CEO Leaves i2 the Day Before Earnings Announcement
i2 Technologies
(ITWO)
announced Monday that CEO Greg Brady has resigned after one year on the job, replaced by founder and Chairman Sanjiv Sidhu.
In a press release, Brady said he is resigning for personal reasons. But rumors of his departure have swirled for the past two quarters as the supply-chain software maker's revenue has tumbled. i2 said Brady, who was president from 1994 to 2001, will remain with the Dallas-based company in an advisory role during the transition and will remain on the company's board of directors.
Sidhu was CEO from the company's founding in 1988 until handing over the reins to Brady last year.
Sidhu said the past 18 months have been difficult for i2 and its competitors due to constrained corporate spending, but that the company expects to see business improve as the economy rebounds.
But analysts said i2's difficulties extend beyond the economy. Since its peak in the first quarter 2001, revenue has dropped about 52%. i2's lead in revenue over that of its competitor
Manugistics
(MANU) - Get Report
has shrunk to less than $100 million a quarter from more than $250 million a year ago.
Earlier this month i2 warned of a $20 million revenue shortfall in the first quarter. The company is set to report earnings Tuesday.
"If they let the CEO go a day before
earnings, that suggests bad news to report," said Pat Walravens, an analyst with Jolson Merchant Partners who has a hold rating on i2. Or, he added, "the silver lining may be here: Maybe we're reaching a point where most other bad news has gotten out." His firm hasn't done any banking with i2.
Walravens said he believes i2 needs to become more disciplined about product development, telling customers to wait for future releases rather than custom-tailoring products for each customer. The company also needs to cut down its approximately 50 applications, including many obtained in i2 acquisitions since 1997, he said.
While Sidhu is hardly new management, Walravens said he is encouraged by the management change, because Sidhu has a greater focus on products than Brady, whose expertise centered on marketing and sales.
A recent survey from i2 Users Group, analyzed by Walravens, showed that as few as 36% of customers were able to get i2's supply-chain planner software functional. The company's most publicly disgruntled customer so far was
Nike
(NKE) - Get Report
, which at the beginning of last year blamed i2 for an earnings shortfall. More recently, i2 disclosed in its 10-K filed April 1 that
Siemens
(SI) - Get Report
, which has put in the largest order in i2's history, has "asserted certain claims" against i2 regarding issues with some software products and services.
"The users of i2, the systems integrators, Wall Street -- across all three -- the consensus was i2 overcommitted and underdelivered in the last cycle," said Brent Thill, an analyst with Credit Suisse First Boston, who has a hold rating on i2. His firm hasn't done any banking business with i2.
Thill said he believed that Brady was capable but that the company needed to make the change in order to stop its downslide amid competition from Manugistics. "There's clearly a new sheriff in town -- Manugistics," Thill said. "At the rate they're going, they're going to overtake i2."
Ian Morton, an analyst with JPMorgan H&Q, called the management change a "neutral move" because it had been rumored for some time. He noted that the company has experienced considerable internal turmoil as it is aggressively moving a large portion of its research and development to India and shifting its sales force's focus to smaller deals. Morton has a market perform rating on i2, and his firm has done underwriting business with the company.
Shares of i2 fell 27 cents, or 6.3%, to $4.01 in recent trading. Shares of i2 have lost about half their value since the beginning of the year.
Staff reporter Michael Dunn contributed to this report
