Sobey's Glitch : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

CBC's 6 p.m. news from Vancouver reported that Sobey's, a food distributor, has been having serious problems with its new computer software for the past two years and, as a result, will be scrapping SAP. I dug around the CBC's "news" sites and searched elsewhere online but could not find a print version of the story. Maybe someone else will have more success.

I did find a couple of news releases, however, that indicate Sobey's did a major takeover of another company today.

TSE trading halt


(The latter site says "not for distribution in US," so I'm not copying it here. Not quite sure how that restriction applies to the internet.)

-- Rachel Gibson (, January 25, 2001


Software hangover staggers Sobeys stock

HALIFAX (CP) - Investors pummelled the stock of Sobeys Inc. on Thursday, in the wake of an information-technology foulup that cost Canada's second-largest grocer at least $89.1 million.

By the day's end Sobeys stock had fallen almost 14 per cent, and some analysts were predicting the computer problems could lead to a flurry of legal actions between Sobeys and German-based international software giant SAP AG.

The share-price drop, by $3.25 to $20.35 on the Toronto Stock Exchange, is a sign that investors were shaken by the announcement late Wednesday from Sobeys' new chief executive officer, said several stock watchers.

"I don't think investors are going to give (Sobeys) managers the benefit of the doubt until they prove out a bit," said Perry Caicco, a retailing analyst with National Bank Financial.

The computer system to track the flow of groceries throughout the company's 1,400 stores has "been years and $90 million" in the making, said Caicco.

"It was meant to have a massive amount of benefit to the company."

Instead, Sobeys stated it will take an after-tax charge of $49.9 million in the current quarter to reflect the abandonment of the system.

The decision was precipitated by a massive five-day crash in early December, said president and CEO Bill McEwan - who had taken over as head of Sobeys just a few days before the crisis hit.

But a spokesman for SAP said the company doesn't agree there are serious problems with its software and was "shocked and disappointed" by the Sobeys move.

SAP's Bill Wohl said two senior executives were scheduled to meet with Sobeys executives on Friday at the supermarket operator's headquarters to discuss the problems.

"We don't see any reason for Sobeys to pull out the SAP solution," Wohl said. "We have full confidence it can work very well for Sobeys."

But several analysts said they expect Sobeys to sue SAP.

"I wouldn't doubt there's going to be a legal case, and that's going to be cranked up pretty quickly on Sobeys part," said one analyst who follows the retailing sector.

McEwan declined Wednesday to comment on the possibility of litigation against SAP, Europe's largest software company and the world's biggest supplier of enterprise software with 21,700 employees in 50 countries.

The new Sobeys CEO spent much of Thursday conferring with institutional investors.

McEwan was unavailable for comment, but a company spokesman confirmed that he would meet SAP executives Friday.

In the December crisis, McEwan said, the database system crashed and forced the company to take special measures to supply stores during the Christmas period. He also said stores ran out of goods that customers wanted.

Wohl said SAP couldn't confirm these problems had occurred, but observed: "This kind of project require a lot of wrenching change at businesses, and they never go through without some issues."

One Halifax-based analyst who follows Sobeys said investors won't let management off the hook for the computer woes.

Jonathan Norwood of Beacon Securities noted several massive block trades Thursday.

"You had institutional investors buying this stock at $27 a few months ago; they're not going to be too happy," he said.

"You have to wonder whose fault is it? Is it SAP's fault? Is it management's fault? I'm not sure why this thing wasn't tested."


-- spider (, January 26, 2001.

Thanks, spider. That CBC site conjures a fear in me not often felt. :)

-- Rachel Gibson (, January 26, 2001.

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