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ITWO Conference Call Notes

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By Woolybooger1
January 18, 2001

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CC: Notes

Just a short disclaimer; my first effort at putting up notes. While I think all the info is very accurate, listening to the CC itself is a great way to get the feel of the Management's idea of their place in the Market.

Also, do not take notes [on] the Fool. My RoadRunner dropped its connection halfway through and all my notes were lost. Instead I recommend taking your notes on your word processor and then pasting it to the Fool so if that happens you don't have to do it again; just food for thought.

MILESTONES

Shattered the One Billion Mark in Revenue with 1.12 Billion in Revenue for year 2000

(1) ITWO and Aspect the previous year brought in 875,000,000 in Revenue, and increase of 28%

(2) Total revenue growth accelerated to 97% in year 2000
This is up substantially from previous years and considering the scale of the organization is remarkable.

(3) Licensee revenues were up 101% from 1999

(4) Operating income tripled up 219%

(5) Net income was up 251% on a Pro forma Basis

Was quite specific about was Pro forma excluded to be clear on the details. Excluded the following:

1. Amortization of intangibles.
2. Write-offs of in process R&D and acquisition related expenses.
3. Non-recurring charges.
4. Employer Taxes on stock option exorcised.
5. Net Losses realized on Minority investments.

Quarter Revenue were at a record level of 378 Million $$$$ equating to a yearly revenue of 1.5 Billion. This equates to a 116 year over year quarter growth from last year 1999.

Software license revenue was particularly strong with 120% growth year over year alone and including Aspect was up 84%.

Pro forma Operating Income was up over 160% on a quarter over quarter basis.

Pro forma EPS for the quarter was $.09, year was $.26

Sequential license growth for the 4th quarter alone was 21% rising to 244 Million $$$$

High Tech was 47% of license revenue
Automotive and Industrial was 17%
Consumer goods and Retail was 22%

International revenue made up 33% in the 4th quarter

Gross Margins were up just slightly 74% vs 73% down overall from previous because of commissions paid to IBM in the Deal with them.

Operating Margins were 17% for the 4th quarter and 14% for the year 2000, which was above the predicted estimate of 11% for the year. Compare to operating Margin in 1999 of 8%.

This is a reflection of the intensive investment I2 has made in R &D in its earlier years.

ITWO employees now stands at 5650, roughly up 2X where they were 1 year ago. Sales reps grew to 580 from 544 in the 3rd quarter. This was up from 253 at the beginning of year 2000.

ITWO still has the largest R & D staff in e-business at 1875 employees working on developments. R & D has come down as a percentage of Gross revenue as expected.


CASH FLOW

60 Million dollars positive Cash flow for the 4th quarter alone and 180 Million dollars for year 2000. Cash and investments now exceed 820 Million $$$$$$.

Deferred revenue was slightly up 166 Million dollars, but was quick to be pointed out that this did not include shady numbers such as contracts booked without money collected and excludes most of end of quarter business which would boost number artificially.

They have # 1 Market presence in Key Spaces.
They have the most sophisticated and difficult IP technology to replicate in the industry.


Expectations for 1st Quarter 2001

361 Million dollars in total revenue
EPS up $.06 on a Pro forma Basis

For Year 2001

Total revenue up to 1.64 Billion, 1.02 Billion of which will be license revenue. EPS for the year $.37.


Milestones in Short

Largest software e-business merger with Aspect Development.

Now are the Only company with a complete e-solutions Footprint.

Provided to their customers over 16 Billion dollars in Hard Value solutions with the ITWO Product.

Goal is to deliver over $75 Billion of value to their customers over the next 5 years.

Company employees has grown from 2800- to over 5600, the largest in the e-commerce business

Goal is to give other Businesses Mastery over their supply chains. They think ITWO is at the right place at the right time with the right product.

Pointed out that ITWO is especially beneficial to other companies in not only a growing economy, but also in a slowing economy because their product helps maximize returns for business when it means the most.

STRATEGY FOR THE FUTURE

(Background things first)

ITWO now has over 1000 customers and wants to build on that

ITWO will continue to strive to work with multiple different architectures that exist in the Market today.

ITWO competed on 111 deals, .won 75% of those. Mainly ORCL and SAP

Strategy with 5 Key Components

(1) Multicompany solutions, planning and transaction management solutions.
Customer Relationship Management
Supply Chain Management
Supply Relationship Management

(2) Embedded Physical Execution
(3) Content
(4) Networking; bringing buyers and sellers together across the Internet.
(5) Open Strategy. ITWO is the 2 in B2B and wants to be open to supporting not only its products, but also those of those that it partners with.


FUTURE OUTLOOK

ITWO does not see much of an economic slowdown in spite of the Stock Market slowdown.

They expect to cross the 5 Billion dollar revenue Mark in the next few years.

They expect to gain more Market share in that they are the One-Stop-Shop for e-business solutions and are ahead of their competitors.


Overall many congrats and some questions about R&D and their ability to grow in a slowing economy. To a person the Management was very upbeat and optimistic about the future and felt they were gaining Market share in the US as well as in foreign Markets.

Hope all this helps the ITWO investors that visit this Board. Thanks to all who add when they visit here.

Woolybooger