i2 Technologies’ long search for a buyer ended today with competitor JDA Software’s $346 million (€233 million) offer to purchase the beleaguered supply chain software supplier.

The deal ends an extended period of uncertainty for i2, a once high-flying supply chain specialist whose sales have been on a steady decline since the turn of the century.

In a statement, JDA CEO Hamish Brewer said, "By acquiring i2, we double our addressable market in manufacturing to include discrete manufacturing, complementing our current market leadership in process manufacturing and strengthening our retail and transportation management presence.”

JDA will finance the acquisition with a combination of debt and cash on hand. At the end of its 2008 second quarter, JDA had grown its cash and cash equivalents to $124.5 million (€83.7 million).

On a conference call today to announce the pact, Brewer characterized the deal as part of a natural evolution for JDA and said it rounds out the company’s manufacturing portfolio.

“This really marks the next logical step for JDA in the ongoing transformation and growth of the company,” he said. With its 2006 acquisition of Manugistics, JDA made its first real foray into manufacturing-based supply chain apps via Manugistics’ presence in process industries. The i2 maneuver gives JDA a foothold in discrete markets, where i2 maintains a strong customer base in automotive, high-tech, and semiconductor sectors, for example.

“We believe this completes the picture in terms of JDA’s addressable market in the manufacturing” arena, Brewer said today.

He also painted the i2 deal as the spitting image of the Manugistics acquisition. After a year’s worth of integration efforts and work to root out cost synergies, JDA expects i2 to become a significant contributor to revenue — and even to be accretive to earnings within that span, similar to Manugistics’ performance during its fledgling tenure as part of JDA.

Analysts today had mixed reactions to the deal.

“One thing that concerns me is that there’s a lot of duplication in functionality,” said John Fontanella, vice president of research at AMR Research, in an interview with Managing Automation. Both providers have strong transportation management offerings and retail applications for merchandising, he said, and even show a fair amount of redundancy in advanced planning and scheduling tools.

“It’s true to say that there’s more product overlap with i2 than there was with Manugistics,” JDA’s Brewer conceded on today’s conference call. But he said JDA’s ability to move Manugistics’ customers forward and transition them to a new technology platform is proof of the company’s ability to integrate acquisitions. He also noted that both i2’s and JDA’s technologies rest on a J2EE foundation — synergy that did not exist in the case of Manugistics’ applications. “The overlap [with i2] is definitely manageable,” Brewer said, and promised that the company would release a product roadmap within six weeks of the completed deal.

Despite his concerns about product duplication, Fontanella gave JDA high marks for its performance in absorbing Manugistics, saying that JDA seems to have “turned the ship around,” retaining customers and continuing to sell licenses. “If I were an i2 user right now, I wouldn’t be concerned,” he concluded.

Bob Parker, vice president of research at Manufacturing Insights, was less sanguine about the outlook for the combined company. While he called JDA a logical buyer of i2, he said Manufacturing Insights is advising customers to devise replacement plans for their i2 software deployments.

“At this point I’m not optimistic that JDA can bring the requisite expertise to some of i2’s markets, like automotive [and] high tech,” Parker told Manufacturing Executive. “I don’t think they’ve done a great job with the Manugistics installed base other than their … retail, footwear, and apparel comfort zone.”

Parker said he thinks i2’s greater focus on services and industry expertise could be lost in the shuffle as JDA looks to devise more packaged offerings for smaller, tier 2 customers. “It’s not just [about] the software in the supply chain arena; you really need to bring the expertise,” he said, adding that he would have given better marks to an i2 acquisition by a more service-oriented company, such as IBM or Deloitte.

For its part, IBM recently acquired ILOG, whose business rules engine helps drive i2’s and other companies’ supply chain optimization offerings. IBM paid nearly the same amount for ILOG — $340 million (€229 million) — as JDA has agreed to pay for i2.

i2 and JDA are two of the last survivors of an intense period of consolidation in the supply chain software market over the past decade. i2 persevered mainly by making meals of other software providers, occasionally completing enormous deals, including the $9.3 billion acquisition (€6.2 billion) of online marketplace purveyor Aspect Development during the B2B-crazed days of 2000.

But what looked like a promising path then now reads like a modern-day Paradise Lost. During its heyday, i2 flirted with $1 billion in revenue and enjoyed a market capitalization in the billions. Since then, the company’s sales have declined markedly year over year in what observers eventually realized was a terminal swoon. As of fiscal 2007, i2’s sales had dropped to $260 million (€178 million).

The outsized revenue of i2’s golden years was built on mega-deals, Fontanella said today, a market that has since withered away. “Very few companies are going to sign up for multiyear, multimillion-dollar supply chain [implementations],” he said. One of JDA’s challenges in merging the two companies will be tailoring i2’s technology to tier 2 accounts — companies closer to mid-market size that aren’t apt to sign seven- or eight-figure software deals.

Another poison pill was of i2’s own making. “They tripped over themselves when they overcommitted and underperformed,” Fontanella said. “There were several occasions where i2 had claimed that software existed to do something, and it didn’t exist.”

Parker agreed, noting that for a time the joke among analysts was that new i2 products ran only on the PowerPoint platform — impressive during sales presentations, but disappointing or nonexistent in practice.

The competitive terrain for supply chain applications in the wake of the proposed merger finds SAP and Oracle still atop the heap, analysts agreed. Parker said a number of small, best-of-breed software companies could capitalize on any market uncertainty following the announcement, including Adexa in semiconductor accounts, Aspen Technology in chemicals and oil and gas verticals, Logility in CPG and food and beverages industries, and Kinaxis in material-intensive planning settings such as high-tech, electronics, and aerospace and defense.

JDA expects the transaction to clear antitrust hurdles and close in the fourth quarter, officials said today. They would not reveal their plans for i2’s executives, including CEO Pallab Chatterjee, saying only that JDA would select the best person from either camp to fill each management role.