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Never underestimate the




Shares of

i2 Technologies


, a software firm that makes supply-chain management applications, were off nearly 7% Wednesday, apparently because Cisco talked Tuesday

in its earnings conference call of budget cuts at some large manufacturers. And big manufacturers use supply-chain management software.

i2 was getting hit harder Wednesday than its supply-chain management counterparts, such as






, because it has greater exposure to the automakers and other manufacturers.

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In a research note,


analyst Christopher Rowen wrote that 17% of i2's fourth-quarter sales came from the auto and industrial sector. On Cisco's conference call, management specifically pointed to weakness at automakers and said that Cisco's sales to that industry could be $100 million less than expected over the next six months.

Rowen said that news, combined with a

weak report from the

National Association of Purchasing Managers

last week, could be bad for these companies, particularly i2.

"Overall, we believe an automotive shutdown could hurt ITWO, but we believe that Q1 will be buoyed as ITWO begins to recognize significant revenues from its large deals with






," wrote Rowen, who rates i2 shares a strong buy. (His firm hasn't done underwriting for the company.)

By comparison, Rowen said only 9% of Manugistics' sales came from automotive parts suppliers in its August quarter, though he wasn't able to obtain a specific breakout of that company's exposure for its November quarter. (He rates Manugistics a strong buy, and his firm hasn't done underwriting for the company.)

A company spokesman also couldn't provide the information. Rowen estimated that Datastream had less than 10% exposure to auto manufacturers. While comparisons of exposure to the auto industry between these companies aren't exact, i2's relative price drop suggests the market sees it more at risk than its competitors.

These kinds of concerns go against the current conventional wisdom that i2's type of software should continue to sell during hard times because it helps companies become more efficient. Bit by bit, each piece of negative news in the technology sector has chipped away at that thesis.

Rowen, who did a recent survey of

Agile Software


customers to find out if tech worries were having a negative effect on spending at technology companies, said he still believes in that theory, but only by a matter of degrees. The results of that survey suggested that high-tech companies are still spending on this kind of software, but two customers told him that their automotive businesses had seen dramatic downturns. (Rowen rates Agile hold, and his firm hasn't done underwriting for the company.)

"I do continue to believe that supply-chain software products are least likely to get cut in a downturn," Rowen said in an interview. "But when industries go into lockdown mode, then I do get a little worried. It looks like there's evidence that automotive, in particular, is in a lockdown."

In his report, Rowen wrote, "A general slowdown in manufacturing could threaten all supply-chain software firms. But we believe investors should consider sector-specific exposure before 'throwing the baby out with the bathwater.' "

Wednesday, it was i2 that investors were throwing out.