i2 revamps tools to woo penny-pinchers

The beleaguered company, retrenching amid depressed spending on business software, plans to repackage and promote several products in its large--some say unwieldy--arsenal of applications to better compete in the so-called profit-optimization software market, said Sam Nakane, chief operating officer at i2.

Profit-optimization software, long used in the travel and hospitality industries, employs a set of algorithms to help companies set prices for everything from seats on planes to bags of candy on grocery store shelves. The software takes into account variable factors, such as seasonality, geography, inventory levels and sales trends to calculate the mix of prices, promotions and discounts most friendly to the bottom line.

Manugistics, an i2 rival and a heavy promoter of profit-optimization applications, reports growing interest in such software--particularly from retailers. The software maker attributes this to the great appeal that improving the bottom line holds in a dismal economy.

Manugistics, which competes with i2 in the market for manufacturing and inventory planning applications, has weathered the IT downturn slightly better than i2 has. Disappointing revenues and losses have hit i2 this year, leading the company to restructure and make deep staff cuts. The company's shares, which traded above $100 in 2000, closed at $1.03 Tuesday and fell below 50 cents last month.

With its bigger push into profit-enhancing applications, i2 might be trying to duplicate Manugistics' success, analysts said.

"They're seeing what we're seeing," said Jerry McNerney, an analyst at AMR Research. "Manugistics is getting nice traction and visibility around this initiative."

A number of smaller software firms, including Rapt and Demandtech, also offer profit-optimizing tools. Analysts said i2 is playing catch-up to these companies. "I applaud i2 for going after this market but think they have a long, long way to go," said Patrick Walravens, an analyst at JMP Securities.

Rumors have circulated recently that i2 is looking to sell certain business divisions it formed from its acquisitions of Aspect Development in 2000 and of RightWorks last year. But Nakane said the company has no plans to sell off any of its business units and that i2 will continue to focus on its traditional product lines--including its inventory, production and transportation planning applications. He did leave the door open, however.

"We want to keep all options possible," he said.