i2 Backs Away From the Edge

"In our view, following some amount of time for investors to digest whether additional cuts portend to weaker demand, they are likely to embrace the more positive outlook on profitability," Coleman wrote. His firm hasn't done any banking business with i2.

But i2 is hardly out of the woods yet. Coleman noted that the supply-chain sector that i2 has dominated continues to grapple with limited growth. The sector has been reeling as companies avoid large deals and complicated software implementations and cut back spending overall.

In addition, i2 disclosed in its 10-Q filing that two former employees have contacted the company's board of directors about various charges related to accounting and revenue recognition, inadequate financial controls and gross negligence or potential fraud in connection with product and customer problems, acquisitions, public disclosure and other management decisions. Based on an audit committee investigation, the board concluded there was no merit to the charges, which came from employees who had previously made claims against i2 seeking monetary relief.

Meanwhile, speculation has been swirling around potential mergers and acquisitions involving i2, with either another company acquiring i2 or i2 selling off some of its assets, Steele noted. "They [i2] don't necessarily need the cash, but since they have a lot of debt on the balance sheet, raising cash wouldn't necessarily be viewed as a negative thing," he said.

The company's long-term debt of $410.9 million nearly surpassed the company's cash and cash equivalents total of $419.4 million as of Sept. 30.