As I2 Nears Profitability, It's Under SEC InvestigationAs I2 Nears Profitability, It's Under SEC Investigation

Though it's taking longer than company officials had hoped, supply-chain software vendor i2 Technologies Inc. is nearing profitability. But the company also said Monday that it's under investigation by the Securities and Exchange Commission for possible accounting improprieties.

The company said Deloitte & Touche LLP will reaudit its financial statements for 2000 and 2001. Arthur Andersen LLP, whose operations have diminished because of allegations stemming from the Enron Corp. scandal, audited those statements. I2 warned that Deloitte's review could cause adjustments in past periods, including its fourth-quarter results released Monday.

In what it called preliminary results, i2 reported a fourth-quarter net loss of $8 million on revenue of $120 million; its third-quarter net loss was $199.1 million. A year ago, i2 reported a loss of $589.9 million for its fourth quarter.

The audits stem from two former i2 executives' allegations last quarter relating to accounting and revenue recognition; inadequate financial controls; and gross negligence or potential fraud in connection with product and customer problems, acquisitions, public disclosure, and other management decisions. An initial review by i2's board found no problems, a company spokeswoman says, but the former executives making the accounting allegations recently provided additional information to the board. Because of the reaudits, the preliminary results issued Monday may be adjusted.

I2 has struggled with a sharp drop in demand and a shift to smaller purchases of its software, which is used to manage factories, distributors, and retail stores. It underwent a number of restructurings and fired 1,400 of its 4,750 employees last year.

Despite i2's ongoing battle to reach profitability, John Bermudez, a senior VP at AMR Research, says it has as good a chance at future success as any of its competitors. "Whether they make it has more to do with how fast the economy turns around," Bermudez says. "The opportunity is still there, and i2 has as many smart people as anyone else in the market."