i2 Technologies announced yesterday that it will surpass revenue and operating income projections for its fourth quarter. Even more interesting is the company's new partnership with A.T. Kearney, a consulting division of EDS. i2 and A.T. Kearney will go after the strategic sourcing market, which many see as a lucrative new possibility for B2B companies. With this move, i2 will be competing even more with Ariba. Questions remain for i2, though, about this move beyond its core business.
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i2 Technologies (Nasdaq: ITWO) had positive words for the market yesterday afternoon. The supply chain management software company said it will top sales and operating income expectations when it officially announces fourth-quarter results after the market's close on Jan. 17. i2 also announced a new partnership yesterday that will strengthen its position in strategic sourcing services, which many see as a strong growth sector for B2B companies. Expected Q4 results Analysts are expecting i2 to report operating income of $51 million. i2 said yesterday that it will "strongly exceed" that projection. The company didn't speak directly to earnings per share targets, but analysts are looking for $0.08 a share. i2 earned $0.05 a share in the year-ago period. New partnership The product and service offerings from the combination will be called 2Source. i2 brings its software to the table, while A.T. Kearney brings the consultants. i2's and Ariba's previous moves When asked about the decision to go with A.T. Kearney over another possible partnership with Ariba, i2 executive Baxtor Nairon said, "Ariba remains an important partner, but because of time issues, we decided to focus our strategic sourcing efforts fully on A.T. Kearney." Looks like Ariba and i2 will be going head-to-head in this market, which could potentially create some bad blood in its e-business solutions partnership with IBM (NYSE: IBM). It seems likely, though, that the companies will continue to partner when it makes sense, and they won't when it doesn't. New focus In next week's release, look for any top or bottom line evidence that bears on these three questions:
i2 expects revenues for the fourth quarter to be more than $370 million. Analysts had expected $343 million. For the year, i2's revenues will be over $1.1 billion. The company earned $319.5 million in last year's fourth quarter. i2 expects license revenues to more than double from last year's.
On the partnership front, i2 signed a deal with EDS (NYSE: EDS) consulting arm A. T. Kearney which boasts, according to the company, "the largest Strategic Sourcing practice of any major consulting firm." Strategic Sourcing provides Net solutions that help companies cost-effectively locate and negotiate with reliable suppliers -- both for commodity raw materials and indirect maintenance and operating supplies.
i2 stepped into the strategic sourcing pond when it bought Aspect Development last year. Ariba (Nasdaq: ARBA) is also in this market, mainly through the firm's purchase of SupplierMarket last year, and with the opening of its Ariba Sourcing unit.
The most interesting things in i2's upcoming earnings release will likely be tied to areas outside the company's core supply chain planning focus. With its accelerating moves into the supplier content and strategic sourcing markets, i2 continues to branch out into Ariba's traditional turf.
Time will bear out the answers for these questions. For now, though, it appears that i2 is growing rapidly and is positioned for even more growth in the future.
Find out more about B2B companies in this year's Industry Focus.
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