Select Comfort puts SAP project into sleep mode

[dhilipkumar]

Select Comfort Corp. last week announced that it is halting work on an implementation of SAP AG's ERP applications as part of a cost-cutting effort. But shareholder pressure also may have contributed to the project shutdown.

Select Comfort, which lost $12.7 million in the first three quarters of the year, said that ending the SAP project will help it save about $15 million annually. The Minneapolis-based company also said that it plans to lay off 120 employees, or 22% of its workforce.

A spokeswoman declined to comment further about the stopping of the ERP work, and it was unclear whether any of the layoffs are related to that decision. In its announcement, Select Comfort said only that the jobs being cut will include administrative and customer service positions.

Select Comfort has been a user of Oracle Corp.'s ERP software since 1998. But the company said in a 2007 filing to the U.S. Securities and Exchange Commission that it planned to install a suite of SAP's applications, including the vendor's ERP, CRM and supply chain management modules. The rollout was initially expected to be completed during the first half of this year.

The project was delayed, though, and other SEC filings show that Select Comfort officials had been pressured to spike it by an institutional shareholder, New York-based investment firm Clinton Group Inc.

"Given Select Comfort's financial performance, the implementation should cease immediately," Jerry Levin, vice chairman of Clinton Group, wrote in a June 23 letter to Select Comfort's board.

An SAP spokeswoman described Select Comfort's decision as an anomaly. "We fully recognize these are truly critical times for our customers," she said. "[But] SAP projects are continuing to go forward."