Monday, August 11, 2008

JDA to acquire i2, creating major SCM player

i2's quest for a buyer has ended, with the announcement of an acquisition by competitor JDA. In 2005, JDA acquired one of the other major supply chain management vendors, Manugistics. Now with it's pick up of i2, it is poised to be the dominant best-of-breed developers of supply chain management (SCM) systems worldwide, with revenues exceeding $600 million and over 6,000 customers.

Even with the combination of i2 and JDA, however, the supply chain management marketplace is still highly fragmented, with dozens, maybe hundreds of niche players. Custom software also plays an important role. Still, JDA will now have a strong array of product offerings for both discrete and process manufacturers and distributors.

But JDA faces more formidible competition. Over the past five years, Oracle and SAP have greatly enhanced their SCM offerings. Though in some ways they still lag functionality now in JDA's portfolio, their promise of ready integration with their own ERP systems is quite attractive to customers of these Tier I ERP vendors.

i2 has been languishing over the past five years. The acquisition by JDA should be a welcome development for i2's customers.

The parties expect the deal to close in the fourth quarter of 2008. JDA's press release it on its website.

Word of the deal may have slipped out early. About a week ago I started to get web hits from Google from individuals searching on various combinations of the words "JDA," "i2," and "acquisition."

Update, Aug. 12. Sarah Lacy has a post that is downright mean in its assessment of i2, though pretty realistic: i2: The Software Company Even Oracle Didn't Want. She points out that JDA's purchase price of $346 million barely exceeds i2's $300 million a year in annual subscription and maintenance revenues.

Update, Aug. 13. Dennis Howlett reflects on the lengths to which i2 fell from its days in the dot-com boom:
I well recall the heady days when i2 boasted of its then record breaking $9.3 billion acquisition of Aspect Development at a time when i2 was attempting to become the dominant demand planning and B2B internet business trading platform provider. Its 2000 customer conference was an exercise in corporate arrogance with the then president Greg Brady lambasting journalists like myself who could not see the sustainability of i2’s business strategy. That was the same year i2 offered a bounty of $500 to anyone who went and got the company’s logo tattooed on themselves. Some weeks later, i2 re-designed the logo.
Howlett is not optimistic about JDA's plans for the combined company:
Less palatable is the combined company expects to ramp up EBITDA to 23.9%, in part based upon $20 million near terms savings but also combined maintenance revenues of 46.9% total revenue. I’d prefer to see JDA invest more heavily in innovation for the vertical markets in which it has successfully focused. Yet it seems that generally, we have entered a period where the financial markets are more interested in recurring revenues than what the vendor can do for customers.
Related posts
i2 forms committee for possible sellout
Pro-sellout shareholder of i2 elects second board member
Major i2 shareholder calls for sale of i2
i2 seeks patent license shake-down fees
Former i2 CEO learns crime does not pay
i2 innovates with hosted vendor-managed inventory services
SAP: If you can't beat 'em, sue 'em
i2 kills off its SRM business
i2 fires 300, struggles to refocus

No comments: