i2 Eyes A Comeback

The Dallas company's stock has been trading on the National Quotation Service Bureau, known as the over-the-counter Pink Sheets, under the ticker "ITWH" since May 2003. "The relisting of our stock on the NASDAQ National Market will represent another important milestone as we continue to make progress toward returning i2 to profitability," said i2 CEO Michael McGrath in a statement.

The company's troubles began back in fall 2001, when a former i2 executive made allegations related to revenue recognition and financial reporting, according to an SEC report filed by i2. The board asked i2's audit committee to conduct an internal investigation of the allegations. In June 2004, the SEC brought enforcement proceedings against i2 for misstating approximately $1 billion of software license revenue, including more than $125 million of revenue it should never have recognized, over a nearly five-year period that ended in 2002. I2 settled the enforcement proceedings by consenting to a cease-and-desist order finding that the company violated the antifraud, internal controls, record-keeping, and reporting provisions of the federal securities laws, and paid a $10 million penalty.

In February, i2 ended a seven-month CEO search when the company's board hired McGrath to replace i2 founder Sanjiv Sidhu, who stepped down as CEO but remains chairman. "For the first 90 days, McGrath has made some good moves, including reorganizing the company to focus on industries instead of products," says Alexi Sarnevitz, research director of retail at AMR Research. "Supply chain companies need to focus on industry-specific applications because [industries] are all very different. For example, it may seem a minor point, but retail can add hundreds of thousands of new vendor items per year. Compare this with aerospace and defense companies such as Boeing, [which] may add five to 10."

The applications groups include Consumer Products, Retail and Distribution, AAIM (automotive, aerospace and defense, industrial and metals), and High Tech.

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