i2 Reports Third Quarter 2005 Results

Dallas, TX -- October 24, 2005

i2 Technologies, Inc. (NASDAQ: ITWO), today announced results for its third quarter ended September 30, 2005.

Key financial metrics for the quarter include:

• Net income applicable to common shareholders of $8.6 million, or $.33 per fully diluted share
• Total revenue of $69.2 million.
• Total operating costs and expenses of $54.4 million.
• Reduction of the company’s long-term debt with the recent purchase on the open market of $50 million of its outstanding 5.25% convertible notes (which includes $28.5 million in purchases that were settled in early October).

Revenue Detail
Total revenue for the third quarter was $69.2 million, compared to $111.1 million in the third quarter of 2004.  Year-to-date revenue was $256.1 million compared to $305.3 million in the first three quarters of 2004.

Excluding the impact of contract revenue, i2 reported third quarter revenue of $68.3 million compared to $81.9 million in the third quarter of 2004. Year-to-date revenue, excluding contract revenue, was $236.8 million compared to $238.2 million in the first three quarters of 2004.

i2 had total third quarter license revenue of $14.6 million compared to $17.4 million of license revenue in the third quarter of 2004. Additionally, i2’s development services revenue includes a license component as disclosed in the Company’s supplemental schedule attached to this press release and posted at www.i2.com/investor. The allocated license component of the Company’s third quarter recognized development services revenue was $3.1 million, compared to $2.4 million in 2004. Year-to-date, the allocated license component of development services projects recorded was $13.7 million compared to $7.4 million in 2004.

The company reported development services revenue totaling $7.2 million, which includes the $3.1 million allocated license component previously noted and an allocated services component of $4.1 million.  This compares to third quarter 2004 development services revenue of $7.5 million, which included $5.1 million of allocated services and $2.4 million of allocated licenses.  Year-do-date, development services revenue for 2005 was $44.1 million compared to $23.3 million for the same period a year ago.

In early July 2005, i2 sold its San Diego-based subsidiary, Trade Service Corporation (TSC). Revenues from this subsidiary had been accounted for in i2’s total license calculations. By removing the TSC revenue accounted for in previous quarters, an adjusted year-over-year quarterly comparison indicates an 11 percent increase in third quarter total license revenue, and a 31 percent year-to-date increase. The chart below offers year-over-year and year-to-date comparisons of i2’s total license revenue with TSC revenue removed.

(in $ millions)	Quarter Ended 9-30-05	Quarter Ended 9-30-04	Three Quarters Ended 9-30-05	Three Quarters Ended 9-30-04
Total License Revenue	$14.6	$17.4	$42.8	$41.9
Less: TSC License Revenue	$0.0	$3.9	$7.4	$11.9
Subtotal	$14.6	$13.5	$35.4	$30.0
Add: Development Services License Revenue	$3.1	$2.4	$13.7	$7.4
Total License + Development Services License (adjusted)	$17.7	$15.9	$49.1	$37.4

Operating Expenses
i2 reported total costs and operating expenses of $54.4 million which includes a $2.2 million gain on the sale of TSC assets. In comparison, total costs and operating expenses in the third quarter of 2004 were $90.2.

“In the third quarter we completed the cost reductions we began on March 30, meeting the goals we set out to achieve. We are now able to invest in the best areas of our business to support profitable growth,” said i2 Chief Executive Officer Michael McGrath. 

Net Income
The company reported third quarter net income applicable to common shareholders of $8.6 million, or $.33 per fully diluted share, compared to net income of $17.1 million, or $0.75 per fully diluted share, in the third quarter of 2004.

Operating income for the third quarter was $14.8 million versus $20.8 million in the third quarter of 2004.  On a year-to-date basis, operating income was $24.7 million in 2005, 70 percent above the same period in 2004.  

The company also provides pro-forma operating income to assist shareholders with analysis of financial and business trends related to the company’s operations. The calculations are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP), and may be different from non-GAAP operating income presented by other companies, but are used as a tool by management to assess i2’s business.  Pro-forma operating income for the third quarter was $13.7 million compared to ($3.7) million in the year-ago quarter (see table that follows).

Reconciliation of GAAP and Pro Forma Operating Income

(in $ millions)	Quarter Ended 9-30-05	Quarter Ended 9-30-04	Three Quarters Ended 9-30-05	Three Quarters Ended 9-30-04
GAAP Operating Income	$14.8	$20.8	$24.7	$14.6
Less: Contract Revenue	($0.9)	($29.1)	($19.3)	($67.1)
Less: Gain on Sale of Business	($2.2)	$0	($2.2)	$0
Add: Contract Expense	$0	$2.1	$1.6	$3.2
Add: Legal Expense	$2.2	$3.2	$5.0	$6.1
Add: Restructuring Charges	($0.3)	($0.7)	$11.7	$3.6
Add: Specific Accruals	$0	$0	$10.5	$10.0
Pro Forma Operating Income	$13.7	($3.7)	$32.0	($29.6)

“This is the second consecutive quarter of significant operating profit, excluding any impact of contract revenue from previous years, demonstrating that i2 has turned the corner on profitability. This has been our number one objective,” said McGrath

Balance Sheet Items
i2 recently reduced its long-term debt  with the purchase on the open market of $50 million of its outstanding 5.25% convertible notes due on December 15, 2006. Of the purchase, $21.5 million was settled and recorded in the third quarter, with an additional $28.5 million settled and recorded in early October. The Company ended the quarter with $272.0 million in total cash (including restricted cash and short-term investments), down from $298.3 million in the prior quarter. At the end of the quarter, the gap between the Company’s long term debt and total cash was approximately $23.2 million.

“The repurchase of this debt is another important step in our plan to strengthen our overall balance sheet,” said i2 Chief Financial Officer Michael Berry. “We are optimistic that the combination of our cash balances, our focus on cash flow, opportunities to monetize the value of  our assets, and the variety of capital sources available to us will allow us to address our outstanding debt and further establish a proper liquidity balance for i2’s future.”

Additional financial information can be found on the Company’s supplemental schedule attached to this press release and posted at www.i2.com/investor.

Management Commentary
“We have transformed i2 into the profitable company we knew it could be, and now we can turn our attention to strategically growing the company by taking advantage of the opportunities created by the next generation of supply chain management,” said McGrath. “We recently released our first wave of next-generation solutions. These are a new type of solution that can provide opportunities for our customers to extend the management of their supply chains at a lower cost and lower risk.” 

Third Quarter Highlights and Other Recent Events
Third quarter highlights and other recent events include:

• The launch of i2 Next-Generation Supply Chain Management (SCM) solutions and the business challenges they address. The next-generation solutions are built on the i2 Agile Business Process Platform, a unique service-oriented architecture (SOA) that includes a layer of technology services and a business process workflow engine. The Company intends to continue releasing additional next-generation solutions throughout the fourth quarter and into 2006.
• The appointment of Barbara Stinnett as executive vice president of Customer Operations and chief customer officer (CCO). In this role, she will lead all of i2’s newly formed industry, sales, services and marketing organizations.
• The creation of a Global Transportation and Distribution Group. This group will provide sales and marketing support as well as consulting and implementation services across all the vertically oriented Industry Groups and the Greater Asia-Pacific region.
• The investment in strategic marketing events aimed at educating customers and prospects about the value i2 solutions offer. These events include:
  • Transportation Tuesdays, designed to help companies learn how to achieve greater efficiencies in their transportation and distribution operations. The initial event was held in Dallas, with other events planned for Chicago, St. Louis and San Francisco.
  • i2 Automotive Day on October 20 in Detroit. The event featured best-practices presentations from i2 customers Kia Motors America, Daimler-Chrysler and The Cooper Tire & Rubber Company, as well as AMR Research.
  • Seven web seminars during the third quarter, featuring i2 customers such as Airbus, Woolworths, Bell Helicopter, ON Semiconductor, Nicholas Piramal India, Adtran and The Brick.  Additional web seminars are scheduled throughout the fourth quarter.
  • Directions 2005, the i2 User Group’s annual conference for learning supply chain management best practices and gaining greater knowledge about the use of i2 solutions. i2 is a platinum sponsor of the event to be held November 7 - 9 in Orlando, Fla.

Earnings conference call information
The i2 management will host a live conference call and webcast with investors today, October 24, 2005 at 5:00 p.m. ET to discuss the third quarter financial results. Investors and other interested parties may access the call via webcast through the Company’s web site at www.i2.com/investors.  An audio replay of the conference call will be available for approximately 24 hours following the call. To access the replay, dial (800) 475-6701 (USA) or (320) 365-3844 (International) and enter access code 799677. The web-cast will also be archived via the company's Web site at http://www.i2.com/investor.

About i2
i2 helps business leaders make better supply chain decisions. i2's flexible next-generation solutions are designed to synchronize demand and supply across ever-changing global business networks. i2's innovative supply chain management tools and services are pervasive in a wide cross-section of industries; 19 of the AMR Research Top 25 Global Supply Chains belong to i2 customers. Learn more at www.i2.com.

i2 is a registered trademark of i2 Technologies U.S. Inc. and i2 Technologies, Inc

i2 Cautionary Language
This press release contains forward-looking statements that involve risks and uncertainties, including forward-looking statements regarding i2’s ability to access capital markets, investments to support profitable growth, i2’s ability to eliminate the gap between debt and cash, and i2’s ability to execute under its new organizational structure and successfully deliver Next Generation Supply Chain Management solutions. These forward-looking statements involve risks and uncertainties that may cause actual results to differ from those projected. For a discussion of factors which could impact i2's financial results and cause actual results to differ materially from those in forward-looking statements, please refer to i2's recent filings with the SEC, particularly the Quarterly Report on Form 10-Q filed August 9, 2005 and the Annual Report on Form 10-K filed March 16, 2005. i2 assumes no obligation to update the forward-looking information contained in this news release.

For further information, please contact:

Beth Elkin, i2 Corporate Communications
469-357-4225
beth_elkin@i2.com