i2 Technologies falls 30 percent but they're not dead

Douglas A. McIntyre

i2 Technologies Inc. (ITWO) just reported perhaps their worst quarter ever today. The stock is down over 30% after falling short of Wall Street’s expectations and announcing the CEO will be leaving at year end.

Missing estimates and announcing the No. 1 guy is leaving on the same day is about the worst possible combination you can ask for when you’re a publicly traded company. I’m sure the whole team in Public Relations was kicking back a few margaritas when they came up with this game plan.

The company earned $3.5 million, or 13 cents a share, on revenue of $65.6 million. Take away all the items and ITWO walked away with 16 cents a share. Analysts were expecting earnings of 22 cents a share on revenue of $64.9 million – slight miss.

CEO Michael McGrath said – “Our earnings and cash used in operations for the first quarter were generally in line with our internal expectations. While we were disappointed with our software solutions and maintenance revenue as well as our software solutions bookings in the quarter, we were pleased with the strong growth we achieved in our services business this quarter as compared to the first quarter of 2006. This growth highlights our continuing transition to a solutions-oriented provider.

He should have said the “roof is on fire everyone, get out of the building, quick!!” What does he care, he’s leaving the company? But the company isn’t closing its doors America, granted they had a terrible day on the market but they aren’t done.

I definitely do not like the $86.3 million total debt they reported but they did manage to grow revenue by $1.6 million from the last quarter. Not impressed? No one is, thus the 30% drop in the stock making it Wall Street’s biggest loser today. Still, they did bring in $65.6 million in revenue for the quarter.

i2 did manage to land a big client this quarter – Costco (COST). The wholesale giant will be implementing solutions from i2 to improve performance and lower their transportation and distribution costs. So if i2 can leverage this relationship and score some more business in the coming months, they should manage to stay away from setting a new 52-week low. Time will tell, but if the stock market starts to turn, I would shy away from picking up shares of i2.

Shares of i2 are edging up less than 1% after hours at $17.90 a share, so that makes up for today’s performance.

Frank Lara Jr.

Frank Lara Jr. can be reached at; he does not own securities in the companies he covers.