RealTime IT News

Online Auto Pact Sends i2 Shares on Wild Ride

If you were an i2 Technologies shareholder on Friday, it must have been like being in the passenger seat during a carjacking. One minute everything's going fine, and the next you're praying there's not a crash.

The supply-chain software vendor entered Friday on a tremendous roll, its stock having nearly doubled from the Jan. 31 closing price of 96 5/16 thanks to some high-profile customer wins and partnerships, the latest being a joint Web site with Toyota that will sell replacement auto parts to dealers and service professionals.

After zooming up from Thursday's closing price of 176-5/16 to an all-time high of 197-1/4, another online auto parts alliance began driving shares of (ITWO) - but driving them down, and at a breakneck pace.

News that i2 would not be part of an online auto parts exchange planned by General Motors, Ford and Daimler Chrysler caused a panic among recently ebullient shareholders, triggering a flash freefall that sent ITWO as low as 129-3/4 in heavy trading.

It was a market overreaction that was soon corrected. ITWO shares rallied to finish the day Friday at 150 19/64. That recovery continued into Monday's session, with the stock selling in the mid-afternoon at 168 3/8 - just slightly below Wednesday's closing price of 169-3/4.

All that adrenaline and we're essentially right back where we started. Which means we can step back, take a deep breath and look at the big picture regarding i2. It's understandable that investors would be concerned that i2 appears to be left out of the multibillion-dollar auto parts alliance, especially since it has been the technology partner (along with Commerce One (CMRC)) for GM's current solo Web site for car parts, TradeXchange.

But investors need to keep in mind two things: 1) i2's supply-chain software can run on top of software from Commerce One and Oracle, the two companies chosen by the auto makers to provide technology for the joint Web venture, so a future role cannot be ruled out; 2) While a piece of this action would be nice, i2 has a lot of other lucrative irons in the fire, with recently announced deals with United Technologies and Honeywell International to set up a Web site for airplane parts, as well as the arrangement with Toyota.

With revenue of $557 million last year and four years of increasing earnings per share, i2 Technologies is a leader in the e-commerce software world. And as more traditional companies take advantage of the cost-savings provided by the Internet, demand for supply-chain software will only increase. As that happens, no other company will be in a better position to benefit than i2.

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