True to its Texas Roots, i2 Does Everything Big

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True to its Texas Roots, i2 Does Everything Big
S. McVey - August 3, 2000

Event Summary

Seemingly overnight, the Dallas-based vendor has leapt from the ranks of unknown companies to be the undisputed champion of B2B supply chain management software and services. Few could have predicted the huge, market-shattering moves that i2 made in its first half of fiscal 2000, which included a broad-reaching alliance with IBM and Ariba and the acquisition of Aspect Development Corporation, the largest such transaction in software industry history.

With Aspect's revenues added in from the last three weeks of June, i2's total revenues jumped 84 percent to $242.6 million from $131.9 million in the second quarter last year. License sales accounted for 62% of this figure with the remainder from services and maintenance. Its twelve-month revenues topping $750 million, i2 is on track for breaking the $1 billion barrier at the end of fiscal year 2000. Because i2 treated its acquisitions as purchases, it posted large non-cash charges this quarter of $208.9 million, which produced a net loss of $280.8 million, or $1.66 a share. The important thing to remember (as i2 is eager to point out) is that the second quarter would have been profitable had it not been for the acquisitions. In fact, i2's operating profits exceeded those of the first quarter by more than 300%.

Figure 1.

Market Impact

Faced with declining revenue growth, it was inevitable that i2 would need to take big, evolutionary steps in order to maintain its leadership in the supply chain management and B2B markets. Its acquisition of Aspect Development was an important step in its progression toward the goal to further its product scope by staking a large claim in the software market for direct and indirect material Internet procurement. Its B2B marketplace solutions have as their core a network of buyers and sellers that can achieve cost savings by leveraging one another's resources in efficient ways.

Though many observers are confused by i2's recent moves, the company appears to be growing its offering in a logical manner. From its origin as an advanced planning and scheduling software vendor, i2 first conquered the remaining functional areas within the purview of APS, such as transportation and demand planning, then added enhancements for customer relationship management, followed by customer-facing e-commerce applications and is now tackling the Internet procurement market.

i2 has a long way to go before it fulfills its own grand vision for seamlessly integrating decisions at the design level through strategic sourcing, supply chain planning, fulfillment, customer care and logistics, but is eminently capable from a financial and market perspective to achieve its goal.

User Recommendations

Software companies tend to generate market hype in direct proportion to their success. Users should bear in mind that the top-ranked company in the eyes of the press may or may not have the best product on the market. In fact, the opposite is often true.

While i2 has had tremendous success in selling its strategy to Wall Street and its solutions to corporate IT departments, it has a less-publicized reputation for difficult implementations caused, in part, by having over-hyped products. Users who fail to conduct a thorough evaluation process when acquiring new technology take a terrible risk in terms of time and project cost. With those caveats in mind, retailers should consider i2 a short-list candidate for a variety of applications, especially those in electronics and high tech manufacturing, industrial manufacturing, and, for its marketplace offerings, retailing.

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