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i2 sees big growth prospects in China

An executive says the e-commerce software maker expects its business in China to grow 100 percent next year because of opportunities in the manufacturing industry.

By Irene Tham

SINGAPORE--E-commerce software maker i2 Technologies expects its business in China to grow 100 percent next year, powered by opportunities in the mainland's manufacturing sector.

This positive outlook came after last week's announcement of its first major deal in China with PC maker Legend Holdings.

A "huge portion" of Legend's 12-month budget--of over $3 million--to automate its supply chain processes will go to i2 for software licenses, i2 Asia-Pacific President Raymond Teh said.

China will be i2's "fastest growing" market in Asia-Pacific, excluding Japan, Teh said.

Specifically, opportunities will come from companies "shifting their production base to the mainland, following the country's entry into the World Trade Organization."

Among others, PC maker Dell Computer in May relocated some of its desktop manufacturing activities to China from Malaysia. Analysts say they believe that many more companies will follow suit as companies tap the mainland's cheaper production costs and skilled engineering work force.

For the nine months ended September 2001, China contributed about 5 percent, or $3.2 million, to i2's Asia-Pacific revenue. Based on his growth projections, Teh expects the mainland to double its percentage contribution next year.

However, he noted that sales in Asia-Pacific will only edge up 5 percent next year to $66.5 million, offset by "flat growth" in the rest of the region as the economic downturn takes its toll.

Revenue contributions from South Asia--Singapore, Malaysia, Thailand, India, Indonesia and the Philippines--are expected to stay at the 35 percent mark next year. Other markets such as Korea, Taiwan and Australia will make up the remaining 55 percent.

The Dallas-based company's current work force in Asia Pacific--including Singapore, Kuala Lumpur, Malaysia; Sydney, Australia; Melbourne, Australia; Bangalore, India; Bombay, India; Jakarta, Indonesia; and Beijing--totals 900 people.

Of these, about 700 are development engineers in its sole regional development center in India, Teh said.

As part of a worldwide cost-cutting exercise announced in October, the company will relocate about 500 Indian nationals from its development centers in the United States, Europe and Canada to India by the first quarter of next year, he said.

"The cost of every (employee) in the U.S. is equivalent to three in India," he explained.

i2 will also reduce its development facilities worldwide to four from 10 by the first quarter of next year. The India facility will be one of those spared.

However, Teh said the company will not close any of its regional offices, nor lay off any of its staff in Asia-Pacific. In the first nine months of the year, the company had laid off about 20 people in the region.

For the third quarter ended September 2001, the company saw its revenue dip 39 percent to $194 million from the year-ago period. The company attributed the decline to the recession and political instability brought on by the Sept. 11 terrorist attacks, "causing customers to postpone or cancel projects and disrupting sales cycles."

Its third-quarter net loss widened to $5.5 billion, from $786 million last year, largely because of the amortization and write-down of intangible assets.

In late August, i2 completed its acquisition of collaborative e-commerce technology company RightWorks in a stock swap worth $34.5 million. With this deal, i2 now provides companies with the software to manage their spending in business-to-business e-marketplaces.

Staff writer Irene Tham reported from Singapore.