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Technology Stocks : i2 Technologies -- Ignore unavailable to you. Want to Upgrade?

To: D. K. G. who wrote (1064)	12/18/1998 6:32:00 PM
From: Shane M	Respond to of 2339

I was coming to post the information on Cooper and the upgrade, but the thread was on top of things. Of particular importance: this upgrade supports/confirms what Sanjiv was saying in the CC - that SAP is all rhetoric right now. Also, from a competitive viewpoint, I think its significant to ITWO investors to note that Oracle recently mentioned strong price competition from SAP in the ERP space. Its not looking as if SAP is going to be able to "coast" with its core business and be able to focus on attacking ITWO. This is good for ITWO IMO. Shane

To: D. K. G. who wrote (1064)	12/21/1998 4:25:00 PM
From: D. K. G.	Read Replies (1) \| Respond to of 2339

Top Stories: Slow Leak Ahead for SAP? fnews.yahoo.com Silicon Valley Dec 21, 1998 By Medora Lee and Dan Colarusso Staff Reporters SAN FRANCISCO -- More bad news in the offing for corporate-software makers. Wall Street analysts, wary of SAP's (NYSE:SAP - news) outlook for the next couple of quarters, are considering revising down their expectations for the German software giant's fourth-quarter. The world's largest provider of enterprise resource planning software, or software that automates back-office tasks, is lagging behind in product development, analysts interviewed say. That is giving competitors like i2 Technologies (Nasdaq:ITWO - news) an edge. Other warning signs they cite: The departure of the executive in charge of SAP's U.S. supply-chain software and concerns that the company's aggressive pricing tactics may backfire. The consensus among analysts polled by First Call calls for SAP to earn 25 cents per ADR in the fourth quarter. SAP is slated to post results on Jan. 26. Joe Cooper at First Call says that estimate has remained constant since Oct. 22, but some analysts say those estimates may be too high. Hambrecht & Quist stands on the bearish end of the spectrum, estimating 22 cents this quarter. And CS First Boston analyst George Gilbert says those figures are probably "a little rich." Gilbert forecasts SAP's year-over-year product revenue to grow 23% in the fourth quarter to $1.1 billion, while H&Q sees it rising 12% to $985 million. (Neither firm has an underwriting relationship with SAP.) Analysts may not be downgrading SAP yet, but they're offering signs that they may do so soon. Hambrecht said in a report this month that it expected "some further downward adjustments in consensus estimates for 1999." Gilbert, who says he's looking at SAP in light of its competitors, upgraded SAP competitor i2 to strong buy from buy. A key reason cited by Gilbert is that i2, whose software helps companies manage their supply chain, "is remaking supply chain planning into the machinery of e-business" while SAP's development efforts have been below expectations. SAP options activity in the last two weeks suggests potential weakness in the company's stock. Traders said they've seen put buying in January options and that open interest at the 35 and 40 strike prices is relatively high. Put options give buyers the right but not obligation to sell shares at a specified price. Implied options volatility, which traders use to gauge the chances of a potential stock price move, has also risen to 70 percent from the low 60s since November for SAP, according to Paul Foster, an options strategist with 1010WallStreet.com. Because SAP has seen its main market for ERP software slow, it has been trying to get into new areas like the supply chain market, which is dominated by companies like i2 and Manugustics (Nasdaq:MANU - news) . It's entering the market just when ERP revenue growth is expected to slow to about 35% annually for the next five years, down from about 50% over the last few years. SAP may face another barrier in supply-chain software. Gilbert says he confirmed on Thursday that John Lee, the highly visible head of SAP's U.S. supply chain effort, has left the company. Gilbert sees that as a negative because "we believe Lee was part of a faction making an unsuccessful push for a major acquisition to accelerate time-to-market" of supply chain products. An SAP spokesperson couldn't confirm that Lee had departed, but said he wasn't on the company's phone list. Other analysts note that SAP's recent use of aggressive pricing against companies like PeopleSoft (Nasdaq:PSFT - news) may come back to haunt the company. Pressuring prices down can build market share, but it can also squeeze a company's margins. In a conference call last week, Oracle (Nasdaq:ORCL - news) CFO Jeff Hanley addressed SAP's "very, very aggressive" pricing tactics, saying that he expected SAP would come to rue the price war it's waging if it lasts much longer. Some analysts agree with Hanley. "It can't be good for them in the long-term if they continue to do this," said one analyst, whose firm has not underwritten for SAP. © 1998 TheStreet.com, All Rights Reserved.