ITWO ($14-->$11)net loss widens, warns of more job cuts
By Siobhan Kennedy
(changes headline, and byline, recasts lead, adds conference call comments, analysts quote, details throughout)
NEW YORK, July 18 (Reuters) - Business-to-business software company i2 Technologies Inc. (NasdaqNM:ITWO - news) on Wednesday posted a wider net loss in the second quarter than a year ago, amid charges for bad debt and job cuts, and warned that more cuts lay ahead.
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``It did turn out even tougher than expected,'' i2 Chief Executive Greg Brady said in a conference call with analysts.
i2, once a high flyer in the market for software that brings buyers and sellers together online, posted a net loss, including charges, of $861 million, or $2.08 a share, compared with a loss of 281 million, or 83 cents a share in the year ago period.
Still, on a pro forma operating basis, excluding the charges, the company posted a loss in line with drastically lowered Wall Street expectations, as revenues slightly dipped in tough market conditions.
The Dallas-based company, which makes software that lets businesses share product catalog data with suppliers via the Web, said on a pro forma basis for the second quarter it lost $66 million, or 16 cents a share. That compares with a profit of $20 million, or 5 cents per share, in the year-ago quarter.
These results included a previously disclosed charge of about $26 million, or about 4 cents a share, to cover the write-off of bad customer debts. Excluding this charge, and other non-cash items to cover the write-off of acquisition-related costs, the company reported a pro forma net loss of 12 cents a share.
Analysts, who the company twice during the quarter had guided to cut their estimates, were, on average, looking for i2 to post a loss of 12 cents a share, according to Thomson Financial/First Call. Estimates ranged between a loss of 13 cents and a loss of 6 cents a share.
Prior to i2's latest warning -- issued earlier this month -- analysts had expected the company to post a loss of 6 cents a share on revenue of $282 million.
``This is a multi-quarter recovery for i2,'' said Brent Thill, an analyst with brokerage firm Credit Suisse First Boston. ``It is not going to happen over night.''
Bill Beecher, i2's chief financial officer, admitted as much on the conference call.
``We have plans in place to return i2 to profitability but timing is uncertain in light of market conditions,'' he said.
``We cannot predict when revenue visibility will improve at this time,'' Beecher said.
MORE JOB CUTS COMING
The company, which laid off 14 percent of its work force during the first quarter, said it had more job cuts to come. The second quarter net results also included a restructuring charge of $33 million to cover the job cuts and office closings.
``Faced with continued market weakness and an expected operating loss in our third quarter, we will be forced to make difficult decisions regarding further reductions in our work force and expense structure,'' Beecher said, although he offered no exact details on where the further cuts would come.
For the second quarter, i2 said it had cut total costs and expenses down to $322 million, excluding the charge to cover bad debt, from $350 million in the first quarter of 2001.
Meanwhile, i2's second-quarter revenue fell to $241 million from $243 million last year and compared with the analysts' downwardly revised consensus of $237.6 million, according to First Call.
Sales of software licenses tumbled to $106 million compared to license revenues of $150 million in the second quarter of 2000.
``The news here is that the economy continues to take its toll,'' said Steve Bowen, an analyst with brokerage firm First Analysis, adding that the company gave no detailed financial guidance on the conference call.
``The little tidbit they said is that they expect revenues to decline sequentially but that was it,'' Bowen said, referring to the third quarter compared to the second.
The fact that i2 made the cautious comments on its third quarter revenue means that analysts are likely to reduce their third quarter estimates further still, Tom Berquist, an analyst with Goldman Sachs said.
``Their comments on the third quarter were a little bit more negative than the ones they made when they preannounced second quarter earnings on July 1,'' Berquist said.
He added: ``It's likely that analysts will take their numbers down again.''
DEPENDENCY ON BIG DEALS
i2, like the majority of business software companies, is highly dependent on booking sales late each quarter, which makes it vulnerable to unexpected financial disappointments if key contracts fail to materialize.
For i2, the situation is worse because it is typically dependent on large, multimillion dollar software deals, rather than a more diverse range of customer contracts large and small. It has also suffered from the concentration of its customer base among hard-hit high-tech firms where rivals have targeted a wider range of industries.
The stock, once one of the highfliers of the Internet economy, has tumbled since March 2000, along with much of the B2B sector.
Since the beginning of this year, i2 has lost 76 percent of its value and has underperformed the S&P 500 software index by 74 percent. The software index of 18 components has gained 10 percent so far this year. |
