i2 bullish about China
This positive outlook came on the back of last week's announcement of its first major deal in China with PC maker Legend Holdings Ltd.
A "huge portion" of Legend's 12-month budget--of over US$3 million-- to automate its supply chain processes will go to i2 for software licenses, claimed i2 Asia Pacific president Raymond Teh in an interview.
Looking forward, China will be i2's "fastest-growing" market in Asia Pacific (excluding Japan), Teh said.
Specifically, opportunities will come from companies "shifting their production base to the mainland, following the country's entry into the World Trade Organization."
Among others, PC maker Dell Computer Corp in May relocated some of its desktop manufacturing activities to China from Malaysia. Analysts believe that many more companies will follow suit as they tap on the mainland's cheaper production costs and skilled engineering workforce.
For the nine months ended September 2001, China contributed about 5 percent or US$3.2 million to i2's Asia Pacific revenues. Based on his growth projections, Teh expects the mainland to double its percentage contribution next year.
However, he noted that sales in Asia Pacific will only edge up 5 percent next year to US$66.5 million, offset by "flat growth" in the rest of the region as the economic downturn takes its toll.
Revenue contributions from South Asia--Singapore, Malaysia, Thailand, India, Indonesia and the Philippines--are expected to stay at the 35 percent mark next year. Other markets such as Korea, Taiwan and Australia will make up the remaining 55 percent.
No further job cuts in Asia
The Dallas-based company's current headcount in Asia Pacific--including Singapore, Kuala Lumpur, Sydney, Melbourne, Bangalore, Bombay, Jakarta and Beijing--totals 900 people.
Of these, about 700 are development engineers in its sole regional development center in India, Teh said.
As part of a worldwide cost-cutting exercise announced in October, the company will relocate about 500 Indian nationals from its development centers in the U.S., Europe and Canada to India by the first quarter of next year, he said.
"The cost of every (employee) in the U.S. is equivalent to three in India," he explained.
i2 will also reduce its development facilities worldwide to four (from the current 10) by the first quarter of next year. The India facility will be one of those spared.
However, Teh said that the company will not close any of its regional offices, nor lay off any of its staff in Asia Pacific. In the first nine months of the year, the company had laid off about 20 staff in the region.
For the third quarter ended September 2001, the Nasdaq-listed company saw its revenues dip 39 percent to US$194 million from the year-ago period. The company attributed the decline to the current recession and political instability brought on by the September 11 terrorist attacks, "causing customers to postpone or cancel projects and disrupting sales cycles."
Its third quarter net loss widened to US$5.5 billion, from US$786 million last year, due largely to the amortization and write-down of intangible assets.
In late August, i2 completed its acquisition of collaborative e-commerce technology firm RightWorks Corp in a stock swap worth US$34.5 million. With this deal, i2 now provides companies with the software to manage their spending in business-to-business e-marketplaces.