i2 disclosure spooks supply chain

Australian users of supply chain software vendor i2 are bracing for the worst following a series of shock disclosures to markets and regulators in the US over the last week.

The besieged supply chain software company has advised shareholders it is currently the subject of a full-blown investigation by the US Securities and Exchange Commission (SEC) over accounting practices, and has said that it will likely have to make "material adjustments" to its financial results as far back as 1999.

Making a bad situation worse, i2 has also warned it may be delisted by the Nasdaq, which has advised of intention to delist the company.

Shares in i2 were suspended from trading on the Nasdaq on Monday March 31. The company has also warned it may breach financial covenant with its bondholders.

Australia's highest profile i2 customer is Woolworths which went live with i2's TradeMatrix Demand Planner and Supply Chain Planner to form the backbone of its e-business supply chain backend system in 2000.

Press releases from the launch quote Woolworths CEO Roger Corbett saying, "In the short term, more accurate sales estimates mean that we have less inactive stock sitting in warehouses and stores. If you consider that Woolworths' grocery division alone deals with around 25,000 products, through more than 600 stores and 20 warehouses, the opportunities for savings are enormous."

Woolworths general manager corporate information technology Steve Bradley refused to comment at time of press; however, a Woolworths spokesman confirmed the grocery retailer was "aware" of the i2's situation, noting it was a "public process". The spokesman refused to elaborate on which of Woolworth's suppliers were also in the i2 boat citing commercial sensitivity.

While i2's customers are understandably shy, their former prospects are not. B2B office supplier Corporate Express Australia had intended to go live with an i2 supply chain and buying hub solution last year, but backed out of the deal when i2 product and rollout stalled due to scalability and implementation issues brought on by integrating new acquisitions.

Corporate Express CIO Gary Whately told Computerworld: "We were looking at it but we backed off. We had some issues in the US in regards to rollout, so we haven't progressed. When the [Untited] States deferred its project, we did too." he said.

Joshua Greenbaum, an analyst at Enterprise Applications Consulting, said i2 is in a "tailspin" that will be tough to pull out of. "The financial difficulties are bad enough, but customer flight is the real problem," he said. "It's hard to justify spending more on i2 technology when the company is looking so shaky."

Gene Hunt, chairman of the Atlanta-based i2 User Group, said the SEC investigation and the other developments is likely to "spark a ripple of concern" among the company's users. Nevertheless, Hunt, a member of the technical staff at Texas Instruments, said the user group still supports i2's executives.

Having reported five straight quarterly losses, an i2 statement says it will continue to cooperate fully with the SEC. i2's Australian office refused to comment on the company's financial position, directing all media enquiries back to headquarters in Dallas, Texas.

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