Given the enterprise software industry's current weakness, Wall Street analysts have ratcheted down their earnings expectations. Perhaps they've become too negative.
Take JDA Software
In the second quarter, JDA generated $1.7 million in cash flow, for a total of $93.9 million in the bank.
Founded in 1985, JDA Software helps companies better manage their retail demand chain. Its software helps manage things like inventory, space, facilities, and forecasting.
JDA does benefit from several positive industry trends: the emergence of new technologies such as RFID, the spread of megastores selling diverse products, and retailers' use of more channels, including e-commerce. These are complex systems to manage, creating big opportunities for software providers like JDA. The company enjoyed strong customer demand in the second quarter, closing 78 deals, including four transactions of more than $1 million.
However, management has little visibility for the third quarter. There's no guidance at all; the CEO said on the conference call that earnings are "difficult to predict." There are "sizable transactions" in the pipeline, but in the enterprise market, deals can be difficult to close. What's more, JDA's much more powerful competitor, Retek, was recently purchased by Oracle
For investors, buying JDA is a bit like rolling the dice.
Further enterprising Foolishness:
Fool contributor Tom Taulli does not own shares of any company mentioned in this article.