Leave it to a shoemaker to give you a good stomping. i2 Technologies' ( ITWO) stock got pummeled Tuesday after Nike blamed a projected shortfall in its third-quarter earnings on the firm's supply-chain software.

i2 shares dove 22.4%, or $7.94, to close at $27.56, just above its 52-week low of $27.31.

Nike says it's not going to boot i2 as its software vendor and i2 says the problem was unique to the shoemaker. But the incident underscores how difficult it can be to deliver on the higher efficiency and inventory control promised by supply-chain software.

It could also signal what might lie ahead for i2 and its customers. i2 has consistently highlighted three big customer wins that it scored during 2000: Siemens, Caterpillar and Kmart. While the announcement of those wins helped drive i2's stock upward, news of any problems with the software at those firms, should they develop, could punish it further.

i2 says that's not gonna happen.

"The key thing is that if you look at this, this is an isolated instance," says Katrina Roche, i2's marketing chief, who said Nike's issues were tied to the way it installed i2's software, and not to the software itself. "We have a lot of customers that have been very successful with i2 solutions."

But the three big customers that i2 has been touting lately were mum about i2's software on Tuesday.

A spokeswoman for Caterpillar declined to comment on its use of i2's software, saying that it was a Nike issue, though the company has made positive comments about the software in the past. Kmart did not return calls for comment, and Siemens couldn't make an executive available.

While it's hard to conclude anything from those nonresponses, Bradley Whitt, an analyst at Southwest Securities in Dallas, said he's had a hard time finding customers who give positive testimonials about i2's software.

"We had a very difficult time getting any active customers to talk to us," said Whitt, who has a neutral rating on i2. "Usually when customers are happy, they call us back. When they're not, they don't. And they didn't." He said some consultants and ex-employees from i2 told him the company had problems in its customer base, though he conceded "we never really got a complete handle on it." (Whitt's firm hasn't done underwriting for i2.)

Mark Verbeck, an analyst with Epoch Partners, says the issues involving Nike don't really matter. The incident will likely result in a harder sell for i2 with other prospects, regardless.

"Every i2 sales rep will now have to answer 'What in the heck happened there at Nike?' " Verbeck said. "I'm sure they'll have a pat answer, but it will leave lingering doubts in customers' minds." Verbeck has been cautious on i2 recently; his company has done no underwriting for it.

I2's Roche said one of the problems with Nike was that the company didn't use i2's standard apparel template when it implemented the software at its footwear division. Somehow, Nike said, the software left it with more inventory in slower-selling shoes and shortages in its high-demand kicks.

"Nike chose not to move forward with our template, and shame on us in not being more aggressive in telling them that they need to follow our implementation methodology," Roche said. I2 wasn't more adamant, she said, because it, too, wanted to try to tackle Nike's complex problem of trying to map and track every shoe model it manufactures.

"Nike had some legitimate issue they wanted to address, and we saw a lot of value in that, so that we could enhance our software for other retail apparel customers," Roche said. "But it took us longer than expected."

A Nike spokesman declined to comment beyond Tuesday's public statements.

Joshua Greenbaum, a consultant with Enterprise Applications Consulting in Daly City, Calif., said i2's software doesn't have a reputation for being technically flawed, but it is known for being extremely complex.

"If the implementation doesn't work, than all the data in the world isn't going to yield the right answer," Greenbaum said. "But I think there's a cautionary tale here in the whole go-live process. To me, it just keeps coming up time and time again. Someone thinks they're ready to go live, they go live, and then we're listening to another earnings warning." (He hasn't done consulting for i2 Technologies.)

He pointed to the well-publicized problems that some firms had implementing PeopleSoft ( PSFT) and SAP ( SAP) software in the 1990s. He said Nike's problems expose the disconnect between hype and reality when it comes to supply-chain manufacturing software.

"We have built up supply-chain manufacturing as a wonderful and compelling concept," Greenbaum said. "But it certainly seems in Nike's case that the concept is ahead of the company's ability to implement it."

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