i2 Backs Away From the Edge

Shares of i2 Technologies(ITWO) climbed Monday as investors responded to news of more layoffs, a reduced risk of delisting and one analyst upgrade Friday.

Shares of i2 rose 26 cents, or 21.9%, to $1.46 in trading that was more than twice average volume. Shares of i2 are up more than 200% from a 52-week intraday low of 41 cents at the beginning of October.

In its 10-Q filing Friday, i2 disclosed that it received a delisting notice from Nasdaq because its stock had traded below $1 for more than 30 consecutive trading days, its stockholders' equity had fallen below $10 million, and its net tangible assets had fallen below $4 million, in violation of listing standards.

But with the recent rally, i2's chances of delisting appear slimmer, apparently prompting some buyers, said RBC Capital Markets analyst Cameron Steele, who has an underperform rating on the stock. His firm hasn't done any banking with i2. He added that i2's rally could be driven in part by bottom-fishing, noting that other companies whose shares have been hammered, such as Kana Software(KANA), enjoyed a run-up Monday too.

Steele also said investors may be responding to i2's plans to cut 15% of its staff, disclosed in the 10-Q filing, in order to return to profitability next year. "I think that's good news because investors want profitable companies right now, and I don't see that changing anytime soon," he said.

Indeed, the company's restructuring prompted SoundView analyst Peter Coleman to upgrade his rating on i2 Friday to neutral from underperform and raise his estimates. With the company hoping to bring down expenses to $100 million by the first quarter 2003, Coleman raised his first-quarter earnings estimate to a pro forma loss of a penny from a loss of 5 cents. Coleman also raised his second-quarter and third-quarter earnings estimate to a penny each in pro forma profit from a pro forma loss of 4 cents in the second quarter and a 3-cent loss in the third quarter. He upped his fourth-quarter estimate to earnings of 2 cents a share from a loss of 3 cents a share.