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.