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I2 Reveals Losses, Layoffs, And Huge Write-Down

Supply-chain management vendor feels the pinch of spending cutbacks among its customers, and doesn't expect fourth-quarter resurgence.

InformationWeek Staff

October 16, 2001

2 Min Read

I2 Technologies Inc. will lay off 1,000 people by early 2002 and move some of its research and development efforts to India in an ongoing effort to reduce expenses, the company reported during an earnings call Tuesday.

For the third quarter ended Sept. 30, i2 reported an operating loss of $87 million on revenue of $194 million. In the same quarter the previous year, the company reported an operating profit of $41 million on revenue of $319.5 million.

CEO Greg Brady said during the call that throughout the third quarter the company faced difficult market conditions, which were worsened by the Sept. 11 attacks that caused customers to postpone or cancel deals. The fourth quarter is typically the strongest for the supply-chain management vendor, but Brady said that will not be the case this year. He declined to provide guidance for the fourth quarter.

The company reported a net loss of $5.526 billion for the third quarter due to the write-down for amortization of good will associated with i2's March 2000 acquisition of Aspect Development for nearly $9.3 billion. Since the purchase, i2 has been writing off the amortization quarter by quarter, at a rate of about $700 million per quarter. For the third quarter last year, for example, i2 posted a net loss of $756 million due primarily to Aspect-related amortization. The company will complete the Aspect-related write-downs in the fourth quarter by taking a final $530 million charge, said CFO Bill Beecher.

Analysts say writing down a huge chunk of the Aspect acquisition now will help i2 to avoid reporting continued quarterly losses that could frighten away jittery customers.

Brady said the company will attempt to cut costs by moving more of its development efforts to India, where it currently maintains offices. He did not say how many developers would be moved there.

I2, which currently has 5,555 employees, took a charge of $22.5 million in the current quarter related to the reduction of its workforce, and will take a similar charge in the fourth quarter as it continues to trim its staff.

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