In a reversal of its revenue results from a year ago, supply chain management software provider i2 Technologies today reported an 18% increase in profit, while total revenue was down 7% for the quarter ended Sept. 30.
A 49% drop in software license revenue was the main contributor to the company's lower quarterly total of $66.5 million, compared with $71.4 million in the like period last year. Total revenue from "software solutions" — which include core license revenue, recurring license revenue, and fees collected for developing licensed functionality — was $10.5 million, compared with $20.6 million a year ago.
Services revenue, however, jumped 24% year over year, totaling $33.4 million, and representing the third consecutive quarter in which services revenue grew by at least 20% year over year. Maintenance revenue dropped 5% to $22.6 million.
Meanwhile, net income in the quarter was $4.5 million, or $0.17 per diluted share, compared with $3.8 million ($0.15 per diluted share) in the third quarter of 2006. The company has consistently reduced its operating costs, which amounted to $58.9 million in the period, down 9% from $64.7 million in the like period last year.
"Our total bookings were lower than our expectations," even after accounting for seasonal softness during the quarter, interim CEO Pallab Chatterjee said on a conference call with investors today. Bookings in the third quarter totaled $46.5 million, including $7 million in software solutions bookings, compared with total bookings of $56.4 million and software bookings of $7.8 million in the like period of 2006.
Chatterjee also detailed i2's plans to accelerate sales in specific focus areas announced earlier in the year. These areas include the restructuring of the sales organization around client business managers who specialize in specific supply chain industries, as well as the appointment of "executive affiliates," seasoned industry veterans who will work with the sales team to gain access to potential customers.
i2 also plans to build out its services organization, an area where the company continues to excel.
"We're not just growing the services business for the sake of growing; we're growing it profitably," Chatterjee said, pointing to an expansion of its managed service offerings announced last month.
In addition, Chatterjee said, the company will announce a new service offering at its annual Directions conference next week, designed to create custom supply chain workflows and analytics based on its Business Content Library, a collection of 450 supply chain KPIs.
In a separate announcement today, i2 said that its board of directors has formed a strategic review committee to evaluate possible options for increasing shareholder value, including joint ventures, partnerships, acquisitions, or a merger or sale of the company. Officials said the company would not release information related to the exploratory process in advance of the board's approval of a decision. The review is expected to conclude at the end of January 2008.
Commenting on the announcement, AMR research director Lora Cecere told Managing Automation, "i2 continues to find its way through a turbulent supply chain planning market. Its continued success in the logistics market is a testimonial to the residual market value of the assets of the company."
I2 also said that its board has identified "some outstanding candidates" to serve as permanent CEO, including Chatterjee, who was named interim CEO in July following the resignation of former Chief Executive Michael McGrath. The company plans to make the appointment following the conclusion of the exploratory process.