i2 Technologies (ITWO:Nasdaq - news) is the leading maker of supply-chain management software, which links manufacturers to their suppliers and customers, letting each hold less inventory and respond more quickly to changing markets.
Operationally, this company is doing just fine. New orders, cash flow and cash on hand are all in good shape, though this is masked (as it is for many other tech companies) by massive amortization of goodwill. Basically, goodwill is born when one company buys another for more than its book value, creating an "intangible" asset which is then written off over the next few years. It doesn't represent a cash outflow, but does lower reported net income. i2, for instance, had operating earnings of 26 cents a share in 2000, but lost $4.83 a share when goodwill and other intangibles were included.
Clearly, i2, along with most other tech companies, overpaid for last year's acquisitions. But since they paid with their own ridiculously overvalued stock, it's pretty much a wash, affecting reported earnings but not much else going forward.
This stock peaked at around $100 a share last year and is now at $16. Yet there's no doubt the global market for supply-chain management software will eventually be huge, once the recession ends. Just about every company is part of a supply chain that can be made more efficient. And i2 is the best in that business.
thestreet.com |
