Subject: ITWO: eDay and Analyst Meeting From: distribution@epoch.com Date: Fri, 11 May 2001 06:00:00 -0500 To: fox@csit.fsu.edu For in-depth coverage of all companies within the Software Sector, please visit http://www.epoch.com/emailalert/software.html Company Note i2 Technologies, Inc. Epoch Partners MAY 11, 2001 NASDAQ:ITWO Mark Verbeck David Trainer Timothy Madda ITWO: EDAY AND ANALYST MEETING _______________________________________________________________________________ FUNDAMENTALS Price (05/10/01) $21.13 FY Ends Dec 2000 2001 NASDAQ Comp (05/10/01) 2,129 Revenue(MM) $1,126.3 $1,274.0 Prev Est.(MM) NC NC NA 52-Week Range $12.56-99.44 EPS Shares Outstanding(MM) 405.8 Q1 $0.04A $0.02A Market Cap(MM) $8,575 Q2 $0.05A ($0.05)E Q3 $0.07A ($0.02)E Avg Daily Vol(3Mo.)(000s) NM Q4 $0.09A $0.01E Fiscal Year $0.26A ($0.04)E Previous Est. $0.26 ($0.04) P/E 81.3x NM Source: Epoch Partners _______________________________________________________________________________ * i2 hosted a two-day event in New York for analysts and customers. The first day showcased customer testimonials and presented product road-map information. The analyst meeting delivered specifics on strategy, execution capabilities, cost- savings efforts, and answers to numerous concerns. * i2’s play-to-win management team assures us that they are minding the store to deliver shareholder value even if they have to change their strategy. * Reagan Lancaster, the new president of Worldwide Field Operations, is taking a page from Siebel’s playbook and focusing aggressively on customer satisfaction, which we believe will not only prevent public relations disasters such as the Nike incident earlier this year, but also will eventually yield additional revenues. * The company stated that it is not changing it’s earlier guidance. While the pipeline is strong, the determinant of revenue will be the closure rates at the end of the quarter. While an improving market sentiment bodes well for closure rates, we remind investors it is not yet the end of June. _______________________________________________________________________________ eDay 2001 i2 hosted back-to-back customer and analyst events in New York on May 9 and 10. The customer event featured testimonials from VF Corporation, Procter & Gamble, Barnes and Noble, Panasonic, and Corporate Express. In addition the company outlined its product road map, which is organized around six pillars for creating dynamic value chains. These pillars are: * Multi-company planning and next-generation transaction management * Visibility with exception-based management * Embedded physical execution * Content, process and technology standards * Open network deployed as a service * Rapid value for all members The company presented a product road map that addressed this framework. We feel the most notable future products are the late 2Q01 release of Distributed Order Management, Financial Settlement and Supplier Enablement and the 3Q01 release of Distributed Inventory Management and the Command and Control Center (previously branded as FulfillmentMatrix). Financial Metrics At the analyst meeting, the company said it was dedicated to keeping spending in line with revenue. On March 4, the company released 500 employees and 100 contractors. The company received more than 700 submissions for expense reductions from its employees and is implementing some of these ideas as well as reducing spending on travel, telecommunications, and facilities. i2 believes that even though its current guidance calls for license sales to be down year-over-year, this guidance conforms to historical growth rates of about 50%, absent the 2000 spending bubble. Focus on Execution The Nike public relations fiasco seems to have spurred increased interest in customer satisfaction at i2. The company has combined sales and delivery under Regan Lancaster. The new president of Worldwide Field Operations is taking a page from Siebel’s playbook (even going so far as to hire the same independent measurement firm) and outlined plans to emphasize customer satisfaction through organizational alignment, compensation, measurement and specialized teams. Customer goodwill is a tremendous asset for a software company and we believe that this part of the strategy could yield significant returns for i2. Having a single head of both sales and services creates a delicate balancing act in the promise department, so we will be paying attention to services margins in upcoming quarters. Vision and Reality CEO Greg Brady delivered his vision of once again reinventing i2, this time as a broad-footprint replacement for the ERP players that is capable of owning the transaction and connecting the value chain. We believe high tech is one of the few industries sufficiently advanced to implement this vision and, even in this vertical, we harbor no concerns over the ERP vendors collective livelihoods. Running to Stand Still i2 threw out the statistic that 50% of its Q1 revenues came from products introduced within the last year. This did not allay our concern that the company will never be able to lower R&D spending as a percentage of sales. In fact, we note that while revenue growth might be in line with historical metrics absent 2000, the growth rate of R&D spending exceeds it. _______________________________________________________________________________ COMPANY PROFILE i2 Technologies is the leading vendor of supply-chain management solutions that enable manufacturers to optimize demand forecasts, production schedules and procurement of components. In addition, i2 offers a platform that gives companies end-to-end collaborative management of their supply chains. _______________________________________________________________________________ The analyst(s) involved in the preparation of this report has an investment position in the subject security. (ITWO). The information contained herein is based on sources believed to be reliable but is neither all inclusive nor guaranteed by Epoch Partners. Opinions, if any, reflect our judgment at this time and are subject to change. Epoch Partners does not undertake to advise of changes in its opinion or the information. Epoch Partners may perform or seek to perform investment banking services for the issuers of securities which are the subject of our Research. Most of the companies Epoch Partners follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in the Epoch Partners Research may be unsuitable for investors depending on their specific investment objectives and financial situation and needs. No report included in the Epoch Partners Research is a recommendation that any particular investor should purchase or sell any particular security in any amount or at all and is not a solicitation of any offer to purchase or sell from or to any particular investor. For additional information that may be available on the securities mentioned, please contact Epoch Partners. This document has been published in the United States for Residents of the United States. Copyright 2000, 2001 Epoch Partners. All rights reserved. Member NASD/SIPC. \END THE ABOVE RESEARCH HAS JUST BEEN PUBLISHED. For in-depth coverage of all companies within the Software Sector, please visit http://www.epoch.com/emailalert/software.html Epoch Research A team of industry-focused analysts creates Epoch’s proprietary Research. 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