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To: GST who wrote (117405)	2/11/2001 1:17:29 AM
From: Glenn D. Rudolph	Respond to of 164684

Summary i2 delivered a very solid quarter, capping off another successful year for the supply-chain software leader. Consistent with the company’s Jan. 8 pre-announcement, licenses and total revenues surpassed expectations, with EPS of $0.09 coming in a penny ahead of the Street. The 4Q performance provides further evidence that i2 enjoys one of the strongest positions in applications software. We believe the company has clear-cut market leadership, a pristine ability to execute, strong management and high barriers to entry. As we pointed out in our Oct. 18th Comment, these assets are translating into enormous, long-term engagements at numerous high-profile customers, including 4Q wins at AT&T Wireless, Applied Materials, Alcatel, Hitachi and 118 others. There was little evidence in the 4Q results to suggest that i2’s status as the market gorilla has diminished in recent months. As a result, we remain bullish on i2’s long-term prospects. Although concerns of an IT spending slowdown are ubiquitous, given a softer macroeconomic outlook, i2 is relatively less exposed, in our view. The company’s products enable users to boost their return on assets, accelerate inventory turns and work more effectively with partners. In short, these projects sit near the top of the IT priority stack, particularly within i2’s core high-tech, automotive and consumer-goods markets. Given the underlying market and company fundamentals, i2 is among the priciest in our sector. Even with the recent pull-back, i2 still trades at a lofty 146x CY01E EPS, or 3.3x PEG. The market may take time to rationalize this valuation, particularly against the backdrop of moderating growth. We would Accumulate ITWO on weakness and focus on the return potential over 12-24 months. 4Q00 Highlights i2 Technologies reported 4Q00 EPS of $0.09 on better-than- expected revenue of $377.9 million (+115%) exceeding ML estimates of $0.08 on revenues of $341.5 million. 4Q license revenues of $243.7 million (+121%) were driven by 122 deals in the quarter, up from 104 last quarter, and exceeded our $217.8 million estimate by 12%. Repeat customer license revenue represented 62% of total licenses, up sequentially from 50%. The company signed 50 deals greater than $1 million with 15 exceeding $5 million resulting in an ASP of $1.9 million. Most of the revenue growth came from domestic sales as international sales grew at a modest 6.5% and contributed 36% of total revenues, down from 40% last quarter. The high-tech vertical represented 47% of licenses, automotive and industrial contributed 17% and the consumer goods vertical made up 22%. down y/y due to commissions paid to IBM. Operating margins continue to expand, up 350 basis points y/y to 17.4% during the quarter. Sales and marketing expenses of $127.4 million were 33.7% of revenues as i2 added 36 new sales reps to end the year with 580, but as expected R&D was down as a percentage of revenues to 17.4% and G&A was in line at 7.0%. Cash grew by $100 million over last quarter to $823 million as i2 continues to drive very strong cash flow. Deferred revenues increased $2.1 million sequentially and DSOs decreased slightly q/q to 71 days (from 74 days) due to a tight focus on collections. Outlook We continue to view i2 as a well positioned enabler of the new economy. The company boasts some of the strongest fundamentals in the enterprise software sector, with visibility into the coming quarter that is as good as ever, in our view. Our concerns are primarily related to valuation, particularly as i2’s growth spools down in the quarters ahead as the company anniversaries the ASDV acquisition. Note that on a pro forma basis (ASDV in all periods), i2 grew licenses 81% from 1999 to 2000, but our conservative pro forma estimate is 40% licenses growth in 2001.

To: GST who wrote (117405)	2/11/2001 1:17:29 AM
From: Glenn D. Rudolph	Respond to of 164684

Summary i2 delivered a very solid quarter, capping off another successful year for the supply-chain software leader. Consistent with the company’s Jan. 8 pre-announcement, licenses and total revenues surpassed expectations, with EPS of $0.09 coming in a penny ahead of the Street. The 4Q performance provides further evidence that i2 enjoys one of the strongest positions in applications software. We believe the company has clear-cut market leadership, a pristine ability to execute, strong management and high barriers to entry. As we pointed out in our Oct. 18th Comment, these assets are translating into enormous, long-term engagements at numerous high-profile customers, including 4Q wins at AT&T Wireless, Applied Materials, Alcatel, Hitachi and 118 others. There was little evidence in the 4Q results to suggest that i2’s status as the market gorilla has diminished in recent months. As a result, we remain bullish on i2’s long-term prospects. Although concerns of an IT spending slowdown are ubiquitous, given a softer macroeconomic outlook, i2 is relatively less exposed, in our view. The company’s products enable users to boost their return on assets, accelerate inventory turns and work more effectively with partners. In short, these projects sit near the top of the IT priority stack, particularly within i2’s core high-tech, automotive and consumer-goods markets. Given the underlying market and company fundamentals, i2 is among the priciest in our sector. Even with the recent pull-back, i2 still trades at a lofty 146x CY01E EPS, or 3.3x PEG. The market may take time to rationalize this valuation, particularly against the backdrop of moderating growth. We would Accumulate ITWO on weakness and focus on the return potential over 12-24 months. 4Q00 Highlights i2 Technologies reported 4Q00 EPS of $0.09 on better-than- expected revenue of $377.9 million (+115%) exceeding ML estimates of $0.08 on revenues of $341.5 million. 4Q license revenues of $243.7 million (+121%) were driven by 122 deals in the quarter, up from 104 last quarter, and exceeded our $217.8 million estimate by 12%. Repeat customer license revenue represented 62% of total licenses, up sequentially from 50%. The company signed 50 deals greater than $1 million with 15 exceeding $5 million resulting in an ASP of $1.9 million. Most of the revenue growth came from domestic sales as international sales grew at a modest 6.5% and contributed 36% of total revenues, down from 40% last quarter. The high-tech vertical represented 47% of licenses, automotive and industrial contributed 17% and the consumer goods vertical made up 22%. down y/y due to commissions paid to IBM. Operating margins continue to expand, up 350 basis points y/y to 17.4% during the quarter. Sales and marketing expenses of $127.4 million were 33.7% of revenues as i2 added 36 new sales reps to end the year with 580, but as expected R&D was down as a percentage of revenues to 17.4% and G&A was in line at 7.0%. Cash grew by $100 million over last quarter to $823 million as i2 continues to drive very strong cash flow. Deferred revenues increased $2.1 million sequentially and DSOs decreased slightly q/q to 71 days (from 74 days) due to a tight focus on collections. Outlook We continue to view i2 as a well positioned enabler of the new economy. The company boasts some of the strongest fundamentals in the enterprise software sector, with visibility into the coming quarter that is as good as ever, in our view. Our concerns are primarily related to valuation, particularly as i2’s growth spools down in the quarters ahead as the company anniversaries the ASDV acquisition. Note that on a pro forma basis (ASDV in all periods), i2 grew licenses 81% from 1999 to 2000, but our conservative pro forma estimate is 40% licenses growth in 2001.

To: GST who wrote (117405)	2/11/2001 1:17:29 AM
From: Glenn D. Rudolph	Respond to of 164684

Summary i2 delivered a very solid quarter, capping off another successful year for the supply-chain software leader. Consistent with the company’s Jan. 8 pre-announcement, licenses and total revenues surpassed expectations, with EPS of $0.09 coming in a penny ahead of the Street. The 4Q performance provides further evidence that i2 enjoys one of the strongest positions in applications software. We believe the company has clear-cut market leadership, a pristine ability to execute, strong management and high barriers to entry. As we pointed out in our Oct. 18th Comment, these assets are translating into enormous, long-term engagements at numerous high-profile customers, including 4Q wins at AT&T Wireless, Applied Materials, Alcatel, Hitachi and 118 others. There was little evidence in the 4Q results to suggest that i2’s status as the market gorilla has diminished in recent months. As a result, we remain bullish on i2’s long-term prospects. Although concerns of an IT spending slowdown are ubiquitous, given a softer macroeconomic outlook, i2 is relatively less exposed, in our view. The company’s products enable users to boost their return on assets, accelerate inventory turns and work more effectively with partners. In short, these projects sit near the top of the IT priority stack, particularly within i2’s core high-tech, automotive and consumer-goods markets. Given the underlying market and company fundamentals, i2 is among the priciest in our sector. Even with the recent pull-back, i2 still trades at a lofty 146x CY01E EPS, or 3.3x PEG. The market may take time to rationalize this valuation, particularly against the backdrop of moderating growth. We would Accumulate ITWO on weakness and focus on the return potential over 12-24 months. 4Q00 Highlights i2 Technologies reported 4Q00 EPS of $0.09 on better-than- expected revenue of $377.9 million (+115%) exceeding ML estimates of $0.08 on revenues of $341.5 million. 4Q license revenues of $243.7 million (+121%) were driven by 122 deals in the quarter, up from 104 last quarter, and exceeded our $217.8 million estimate by 12%. Repeat customer license revenue represented 62% of total licenses, up sequentially from 50%. The company signed 50 deals greater than $1 million with 15 exceeding $5 million resulting in an ASP of $1.9 million. Most of the revenue growth came from domestic sales as international sales grew at a modest 6.5% and contributed 36% of total revenues, down from 40% last quarter. The high-tech vertical represented 47% of licenses, automotive and industrial contributed 17% and the consumer goods vertical made up 22%. down y/y due to commissions paid to IBM. Operating margins continue to expand, up 350 basis points y/y to 17.4% during the quarter. Sales and marketing expenses of $127.4 million were 33.7% of revenues as i2 added 36 new sales reps to end the year with 580, but as expected R&D was down as a percentage of revenues to 17.4% and G&A was in line at 7.0%. Cash grew by $100 million over last quarter to $823 million as i2 continues to drive very strong cash flow. Deferred revenues increased $2.1 million sequentially and DSOs decreased slightly q/q to 71 days (from 74 days) due to a tight focus on collections. Outlook We continue to view i2 as a well positioned enabler of the new economy. The company boasts some of the strongest fundamentals in the enterprise software sector, with visibility into the coming quarter that is as good as ever, in our view. Our concerns are primarily related to valuation, particularly as i2’s growth spools down in the quarters ahead as the company anniversaries the ASDV acquisition. Note that on a pro forma basis (ASDV in all periods), i2 grew licenses 81% from 1999 to 2000, but our conservative pro forma estimate is 40% licenses growth in 2001.

To: GST who wrote (117405)	2/11/2001 1:23:49 AM
From: Glenn D. Rudolph	Respond to of 164684

Solid 4Q Performance Summary i2 delivered a very solid quarter, capping off another successful year for the supply-chain software leader. Consistent with the company’s Jan. 8 pre-announcement, licenses and total revenues surpassed expectations, with EPS of $0.09 coming in a penny ahead of the Street. The 4Q performance provides further evidence that i2 enjoys one of the strongest positions in applications software. We believe the company has clear-cut market leadership, a pristine ability to execute, strong management and high barriers to entry. As we pointed out in our Oct. 18th Comment, these assets are translating into enormous, long-term engagements at numerous high-profile customers, including 4Q wins at AT&T Wireless, Applied Materials, Alcatel, Hitachi and 118 others. There was little evidence in the 4Q results to suggest that i2’s status as the market gorilla has diminished in recent months. As a result, we remain bullish on i2’s long-term prospects. Although concerns of an IT spending slowdown are ubiquitous, given a softer macroeconomic outlook, i2 is relatively less exposed, in our view. The company’s products enable users to boost their return on assets, accelerate inventory turns and work more effectively with partners. In short, these projects sit near the top of the IT priority stack, particularly within i2’s core high-tech, automotive and consumer-goods markets. Given the underlying market and company fundamentals, i2 is among the priciest in our sector. Even with the recent pull-back, i2 still trades at a lofty 146x CY01E EPS, or 3.3x PEG. The market may take time to rationalize this valuation, particularly against the backdrop of moderating growth. We would Accumulate ITWO on weakness and focus on the return potential over 12-24 months. 4Q00 Highlights i2 Technologies reported 4Q00 EPS of $0.09 on better-than- expected revenue of $377.9 million (+115%) exceeding ML estimates of $0.08 on revenues of $341.5 million. 4Q license revenues of $243.7 million (+121%) were driven by 122 deals in the quarter, up from 104 last quarter, and exceeded our $217.8 million estimate by 12%. Repeat customer license revenue represented 62% of total licenses, up sequentially from 50%. The company signed 50 deals greater than $1 million with 15 exceeding $5 million resulting in an ASP of $1.9 million. Most of the revenue growth came from domestic sales as international sales grew at a modest 6.5% and contributed 36% of total revenues, down from 40% last quarter. The high-tech vertical represented 47% of licenses, automotive and industrial contributed 17% and the consumer goods vertical made up 22%. Gross margins for the quarter increased to 74.4% but were down y/y due to commissions paid to IBM. Operating margins continue to expand, up 350 basis points y/y to 17.4% during the quarter. Sales and marketing expenses of $127.4 million were 33.7% of revenues as i2 added 36 new sales reps to end the year with 580, but as expected R&D was down as a percentage of revenues to 17.4% and G&A was in line at 7.0%. Cash grew by $100 million over last quarter to $823 million as i2 continues to drive very strong cash flow. Deferred revenues increased $2.1 million sequentially and DSOs decreased slightly q/q to 71 days (from 74 days) due to a tight focus on collections. Outlook We continue to view i2 as a well positioned enabler of the new economy. The company boasts some of the strongest fundamentals in the enterprise software sector, with visibility into the coming quarter that is as good as ever, in our view. Our concerns are primarily related to valuation, particularly as i2’s growth spools down in the quarters ahead as the company anniversaries the ASDV acquisition. Note that on a pro forma basis (ASDV in all periods), i2 grew licenses 81% from 1999 to 2000, but our conservative pro forma estimate is 40% licenses growth in 2001.