MuM’s 2011 shows a VAR in transition

Mensch und Maschine last week gave formal, final results for 2011 that confirmed its earlier disclosure and provides more details — but the big takeaway is that MuM’s new strategy appears to be working. Over the last 18 months or so, MuM has sold off much of its low-margin distribution business while buying up VARs to expand its higher-margin VAR segment. As a result, revenue will decline sharply but the remaining business will be far more profitable. MuM is the “poster child” for the types of changes that many resellers are contemplating, as they look for ways to remain relevant to both their software partners and their customers. To recap, MuM’s sales from continuing operations were up: Software revenue rose by 12% to €29 million, while sales from the VAR D / A / CH business were up 18% to €68 million. The VAR business grew nicely in the fourth quarter (up around 20%) at a much higher level of profit that the distribution business (40% gross margin for the VAR business vs 23% for Distribution). Customers also seem to like the move to value-added services, with revenue from MuM’s home base of Germany up 15% over last year to €56 million (although it’s hard to tell how much of that is true organic growth, given all of the changes the company saw in 2011). Due to the company’s sale of its distribution business at the end of October, total revenue for the year were down 2% to €192 million. Margins rose despite decreased revenue and, as a result, management will propose doubling the dividend to €0.20 per share. Looking forward, MuM CEO Adi Drotleff sees a “[c]ertain slowdown of the economic environment.” The company’s current forecast targets sales in 2012 of approximately €150 million, a slightly lower growth rate than in earlier forecasts. Gross margins should continue to climb in 2012, despite lower sales, because of the changed mix to more profitable sales. The 2012 total includes several planned (but unnamed) acquisitions in Europe by the middle of the year. The company expects to hit the €200 million revenue mark in 2014, with a group gross margin, for the first time, of over €100 million. MuM constitutes 20% of Autodesk’s sales in Europe and 8% on a global level. MuM is visible, public face for the resellers who are rebuilding their businesses to create higher-value offerings that are less dependent on their software partners. The combination of an uncertain future in software delivery mechanisms, increasing on-demand training via the Web, and some turmoil among channel management strategies by the major engineering software players mean that resellers (those that can adapt) are looking for more services and software add-on businesses of their own. We’re going to be covering this topic in a session I’m hosting at COFES next week – join us!