental note. While talking about the budget, he said, "When markets move beyond 5,700-5,800, it is a major resistance for the market overall, so, it clearly depends on how the budget is. Otherwise, assuming that the budget is market neutral or slightly negative, we would be in the range of 5,200 to 5,600."

He also said that the post-budget process of cabinet reshuffle should create a positive impact on the market and the economy.

Sensex sheds gains again

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The market, which rebounded into positive territory a little past noon, faltered again due to lack of support at higher levels. With no big triggers to warrant strong buying, investors are mostly seen pressing sales at every small rise in prices today.

The reporting season is almost over and investors are most likely to tread cautiously ahead of the budget. Activity is mostly stock specific with the latest quarterly numbers providing some direction for stocks.

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The Sensex, which drifted down into the red a little while ago, is now up 13.78 points or 0.08% at 13,287.58. The Nifty is at 5482.55, up 2.55 points over its previous closing mark.

Realty stocks, which suffered some sharp losses in recent weeks, are among the notable gainers this afternoon. Stocks from this space opened on a rather dull note this morning, but have come back fairly strongly now thanks to buying at lower levels.

Metal stocks remain steady. Select consumer durables, FMCG and capital goods stocks have posted notable gains. Automobile stocks are quite subdued. Power, healthcare, bank and information technology stocks are mostly trading flat.

Jaiprakash Associates remains the top gainer in the Sensex. At Rs 88, the stock is up nearly 4% at present. Jindal Steel is up 3% at Rs 688.50 and Tata Steel is up with a gain of 2.7% at Rs 633.30.

Larsen & Toubro, Bajaj Auto and Hindustan Unilever are up 1.1% - 1.3%. State Bank of India, ITC, Tata Power, Tata Consultancy Services and Reliance Industries are up with modest gains.

HDFC is down by about 2.5%. Mahindra & Mahindra has lost 2%. Hindalco, Tata Motors, HDFC Bank, Reliance Communications, Cipla, ONGC and Maruti Suzuki are also trading weak.

Jubilant Lifescience, Sintex Industries, Lanco Infratech, Container Corporation, Shree Renuka Sugars, Areva, Oriental Bank of Commerce, Indian Overseas Bank, Petronet LNG, RC and Godrej Consumer Products are among the prominent losers in BSE 'A' Group.

All the sectoral indices on BSE in the green

The key benchmark indices surged in late trade to hit fresh intraday highs tracking firm global stocks on positive China's trade data and easing tensions in Egypt political crisis. Domestic data showing slowing inflation in January 2011 eased worries of further monetary tightening by the central bank also aided rally. Market gained for the second straight day as investors bargain hunt beaten down stocks after the recent sell off. Reliance Infrastructure gained on good Q3 results. Today's rally was broad based with all the 13 sectoral indices on the BSE clinching gains with shares from capital goods, metal, auto and banking in the forefront. The market breadth was strong with the BSE Mid-Cap and Small-Cap indices outperforming the Sensex. The BSE 30-share Sensex was provisionally up 488.86 points or 2.76%. The Sensex regained psychological 18000 mark today.

The market opened on a firm note on positive Asian stocks. It was hovering near the day's high after hitting fresh intraday highs in morning trade. It surged to hit fresh intrday highs in mid-morning trade. It extended gains in early afternoon trade. Market extended gains to strike fresh day's high in afternoon trade. It was hovering near the day's high in mid-afternoon trade. It surged to hit fresh intraday highs in late trade.

The headline inflation eased slightly in January on some moderation in manufactured products. The wholesale price index (WPI), India's main inflation gauge, rose 8.23% in January from a year earlier. The index rose 8.43% in December from a year earlier. Food prices in the WPI index jumped 15.7% in January compared with 13.6% in December. As per provisional figures, foreign funds sold shares worth Rs. 537.71 crore while domestic funds bought shares worth Rs. 519.67 crore on Friday, 11 February 2011.

The government expects headline inflation to ease to 7% by end March, Finance Minister Pranab Mukherjee said on Monday, matching other government forecasts.

The Q3 December 2010 results season is drawing towards a close. The results announced so far showed that the combined net profit of a total of 2,960 companies rose 21.5% to Rs. 85820 crore on 18.9% rise in sales to Rs. 933468 crore in Q3 December 2010 over Q3 December 2009.

There are concerns of slowdown in corporate profit growth going ahead. With the rise in key policy rates by the Reserve Bank of India (RBI) recently, interest cost will only rise in the coming quarters that could hurt earnings going forward. If raw material costs keep rising at a fast clip, companies will feel the heat of slowing sales growth and rising cost of operations that could start eating into profit growth.

European shares rose on Monday to a 29-month high as talk of slower-than-expected Chinese inflation data and strong China trade figures boosted sentiment, with miners the major risers. The key benchmark indices in France, Germany and UK rose by between 0.01% to 0.32%.

Asian stocks rose on Monday as investors greeted news of Egyptian President Hosni Mubarak's resignation with relief. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.88% to 1.89%.

China's Shanghai Composite jumped 2.53% after China's trade surplus fell to its lowest in nine months in January after imports surged, supporting the government's case ahead of a G20 meeting that it is doing enough to spur domestic demand without speeding up currency appreciation. The trade surplus shrank to $6.5 billion from $13.1 billion in December, well short of forecasts for a $10.7 billion gap.

Japan's economy shrank slightly in the final quarter of 2010 but analysts expect a recovery this year as stronger exports to China and other parts of fast-growing Asia offset persistently weak domestic demand. Gross domestic product (GDP) shrank 0.3% in October-December from the previous quarter, slightly less than a 0.5% fall expected by markets but still the first contraction in five quarters.

Mubarak handed power over to the army, bowing to escalating pressure from the military and protesters demanding he goes. His departure was seen partially reviving investors' appetite for risk. Two weeks of anti-government protests in Egypt sparked concerns the unrest could spread across the Middle East, contributing to volatility in markets and commodity prices worldwide.

US index futures pared gains. Trading in US index futures indicated that the Dow could gain 1 points at the opening bell on Monday, 14 February 2011.

U.S. stocks closed out their second straight week of gains on Friday with a rally sparked after Egyptian President Hosni Mubarak resigned, easing tension around the region for now.

As per provisional figures, the BSE 30-share Sensex was up 488.86 points or 2.76% to 18,217.47. The index gained 499.01 points at the day's high of 18227.62 in late trade. The Sensex rose 128.51 points at the day's low of 17857.12 in early trade.

The S&P CNX Nifty gained 152 points or 2.86% to 5,462 as per provisional figures.

The BSE Mid-Cap index rose 3.57% and the BSE Small-Cap index rose 3.99%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was strong. On BSE, 2427 shares advanced while 500 shares declined. A total of 61 shares remained unchanged.

All the 30 members from the Sensex pack 28 stocks logged gains and two fell.

BSE clocked turnover of Rs. 3448 almost same as that of Rs. 3445.18 crore on Friday, 11 February 2011.

Index heavyweight Reliance Industries (RIL) rose 0.48%to Rs. 915 reversing initial losses. The stock had fallen to the day's low of Rs. 895 on reports stock exchange regulator Sebi could levy a record penalty on RIL if it is able to establish that the company was involved in insider trading. The penalty could be worth Rs. 25 crore or three times the amount of profit the company made from insider trading - whichever is higher.

Diversified Jaiprakash Associates surged 6.73% extending Friday's 7.35% gains. The stock had hit 52 week low of Rs. 70.25 on 9 February 2011.

Reliance Infrastructure rose 1.35% to Rs. 624 after company announced buyback of shares at a price of Rs. 725 at a premium over the current ruling price. The consolidated net profit rose 10.16% to Rs. 405.25 crore on 11.2% rise in total income to Rs. 3871.64 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result during market hours today.

India's largest engineering and construction firm by sales Larsen & Toubro jumped 7.21% after company announced during market hours today that it bagged Rs. 1100 crore EPC order from GSECL.

Among other capital goods stocks, Bhel, Usha Martin, ABB, BEML and Thermax rose by between 3.51% to 6.28%.

Inerest rate sensitive auto stocks rose across the board after data showed inflation moderated in the month of January. Car maker Maruti Suzuki India rose 3.18%. The stock had hit a 52-week low of Rs. 1146 on Thursday, 10 February 2011. India's second largest bike maker by sales Bajaj Auto gained 3.22%. India's top bike maker by sales Hero Honda Motors rose 3.84%. The stock had hit a 52-week low of Rs. 1412.20 on Wednesday, 9 February 2011.

Mahindra and Mahindra (M&M) gained 1.51%. The company recently unveiled plans to acquire a 38% stake in BSE-listed EPC Industrie. The acquisition would be through preferential allotment of shares by EPC, following which M&M will make the mandatory open offer to acquire a 20% stake in the Nashik-based micro-irrigation firm.

Tata Motors jumped 5.58% after consolidated net profit jumped 272.9% to Rs. 2424 crore on 22% rise in consolidated revenue to Rs. 31685 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 result at the fag end of the trading session on Friday, 11 February 2011. The stock had jumped 3.79% on Friday.

Interest rate sensitive banking stocks rose after data showed inflation moderated in the month of January. India's largest private sector bank by market capitalisation ICICI Bank was up 2.94%. India's second largest private sector bank by market capitalisation HDFC Bank was up 2.39%. India's largest commercial bank by branch network State Bank of India gained 4.42%. State Bank of India has raised term deposit rates on two maturity buckets — 555 days and 1,000 days — by 25 basis points. Simultaneously, to protect its margins, the bank has marked up its lending rate by 25 basis points. All rate hikes are effective from 14 February 2011.

Among other banks, Federal Bank Yes Bank, Bank of India, Canara Bank, IDBI Bank, Indian Overseas Bank, Axis Bank, Kotak Mahindra Bank, Bank of Baroda, Union Bank of India and Punjab National Bank rose by between 2.19% to 5.43%.

Metal stocks gained across the board after China's trade data showed imports surged in the month of January. China is the World's largest consumer of base metals. Hindalco Industries rose 3.84% after net profit rose 7.78% to Rs. 460.34 crore on 12.53% rise in total income to Rs. 6035.22 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result on Saturday, 12 February 2011.

Steel giant Tata Steel rose 4.26% ahead of Q3 results on Tuesday, 15 February 2011.

Jindal Steel & Power, Hindustan Zinc, JSW Steel, Jindal Saw, Sterlite Industries Steel Authority of India, National Aluminum Company rose by between between 0.01% to 6.59%.

LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.11% on Friday, 11 February 2011.

In macro news, the latest economic data showed industrial output in December 2010 rose a slower-than-expected 1.6% from a year earlier. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 1%, the statistics office said in a statement. Growth in industrial output in November 2010 was revised upwards to 3.62% from earlier 2.7%

The food price index rose 13.07% and the fuel price index climbed 11.61% in the year to 29 January 2011, government data on Thursday 10 February 2011 showed. In the prior week, annual food and fuel inflation stood at 17.05% and 11.61%. The primary articles price index was up 16.24% in the latest week, compared with an annual rise of 18.44% a week earlier.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by the finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations. The Finance Minister may announce a new road map for the Goods & Services Tax (GST). The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

The Centre has reportedly sent the empowered committee of state finance ministers yet another draft constitutional amendment on the proposed goods & services tax (GST) in a last-ditch attempt to reach a consensus before the Budget session of Parliament. The third draft reportedly proposes the creation of a GST Council through an Act of Parliament, instead of presidential order, as proposed in the previous draft.

The government may also announce some populist measures in the Budget given that assembly elections are due in Kerala, Tamil Nadu, West Bengal and Assam. In all these states, the Congress is potentially looking to regain power or to retain it.

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The company also offers professional services and consulting, and claims to be the only one of its kind that works with its client throughout the business cycle, "from collaboration to buying decision to transaction." Its products are used within both supply chains and marketplaces.

Market Impact

Connecting companies into a supply chain or trading exchange is much easier than getting data to flow smoothly. Many companies hope to find a niche within this problem space. IPNet is a leader among independent companies, and implementation of AS2 is useful both for adding value for its customers and for showing that is continues to be a technical leader.

This particular technical advance won't remain a differentiator for too long. As an emerging Internet standard AS2 faces fairly rapid implementation by all companies involved in moving business data over the Net. In fact, there aren't many technical challenges that would prevent other companies from entering into competition, and some sellers of exchange services or of software for building exchanges have decided to solve this problem internally. However, companies taking this approach won't necessarily find it easy to replicate IPNet's consulting expertise.

A bigger threat (or opportunity) to IPNet is probably that of being acquired by one of those market enablers. In the same way that Commerce One recently acquired AppNet for both its expertise and its staff, a number of companies could be interested in getting access to IPNet's technology and consulting. Ariba is one, since that company has undertaken a large agenda of partnerships - each of which requires significant resources for software integrations - and might still be suffering somewhat on the data side from its early decision to take a less-than-open approach to XML. But a smaller company with its eyes on enabling the construction of markets (or supply chains) for mid-range or even small businesses could also see acquiring IPNet as the means to solving the data interchange problem.

We note that IPNet and competitor Cyclone Commerce (See "Cyclone Untangles Digital Partnerships") have most of their strategic partnerships with systems integrators and hardware manufacturers. We're concerned that this means that none of the major software companies whose products they might complement see them as possible partners. If the value of these technologies is mostly to systems integrators who might be doing one-off implementations or tying together incompatible products, we think that IPNet and Cyclone should be looking for a bigger home sooner rather than later.

User Recommendations

As e-commerce becomes pervasive data translation capabilities are vital, and some otherwise excellent vendors may not have the data translation capabilities that particular customers need. A company that is building either a supply chain or a marketplace might look on IPNet as the key to letting them choose a primary vendor with excellent features but a weakness in data integration. There are also companies that have particular needs, outside of any commercial packages like supply chain systems, to integrate data from partners. IPNet is an obvious candidate to consider in these cases. Another application would be to assist with the integration of the parts of a newly merged company.

We recommend that potential users take full advantage of IPNet's consulting, and to obtain a comprehensive pre-sales analysis of the magnitude of the problem and the proposed solution before signing on the bottom line. Since this is in IPNet's best interest we think you'll find it to be a standard offer.

Epicor's Mid-Market Pitch Becomes Higher For (One) Scala Part One: Event Summary

While the market has for some time been buzzing about the (for many still miraculous) predatory comeback of SSA Global, another true mid-market incumbent vendor, Epicor Software Corporation (NASDAQ: EPIC), should be lauded too for its recent revival. Like SSA Global, and intriguingly in the same time frame, Epicor did not have much upbeat news for several years following on its progenitors' (i.e., erstwhile Platinum Corporation and Dataworks) merger in 1998 and subsequent name change from Platinum to Epicor in 1999. Nevertheless, in the past two years, Epicor has seemingly achieved a turnaround both in terms of its financial performance and of its strategy clarity. It has also for over two years reverted to its, this time possibly more selective, acquisition streak starting with the Clarus e-procurement acquisition at the end of 2002, and former ROI Systems and TDC Solutions acquisitions mid-2003 (for more information, see Epicor Picks Clarus' Bargain At The Software Flea Market and Epicor Conducts Its Own ROI Acquisition Rationale).

As highlighted in the above articles, it appears this time though that Epicor has learned some hard lessons from its cumbersome inception through mergers that had initially resulted in unrelated, diverse products, and all in the face of the overall weakness of the enterprise resource planning (ERP) market during 1999 and 2000. Thus, the Scala merger too seems to have much of a strategic merit as opposed to a knee-jerk, me too' impulse owing to the ongoing consolidation craze in the market. While customers want their enterprise applications providers to oblige them with new products and technologies, vendors in turn feel compelled to increase revenues and market share as to be able to justify funding of new product development.

To that end, Epicor pledges to continue to invest in its products and to grow both organically and through acquisitions, in order to assemble the right mix of back-office, front-office, and collaborative e-business functions, delivered under a single-point accountability (i.e., "one-stop shop" and "one throat to choke") approach that is overwhelmingly desired by its target market. While in the past Epicor would integrate with partner products for best-of-breed solutions to accommodate these requirements, it has lately been expanding the boundaries of traditional ERP by building fully integrated applications that are based on the same technology and toolsets, and possibly delivered all from a single vendor.

This is Part One of a five-part note.

Part Two will detail how Scala complements Epicor.

Part Three will discuss the market impact.

Part Four will present merger synergies and challenges.

Part Five will address more challenges and make user recommendations.

Epicor Acquires Scala

Accordingly, back at the end of 2003, Epicor and Scala Business Solutions (Euronext: A.SCALA), an Amsterdam, the Netherlands-based provider of collaborative enterprise software for mid-size enterprises and subsidiaries of global corporations, jointly announced that the expectation was justified that they would reach agreement on a merger. The proposed merger was effected by a public offer by Epicor for all the outstanding ordinary shares in the capital of Scala at an anticipated aggregate transaction value of approximately $87 million (USD)—the equivalent of Euro3.27 per ordinary share—, as of the closing price on November 13, 2003, consisting of a cash price of $ 41.7 million (USD) subject to adjustment, plus 4.1 million shares of Epicor's common stock. The offer was made up of a cash price of $1.823 (USD) per Scala share plus 0.1795 shares of Epicor's common stock.

The public offer only commenced following the completion of Epicor's due diligence investigation of Scala, the receipt of a fairness opinion by Scala, regulatory approvals, the filing of an S-4 registration with the Security and Exchange Commission (SEC) by Epicor, and other customary conditions including, among others, material adverse changes to Scala and management retention agreements. Initially, Epicor anticipated that it would begin the public offer for all outstanding ordinary shares of Scala and publish an offer memorandum in December 2003, and close the transaction in the first quarter of 2004. The combination was then also expected to be accretive to Epicor's Generally Accepted Accounting Practice (GAAP) earnings in the second quarter of 2004 and for the fiscal year 2004.

One of the requirements for delisting Scala's stock on the Dutch exchange was that at least 95 percent of the ordinary shares of Scala are offered. As said earlier, the anticipated transaction value of approximately $87 million (USD) was to be paid partly in cash and partly in Epicor common stock, with a 20 percent downwards protection for the shareholders of Scala. Any decrease in the value of the common stock of Epicor below a floor of $10.21 (USD) per share was to be compensated in cash by an adjustment in the offer price. The anticipated transaction price of approximately $87 million (USD) represented a premium of approximately 40 percent as of the closing price of Scala's shares on November 13, 2003, and a 59 percent premium on the basis of the 30-day share price average. The closing of the transaction, which was expected to occur in early 2004, was subject to certain conditions including, but not limited to, regulatory clearance and acceptance by Scala shareholders, whereas the Dutch regulator of the financial markets (Netherlands Authority for the Financial Markets) and Euronext had been informed of the intended bid. SG Cowen Securities Corporation was adviser to Epicor and Fortis Bank Corporate & Investment Banking was adviser to Scala, with respect to the transaction.

However, the acquisition closing process was delayed for one major reason, which was the ensued restatement of Scala's US GAAP financial figures by its auditor KPMG, so that it was not until mid-June that Epicor was able to declare its public offer to acquire all issued and outstanding ordinary shares in Scala unconditional. As of the tender closing date, approximately 21.7 million Scala shares have been tendered into the offer, and upon the delivery of these Scala shares, Epicor was to hold approximately 93.2 percent of the issued share capital of Scala. Epicor then conducted a subsequent tender period for holders of Scala shares who had not yet tendered their shares, which expired effective July 5. Following the completion of that subsequent tender period and the tendering of 1,096,048 shares in the period, corresponding with approximately 4.54 percent of all outstanding Scala shares, Epicor now holds a total of approximately 97.98 percent of all outstanding Scala shares. Consequently, Euronext Amsterdam N.V. then confirmed that the listing of the Scala shares on the official market of Euronext Amsterdam N.V. would terminate as of July 13, 2004, whereby July 12, 2004 was the last trading day of the Scala shares on the Euronext exchange.

What the Merger Creates

The merger by all accounts creates the largest independent global mid-market provider of collaborative ERP, customer relationship management (CRM), and supply chain management (SCM) applications based on Microsoft's .NET platform and Web services, with approximately $250 million (USD) annual revenue run rate, nearly 1,500 employees, and with over 20,000 customers. The combined company hopes to expand its global presence with worldwide coverage of sales, consulting, and support for mid-market and large multinationals as well as local enterprises, offering a broad suite of integrated solutions.

Both Epicor and Scala customers should now be served by a global entity with the reach and scale to more effectively support their operations, and will be well positioned for growth with local support in emerging markets, and in key markets where Scala traditionally performs well, such as Scandinavia, Russia, Central and Eastern Europe, and China. Scala's customer base is predominantly European , while Epicor's largest customer base predominantly in North America, Australia, and the UK. The resulting company's revenues will therefore be diversified across regions with approximately 52 percent of its revenue base in North America and 48 percent outside this region.

The combined company plans to further support and develop iScala products, while Scala's management was offered one board seat out of six on Epicor's board of directors. In the long term, the combined company's product offering would be developed using the functional synergies of all products, and the integration advantages of the .NET framework and Web services. Enlarged Epicor pledges to continue the unwavering commitment to developing and bringing to market software and services based on Microsoft technology, given its strong Microsoft partnership—as a globally managed independent software vendor (ISV) and Microsoft Global ERP Ecosystem partners—and has actively participated for many years in numerous Microsoft joint development programs and early adopter technology initiatives.

The merger may also bode well for Epicor's expanded presence in key growing verticals including financial services, consumer packaged goods (CPG), professional services, automotive, industrial machinery, light engineering, electronics, hospitality, pharmaceuticals, and nonprofit. Also, this might increase the vendor's scale and reach to support global multinational corporations with a worldwide infrastructure for sales, consulting, and support, and a strong partner channel—combining over 400 partners worldwide, with possible operating and infrastructure synergies in general and administrative (G&A), research and development (R&D), facilities, and technical support with a solid platform and infrastructure for future strategic and tactical acquisitions in a consolidating market.

Prior to the merger, Epicor had delivered its solutions to over 15,000 customers worldwide, whereby its manufacturing customer community includes over 6,500 customers, implemented in more than thirty-five countries. Epicor's broadening suite of integrated software solutions features CRM, financials, manufacturing, SCM, professional services automation (PSA), and collaborative commerce applications.

On the other hand, Scala's main trump is unrivaled localization capabilities for companies doing business in established or emerging markets, or even in some of the world's most difficult-to-get-to places. Scala has garnered the local know-how and expertise to deliver results for businesses almost anywhere in the world, from over twenty-five years working with international companies and their subsidiaries and divisions in many types of industries. Scala delivers software and services that support local currencies, accounting regulations, and legal requirements in more than thirty languages in over 140 countries.

Epicor Financials

Since the transaction closing, Epicor has reported two quarters of earnings, most recently the October 20 upbeat announcement of financial results for the third quarter ended September 30, 2004. For a protractedly languishing company until not that long ago (see figure 1), reporting facts like that the Q3 2004 revenues grew over 54 percent, year-over-year, whereby Q3 2004 license revenues grew over 64 percent, year-over-year, second quarter GAAP earning per share (EPS) grew over whopping 175 percent, year-over year, while the vendor added over 165 new customers to its base and it released over 50 product upgrades to market across its suite of solutions, and so on, should bear a great importance and vindication to the long-embattled but persistent management.

Figure 1

Total revenues for the quarter were $62.2 million (USD), up over 54 percent compared to $40.3 million (USD) for Q3 2003, whereby it included $17.5 million (USD) in total revenues from Epicor's recently acquired subsidiary Scala Business Solutions N.V., whose revenues have fully contributed for the first time to this quarterly report. Excluding the contribution from Scala, Epicor's total revenues grew 11 percent year-over-year. Software license revenue totaled $15.3 million (USD), a 64 percent increase compared to $9.4 million (USD) a year ago and including $4.7 million (USD) for the contribution from Scala (see figure 2). Excluding the contribution from Scala, Epicor's license revenues grew approximately 13 percent year-over-year.

Figure 2

Consulting and maintenance revenues for the third quarter were $45.9 million (USD) compared with $30.4 million (USD) in the third quarter of 2003, up over 50 percent. Included in consulting and maintenance revenues was $12.6 million (USD) from Scala's contribution. Excluding the contribution from Scala, Epicor's consulting and maintenance revenues grew approximately 10 percent year-over-year. GAAP net income for the third quarter was $6.3 million (USD), which compares with net income of $1.8 million (USD) in the prior year's period. For the quarter, adjusted earnings were $9.6 million (USD) compared with adjusted earnings of $4.7 million (USD) in the same period last year. Adjusted earnings exclude amortization of capitalized software development costs and acquired intangible assets, stock-based compensation expense and restructuring charges, and other.

Further, Epicor ended the quarter with cash and cash equivalents of $46.6 million (USD), up approximately 2 percent from the prior quarter, including significant cash expenditure for transaction costs, Sarbanes-Oxley costs, and severance costs following the reduction in force completed during the quarter as a result of consolidating the Epicor and Scala organizations.

For the fourth quarter 2004, the company raised its previously issued total revenues expectations from the range of $66 to $67 million to $67 million (USD) in total revenues, while for fiscal year 2004, the company raised its previously issued total revenue guidance of $220 million to $221 million (USD). Additionally, the company provided an initial outlook for fiscal year 2005, where it anticipates the revenues to be approximately $273 million (USD) The company has also completed extensive operational reviews of its Scala acquisition and put in place plans toward achieving its cost synergies and accretion goals, which was

Check Point Leads Firewall Marke

Israeli based Check Point Software Technologies, Ltd., headquartered on the outskirts of Tel Aviv, was founded in 1993. On June 28, 1996, Check Point launched its IPO on NASDAQ under ticker symbol CHKPF. On March 3, 1999, they changed their ticker symbol to CHKP.

Check Point's founder, Chairman, President, and CEO, Gil Shwed developed his security skills while working in the intelligence unit of the Israeli Army. With fellow founders, Marius Nacht, and Shlomo Kramer, he was able to launch the first release of FireWall-1 in 1994. The wholly owned U.S. subsidiary, Check Point Software Technologies, Inc., was formed in 1995 to lead the company's marketing initiatives. Today the United States represents 60% of the company's market.

Vendor Strategy and Trajectory

Check Point is positioning itself to be the worldwide leader in securing the Internet. In line with that, Check Point has done a nice job of securing itself as market leader in firewall products. Though a firewall alone cannot guarantee that your website or network will not be broken into, if configured correctly it can certainly reduce the risk by a large margin. Check Point's FireWall-1 product is undoubtedly their most popular and sought after product. FireWall-1 is a carrier class product, and is used as the basis of a Managed Firewall Service at numerous ISPs, ASP, Telcos, and MSPs.

Figure 1. Check Point soars over leading market indicators.

Check Point has done a nice job of building a wide distribution channel that includes France Telecom, Sprint, and Nokia.

ANALYSIS

Vendor Strengths

Technology Leadership: Check Point invented, patented, and coined the terminology Stateful [Packet] Inspection. Though Proxy firewall architectures were around long before Stateful Inspection, by the late 90s, the firewall market was seeing more demand for Stateful Inspection firewalls than Proxy firewalls. In part the demand for Stateful Inspection firewalls increased as a result of Check Point's successful marketing initiatives to discredit Proxy firewalls.

Among security professionals, the security of Proxy firewalls vs. Stateful Inspection firewalls has been a long-standing religious war. IT decision makers are more likely to get recommendations to go with either one of these architectures most likely based on which product an integrator or VAR is more familiar with. Both architectures are sound and secure if implemented correctly.

To Check Point's advantage, the development cycle for Stateful Inspection firewalls is typically shorter than the development cycle for Proxy firewalls, and initially, some Proxy firewalls could not deliver the same performance throughput as Stateful Inspection firewalls.

Reseller Partnerships: Last October 19th, Check Point and Nokia announced an expanded partnership where they will promote the Nokia IP330, IP440 and IP650 firewall/VPN appliances. If you purchase these appliances through Check Point, they are known as the VPN-1 Appliance 330, 440, and 650. This suite of security appliances marks the first time a firewall or VPN product has debuted with built-in high-availability and load sharing.

Figure 2. The Nokia IP650 uses Check Point Firewall-1 technology.

Nokia IP650

Breadth of Coverage: From its initial firewall product, Check Point has expanded their product offering to Intranet and Extranet VPNs as well as Secure Remote Access VPNs. Secure Remote Access a way for remote and mobile users to connect to their corporate network through a secure encrypted channel.

Open Platform Focus: Check Point has created an Open Platform for Security (OPSEC) guideline for other information security products that is a security certification, as well as a way for Check Point to make sure that other security products interoperate with theirs. Today Check Point has over 200 OPSEC partners. OPSEC partners use published OPSEC APIs, which allows partners to embed Check Point technology into other network devices such as routers and switches. OPSEC also enables customers to choose from best-of-breed content security solutions (i.e., URL filtering, virus-scanning, intrusion detection systems) that are tightly integrated with Check Point solutions.

Network Management Capabilities: The Check Point solution to firewalls, now includes a carrier-class network management console known as Provider-1. Using Provider-1, large organizations, including managed service providers, can manage hundreds of security policies from a single point. For companies that employ the use of hundreds of firewalls, and some do, this advantage lowers the cost of ownership by alleviating the problem of putting a security engineer physically in every location where a firewall lives. Typically, after a firewall is installed and implemented, the most common change of configuration that it will need is a change in its firewall rule set, or information security policy.

Management Architecture: Check Point's conventional management architecture allows customers to manage multiple firewalls that are in different physical locations, from one central location. The difference with Provider-1 is that one can manage multiple customer implementations, each of which represent many, many firewalls/VPN gateways from one location. Each customer or office location has a unique security policy that is administered across multiple enforcement points. One network administrator is then able to manage multiple customers' security policies. This is a product that is in line with what managed VPN service providers need as well as enterprises with large branch offices requiring multiple firewalls/VPN gateways and different security policies for each region.

Vendor Challenges

AXENT's Raptor firewall, is as secure as Check Point's, and has more to offer in the way of Proxy capabilities. As well, the Raptor firewall is easier and faster to implement. A common complaint among expert security professionals is that Check Point's documentation is hard to follow, and is not as straightforward as it could be. Further, engaging Check Point's customer support for product implementations is difficult and expensive.

Another advantage that AXENT has over Check Point is that Raptor interoperates with HP OpenView, a widely used network management station. This means that in Network Operation Centers (NOCs) at service provider locations, if they are using HP-OpenView for an NMS, do not have to run a separate network management station just for the firewall(s).

BOTTOM LINE

Vendor Predictions

Check Point's security products are in high demand in a rapidly increasing market. Their firewall product is the market leader, and will continue to be for the foreseeable future. Warburg Dillon Read forecasts that Check Point Software will earn $2.10 per share for 1999 and $2.76 per share for 2000. On June 30, Check Point announced a two for one stock split that will take affect on July 14. TEC anticipates that Check Point will continue to develop cutting-edge security products and lead the firewall market into 2001.

Figure 3. Check Point Earnings Per Share Summary and Forecast[2]

[1] Earnings Per Share (EPS) is equivalent to profit per share for each outstanding share of common stock. [2] Source: NASDAQ Stock Market, Inc.

Figure 4. Check Point's Net Income from 1995 to 1999 Shows an Impressive Trend.

Vendor Recommendations

In order to gain more market share, Check Point needs to stop discrediting Proxy solutions and embrace them. The firewall market of the future is the hybrid market, which consists of an architecture that includes stateful packet inspection as well as proxy capabilities. Because certain protocols such as the Simple Object Access Protocol (SOAP) can be passed through firewalls, there are some security problems that only Proxies can solve. SOAP is being widely supported by IBM and Microsoft, and likely its utilization will increase in the future.

Another area of concern is the installation and licensing procedures for Check Point security products. Polly Siegal, Director of Engineering at Rainfinity, Inc. a Check Point VAR says, "The installation, licensing and configuration is overly complex, requiring more expertise than should be necessary."

User Recommendations

Because Check Point's customer support process is complex, using a VAR for support that has Check Point Certified Systems Engineers (CCSEs) on staff is recommended instead of going through Check Point directly. The installation and licensing is complex enough that it is well worth hiring a FireWall-1 knowledgeable consultant rather than having your IT team sweat out a gnarly installation process.

With security engineers hard to find, and a competitive job market, it's important to make sure that the CCSEs that a VAR had on staff last month, are still there this month. Ask your Check Point VAR how many CCSE's they have on staff before signing an installation and integration contract.

If high-availability is important to your site, you can't go wrong by purchasing a Nokia/Check Point FireWall-1 firewall appliance - it is without question, the leading firewall appliance on the market today.

Fujitsu Poised to (Inter)Stage Glovia's Comeback Part Three: Market Impact

Market Impact

In October 2003, a leading provider of extended ERP solutions for engineer-to-order (ETO) and high volume manufacturers, Glovia International, announced it formed a strategic alliance with Fujitsu Software Corporation to provide manufacturers, customers, and suppliers with improved collaboration and integration capabilities. Glovia International is headquartered in El Segundo, California (US), and is a subsidiary of Fujitsu Limited (TSE:6702), a Tokyo, Japan-based leading provider of international IT and communications solutions with consolidated revenues of $38 billion (USD) in fiscal 2003. The strategic alliance should allow Glovia to improve its customers' ability to collaborate with trading partners and reduce supply chain costs while enabling Fujitsu Software Corporation to further penetrate the manufacturing industry. Fujitsu Software Corporation, based in San Jose, California, is also a wholly owned subsidiary of Fujitsu, and delivers one of the world's broadest lines of application infrastructure software products, including the Interstage Suite and NetCOBOL.

Glovia is indisputably past its few restructurings and ownership-change hardships from the past few years, and the vendor now has verifiable and clear manufacturing-oriented, extended-ERP product and service offerings, and strategies to execute. The extended period of transitions and restructurings has done a gross disservice to the seasoned vendor whose astute products have been available to manufacturers for over 30 years, and yet, nowadays only some might be aware its longevity.

This is Part Three of a four-part note.

Part One detailed recent announcements.

Part Two discussed Fujitsu's support of Glovia.

Part Four will cover challenges and make user recommendations.

glovia.com

Glovia has long offered a versatile manufacturing-focused ERP system and was renamed glovia.com to further reflect the idea of globalization, optimization, and visualization. Glovia stands for GLObal Value Integrated Applications in 1999. The addition of the ".com" suffix reflected not only the product's Java-based, thin client interface, but also advancements in its object-oriented component architecture and key e-commerce-oriented functional enhancements. To that end, with the help of the parent company's deep pockets and technology infrastructure products, Glovia can now boast web-based software capabilities and domain expertise in business-to-business (B2B) collaboration, as it now offers a fully web-enabled B2B transaction applications suite with more than seventy fully integrated modules that support nearly every area of manufacturing business functions, such as product management; customer relationship management (CRM); supply chain management (SCM); supplier management; manufacturing; financials; projects; business intelligence (BI); collaboration and integration; tools; and, technology.

Moving forward, Glovia will also be able to offer the above functions as individual components, owing to Java wrappers around all of the main business process components it currently supports, such as "design", "sell"' "plan", "source", "make", "fulfill", "service", "finance", and "manage projects". Although the glovia.com suite covers nearly every area of extended ERP and nearly all the processes within the entire product's life cycle, and although it is flexible enough to serve the gamut of manufacturing modes from made-to-order to high-volume manufacturers with one solution, the vendor is not trying to be all things to all manufacturers. It still targets mixed-mode manufacturers (i.e. a medley of engineer-to-order [ETO]/project and contract handling, via make-to-order [MTO], and assemble-to-order [ATO], to high-volume/repetitive/make-to-stock [MTS] practices within the same organization) in electronic components, consumer electronics, and automotive sectors.

The product is also scaleable, with more than 1,000 mid- and large-sized manufacturers in over 5,600 sites worldwide. After Japan, the US is the second strongest market for Glovia with over 300 customers. The product is also global being available in twenty languages and with support for multiple currencies, it is implemented in over one hundred countries. To that end, Glovia has approximately 650 employees worldwide, dedicated customer support centers, and professional services teams in North America, Europe, Japan and Asia.

During these days of an ongoing consolidation in the market, Glovia is blessed with an indisputable viability of its financial backer. Furthermore, Fujitsu provides Glovia with a huge internal selling opportunity. Namely, in addition to over 30 Fujitsu's factories already running on glovia.com, Fujitsu has committed to implementing Glovia inside many more of its over 400 subsidiaries worldwide, which is a vast backlog opportunity every vendor wishes to have in case of a protracted sluggish market. In addition, Fujitsu's hardware and IT services groups have longstanding relationships with Japanese multinational corporations that have often led to greatly reduced (if not automatic) sales cycles in the past. The future could therefore bode well for Glovia given backing from the Fujitsu's blue chip customers like Caterpillar, Dell Computer, Dunlop, Canon, Pioneer, Panasonic, Bosch, Mitsubishi, Eaton Semiconductor, Xerox, Yamaha and Ericsson; its functionally strong and scaleable extended-ERP system; and, its new push with e-business collaboration enabling products. Fujitsu has been a household name in Japan, and has lately also benefited as its domestic customers have pulled it into their subsidiaries in China, Taiwan, and Hong Kong.

With over seventy extended-ERP modules, glovia.com still has much to offer manufacturing and service environments. Although it originated in the US market, it has enjoyed its greatest success with Japanese companies because of Fujitsu's involvement starting in the 1990s. Support for serial effectivity, the "kanban" and the "Seiban" lean/JIT manufacturing approaches enable manufacturers to handle configured items even in batches of one. ("Kaban" loosely translated, means card, billboard, or sign. The term is often used synonymously for the specific just-in-time [JIT] scheduling system developed by the Toyota Corporation in Japan. Seiban is a number or label attached to all parts, materials, purchase and manufacturing orders identifying a particular customer, job, product or product line resulting in separate MRPs in the overall materials requirement planning [MRP] process.) All these functions, aimed at inventory optimization and waste management, streamlined planning and control for specific products, models, and sequenced production, are offered by Glovia, and are functions that Glovia's many competitors have yet to emulate.

Also, Glovia's virtual manufacturing capabilities still give it a functional edge over many other products for the mid-market. In addition to the above JIT practices amenable to Japanese manufacturers, Glovia has lately been involved in delivering a set of "new business models" for the idiosyncratic domestic market. An example would be helping Japanese companies to source outside the "keiretsu" (a Japanese term describing a loose conglomeration of companies organized around a single bank for their mutual benefit) for better pricing and other terms of trade.

Moreover, remote inventory tracking (e.g., parts stored on service trucks) and tracking inventory by projects make Glovia a strong fit for project-based and service industries. At the core of its projects functionality is a service item feature that allows the system to define and manage service products, which are often activities rather than physical stock items, such as engineering, education, installation, and consulting. Similar to the way bills of material (BOMs) aid production planning for standard physical products, the service item aids scheduling and capacity planning for services. Also, the suite supports "progressive engineering", which is the ability to handle items that are part of the project but still undefined, that can nevertheless be included in the project work breakdown structure (WBS). The application will plan around those items without losing the integrity of the structure.

Other highlights of Glovia's projects functionality include project costing, which is kept separate from the ERP system's general ledger, and a project definition feature for defining and managing complex projects. Thus, through program cost accounting, project accounting, project definition, and project resource planning sub-modules, Glovia takes a holistic approach to the needs of project-driven manufacturers, since it can address the entire process life cycle, beginning with the bid and estimating processes, all the way to installation and service management. It can thereby connect project status tracking with back-office processes. The system also can interface to project management tools such as Microsoft Project through the project management interface sub-module.

However, glovia.com has not traditionally been strong in the distribution and transportation modules (i.e., the "ship/deliver" business process), plant maintenance or enterprise asset management (EAM), or in so-called "white-collar" corporate functionality, such as global financial consolidation or human resources (HR). Recently though, Glovia has added much-needed functionality in its financials module, specifically in the areas of general ledger, cash management, budgeting, financial reporting and consolidation (through the alliance with Cognos). This will help increase its win rate within enterprises with complex organization, and help move it beyond the stronghold of the four walls of a single plant and collaborate with its sister plants and trading partners.

As of glovia.com 6, the vendor espoused a demand-focused offering aimed at manufacturers wanting to use the internet to collaborate with suppliers, customers, and other trading partners, and thus re-engineer their supply chains. One of its key new modules is intelligent order management, which takes projected inventory from the system's APS (advanced planning and scheduling) system or a third-party APS system and allows users to plan accordingly by visualizing the best possible shipment date for any order, whether a standard or configured product, from any of its facilities. It further includes advice on product substitutions and alternative configurations, with accompanying costs and delivery information, costs per plant, system prompts and recommendations for the best solution. Global planning, collaboration and integration capabilities in the version 7 should also give customers visibility into demand. Planned future enhancements (possible as early as version 8) will supposedly enable real-time demand planning. Instead of manufacturers aggregating demand and optimizing the long-term plan, they should be able to optimize the execution of the plan and test the capacity, and the profitability of the supply chain in real-time, as the demand occurs.

Other notable available enhancements are the Advanced Capacity Planning module re-written in Java and the Shop-Floor Data Collection (SFDC) module with bar code scanning support for high-volume manufacturing and complex industry requirements. In particular, the latter now features manufacturing execution monitoring through a browser interface. Glovia may also make great play of its web-based configuration tool, which allows users to configure BOMs and routings in a visual graphical environment, and of its CRM functionality specifically designed for its target industries with its sales force automation (SFA) and field service capabilities. In addition to the above-mentioned Configurator, the suite also has parts of product life cycle management (PLM) functionality in its engineering module, including a centralized repository for all product-related data including engineering change management (ECM).

Technology Advantage

A wide range of platforms cover UNIX, Linux, and Microsoft Windows 9x/2000/NT; however, there is currently only support for the Oracle database, which is a potential downside. Owing to its newly found flexibility through Java and XML enablement, glovia.com may now function well as either a corporate backbone system, or as a solution that executes operations and planning at the plant or unit level. As a result of the co-existence with other systems in the latter case, the vendor has lately begun to offer integration adapters to link with other enterprise or legacy systems.

Possibly the most beneficial edge for Glovia is the availability of underlying technologies from infrastructure and up such as system management; storage management; application development suite; application server; portal server; content management server; business process manager; integration manager/server; XML search engine; XBRL (eXtensible Business Reporting Language) tool; integration navigators; traffic integrator; and, security integrator, which are all provided by Fujitsu.

Interstage Suite

Fujitsu Software has been making a concerted effort to (re)launch its Interstage suite, comprising of the above pieces of process automation, integration, and application servers. The focus has also been on distribution partners, OEM agreements (like the recent ones with Sybase and SSA Global), and expanding existing client relationships. Fujitsu has already had some success in parts of Europe and Asia but has failed to make a broader global impact because of poor channel and ISVs' (independent software vendors) support. Its flagship Interstage component, Business Process Manager (formerly iFlow), has often generated positive feedback from clients, but Fujitsu has struggled to convert this goodwill into broader sales opportunities, with only about one hundred customers. Time will tell whether its recent enhancements, in terms of linking parts of business process are carried out

The product also features a new rules engine, based on Ilog's JRules technology, which enables user companies to institute a plethora of highly complex rules, such as giving different customers different discounts. Also new are process agents that route or escalate problematic transactions to the assigned problem solvers within an organization, which could also come in handy because of Glovia's real-time global order fulfillment aspirations. The product also offers analytics for business activity monitoring (BAM) purposes, which can be used to set key performance indicators (KPIs) like agreed service levels, and thereby perform simulations and "what if" planning scenarios for senior business managers. Thus, Fujitsu has been making strides to tackle the process automation, performance measurement and visibility aspects of the emerging business process management (BPM) market. The analytics can be driven out of the Microsoft Analyses offering, but will also work with Cognos and Hyperion BI products and on-line analytic planning (OLAP) cubes.

Fujitsu/Glovia's Vision

Despite the digital marketplaces' limited takeoff so far, the Fujitsu/Glovia's vision still remains to become the leader in B2B e-commerce for the global enterprises, responding first pragmatically to business globalization with the current multi-national capabilities of the former glovia.hub product. Even while it is now being rolled into the glovia.com umbrella, the collaborative product is still a work-in-progress, since its first incarnation is very much aimed at globally managed sales order processing and materials procurement, and it should reportedly go a great deal further to become a completly integrated technology solution for instituting operational performance management. For now, it is about helping multi-site, multi-national manufacturers to co-ordinate their sales and procurement via portals without building out and integrating custom infrastructure and applications. Next step will supposedly be to enable business visualization or executive "dashboards" that provide meaningful and user-tailored visual representations of what is going on with the overall department business health. The final step is business optimization which is the ability of a manager to know and understand where the cheapest location to build a product is, given, such as inventory on hand, available capacity to build and logistics network information.

As companies increase their global exposure, particularly through on-line channels, language is an obvious and important barrier to overcome. Therefore, adding a real-time, multi-lingual translation capability, such as enabling customers to enter orders on a web-site in their native tongue, has a tremendous yet straightforward benefit. Despite this, it has not been offered by many at this stage. Glovia's Global Order Management System, which allows companies to manage pricing, ordering, scheduling, and delivery with multi-language, multi-currency, and multi-location, as well as tax and tariff regulation, may offer lots of bang for a buck and give competitors a run for their money. Many increasingly realize that conducting meaningful B2B e-commerce involves far more than just posting a product catalog and taking orders from domestic customers. Other benefits include the ability to aggregate sales and demand within a single organization, to merge products and services as one offering, and to generate quotations that reflect multi-plant collaboration. To that end, glovia.com processes information (e.g., a placed order) in real-time rather than in batch mode, thereby propagating changes almost instantly throughout the value chain.

This concludes Part Three of a four-part note.

Part One detailed recent announcements.

Part Two discussed Fujitsu's support of Glovia.

Part Four will cover challenges and make user recommendations.