I2 to cut staff by 30 per cent

Supply chain software maker i2 Technologies Inc. said Tuesday that it plans to cut 30 per cent of its 4,600 employees after a disappointing – and unprofitable – quarter marked by declining software sales.

I2’s second-quarter revenue came in at US$120 million, a 52 per cent drop over the $249 million posted in the year-ago quarter.

Meanwhile, its software license revenue sank 75 per cent to $26 million from $106 million posted in the year-ago quarter. Software license revenue also dropped 56 per cent over sequential quarters; in the first quarter of this year, i2 posted $59 million in software license revenue.

In response, the Dallas company announced a restructuring plan aimed at trimming operating costs by at least 30 per cent by year-end. Layoffs are part of the cost-cutting plan. In addition, i2 will move more software development work to India, migrate its software to more standard modules, and work to reduce product overlap, executives said.

“We are intensely focused on returning the company to profitability as quickly as possible,” said Sanjiv Sidhu, i2’s chairman and CEO who resumed the chief executive post in April after then-CEO Greg Brady resigned.

In a conference call with analysts, Sidhu attributed i2’s disappointing results to a slump in demand for business software and smaller deal sizes.

The company expects to take a restructuring charge of over $50 million in the third quarter to cover severance, facilities closures and other costs associated with the restructuring plan.

The layoffs announced Tuesday are not i2’s first. The company has trimmed 25 per cent of its workforce – 1,600 employees – over the last 18 months.

“To some degree, we are moving i2 back in time to resemble the smaller, but more nimble and focused company of some years ago. We believe we are on the right path,” said Bill Beecher, i2’s chief financial officer, in the conference call.

AMR Research Inc. says that although i2’s sales pipeline is strong, sign-offs have been stalled. Questions about the company’s viability have been raised. “If this is truly the bottom and the restructuring works well, then the wound will probably be cauterized,” AMR Research wrote in a research brief published this week. “However, masterful execution will not be entirely in i2’s hands in this challenging economy.”