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i2 Technologies, Inc. (NASDAQ: ITWO) today announced results for the fourth quarter and fiscal year 2006.

A summary of fourth quarter results:

• Total revenue was $79.6 million, including contract revenue of $4.0 million
• Total costs and expenses were $65.1 million
• Net income applicable to common stockholders was $14.3 million
• Diluted earnings per share (GAAP) were $0.54
• Non-GAAP diluted earnings per share were $0.52 (excluding stock option expense and contract revenue and contract expense)
• Cash flow from operations was $6.0 million
• Total bookings of $63.9 million, including $17.4 million in software solutions bookings

A summary of fiscal year 2006 results:

• Total revenue was $279.7 million, including contract revenue of $4.1 million
• Total costs and expenses were $250.3 million
• Net income applicable to common stockholders was $21.3 million
• Diluted earnings per share (GAAP) were $0.82
• Non-GAAP diluted earnings per share were $1.27 (excluding stock option expense and contract revenue and contract expense)
• Cash flow from operations was $14.8 million
• Total bookings of $257.3 million, including $49.5 million in software solutions bookings

"We ended 2006 with strong financial and operational performance. The fourth quarter was highlighted by operating revenue growth, continued profitability and our highest level of software solutions bookings in the last two years," stated i2 Chief Executive Officer Michael McGrath. "Two years ago, we set three objectives around financial and operational performance and management processes. We are pleased that we have successfully achieved those objectives. Our objectives going forward are focused on sustained profitable growth, operational excellence and supply chain industry leadership with our new-generation solutions as the cornerstone."

Fourth Quarter Results

Revenue Detail
Total revenue for the fourth quarter was $79.6 million as compared to $96.6 million in the fourth quarter of 2005. Total revenue included contract revenue of $4.0 million and $23.2 million in the fourth quarters of 2006 and 2005, respectively. Excluding the impact of contract revenue, operating revenue was $75.6 million as compared to $73.4 million in the fourth quarter of 2005, growth of 3 percent year-over-year.

i2 had total fourth quarter software solutions revenue, which includes core license revenue, recurring license revenue as well as fees received to develop the licensed functionality, of $23.4 million. Software solutions revenue grew 2 percent compared to $23.0 million in the year-ago quarter. Recurring license revenue in the fourth quarter 2006 includes approximately $5.2 million related to platform technology bookings recorded in the second quarter of 2006.

Services revenue in the fourth quarter was $29.5 million, an increase of 16 percent from the $25.4 million of services revenue in the fourth quarter of 2005. Services revenue includes fees received from arrangements to customize or enhance previously purchased licensed software. Services revenue also includes reimbursable expenses.

Fourth quarter maintenance revenue was $22.7 million, a decrease of 9 percent from $25.0 million in the year ago quarter.

Costs and Expenses
Total costs and expenses for the fourth quarter of 2006 were $65.1 million. In the fourth quarter, non-operating legal expenses were $7.4 million, including $2.5 million for a settlement agreement with Gregory A. Brady, a former officer and director of the company. The company anticipates this settlement agreement will conclude its indemnification obligations to Mr. Brady. Fourth quarter total costs and expenses also included $3.1 million in stock option expense. Total costs and expenses increased 14 percent compared to $57.3 million in the fourth quarter of 2005.

Income Tax Expense
In the fourth quarter, the company recorded a $2.9 million reversal to a valuation allowance related to specific international subsidiaries. This reversal resulted in a $1.1 million benefit to income taxes for the fourth quarter.

Net Income
The company reported fourth quarter 2006 net income applicable to common stockholders of $14.3 million or $0.54 per diluted share. This compares to $34.2 million or $1.33 per diluted share in income from continuing operations, including preferred stock dividend and accretion of discount, in the fourth quarter of 2005.

Fiscal Year 2006 Results

Total revenues for 2006 were $279.7 million as compared to $336.9 million for 2005. Total revenue included contract revenue of $4.1 million and $42.5 million in 2006 and 2005, respectively. Excluding the impact of contract revenue, operating revenue was $275.6 million for 2006 as compared to $294.3 million in 2005, a decline of 6 percent year-over-year.

Software solutions revenue decreased 15 percent to $76.2 million in 2006 compared to $89.9 million in 2005. Services revenue was $106.5 million in 2006 compared to $103.8 million in 2005, an increase of 3 percent. Maintenance revenue decreased 8 percent to $92.8 million in 2006 compared to $100.6 million in 2005.

Total costs and expenses for 2006 declined 11 percent to $250.3 million as compared to $281.5 million in 2005. During 2006 the company incurred $17.4 million in non-operating legal expenses, including the $2.5 million settlement amount with Mr. Brady mentioned above, and $15.4 million in stock option expense.

The company reported net income applicable to common stockholders of $21.3 million or $0.82 per diluted share for 2006. This compares to $40.4 million or $1.65 per diluted share in income from continuing operations, including preferred stock dividend and accretion of discount, in 2005

Non-GAAP Earnings Per Share

The company provides non-GAAP financial measures to assist stockholders with the analysis of financial and business trends related to the company’s operations. These calculations are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies, but are used as a tool by management to measure the effectiveness of i2’s business.

Non-GAAP diluted earnings per share in the fourth quarter of 2006 were $0.52, compared to $0.43 per diluted share from continuing operations, including preferred stock dividend and accretion of discount, in the comparable period last year on a non-GAAP basis. Non-GAAP diluted earnings per share for 2006 were $1.27, compared to a loss of ($0.02) per diluted share from continuing operations, including preferred stock dividend and accretion of discount, in 2005. Non-GAAP diluted earnings per share excludes stock option expense and the net effect of contract revenue and contract expense.

Contract revenue is the result of the recognition of certain revenue carried on i2’s balance sheet as a portion of deferred revenue and is a result of the company’s 2003 financial restatement. The company recognized $4.0 million of contract revenue during the fourth quarter of 2006 and recognized $4.1 million during fiscal 2006. The remaining deferred contract revenue balance as of December 31, 2006 was $3.2 million.

	Quarter Ended 12-31-06	Quarter Ended 12-31-05*	Year Ended 2006	Year Ended 2005*
GAAP diluted EPS from continuing operations including preferred stock dividend and accretion of discount	$ 0.54	$ 1.33	$ 0.82	$ 1.65
Add: Stock option expense	$ 0.12	$ 0.00	$ 0.59	$ 0.00
Less: Effect of contract revenue and expense	$ 0.14	$ 0.90	$ 0.15	$ 1.67
Non-GAAP diluted EPS from continuing operations including preferred stock dividend and accretion of discount**	$ 0.52	$ 0.43	$ 1.27	($0.02)

* 2005 amounts exclude results from discontinued operations
** Non-GAAP EPS amounts may vary from GAAP EPS and adjustments due to rounding

Please see the attached schedules for a more detailed reconciliation of GAAP to non-GAAP financial measures.

Other Financial Information

During the fourth quarter, the company paid $24.6 million in principal and interest on its debt, including $21.8 million to retire the remainder of its 5.25 percent convertible subordinated notes. The company also paid $1.3 million in cash dividends on its preferred stock. On December 31, 2006, i2’s total cash (including restricted cash) was $114.0 million. Total debt at the end of 2006 was $86.3 million which represents the face value of the company’s 5 percent senior convertible notes.

The company generated cash flow from operations of $6.0 million in the fourth quarter of 2006. For 2006, the company generated cash flow from operations of $14.8 million.

Full Year 2007 Outlook

In 2007, the company expects to increase bookings and operating revenue by continuing its investments in sales, marketing and services. Given the costs associated with such investments, profitability in the first half of 2007 is likely to be reasonably comparable to the first half of 2006. The company anticipates that profitability will increase from that level in the second half of 2007. For the full year, the company currently estimates that GAAP diluted earnings per share are expected to be in the range of $0.90 to $1.10 per diluted share, depending on the nature and timing of bookings. Excluding anticipated stock option expense and contract revenue (totaling $0.35 per diluted share), non-GAAP diluted earnings per share for the full year are currently expected to be in the range of $1.25 to $1.45 per diluted share.

The company expects to generate positive cash flow from operations for the full year 2007. However, in the first quarter of 2007, the company expects to experience negative cash flow from operations at a level comparable to or worse than the $7.9 million negative cash flow experienced in the first quarter of 2006. This is primarily due to expected cash outlays associated with non-operating legal expenses accrued in the fourth quarter of 2006 (which includes the aforementioned settlement agreement payment of $2.5 million) as well as annual and semi-annual employee-related incentive and commission payments.

The company’s statements regarding future financial performance are based on current expectations for bookings, cash collections, revenue and expense. Such statements are forward-looking, and the company expressly disclaims any current intention to update forward-looking statements. Actual results may differ materially. See “i2 Cautionary Language” below.

Earnings Conference Call and Webcast Information

The i2 management team will host a live conference call with investors today, February 1 at 10 a.m. ET to discuss the fourth quarter and fiscal year 2006 financial results. Investors and other interested parties may access the call and accompanying slide presentation via webcast through the company’s Web site at http://www.i2.com/investor.

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 857830. The webcast 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 new-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; 20 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 US, 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 outlook for 2007 bookings, operating revenue, diluted earnings per share, non-GAAP diluted earnings per share and cash flow from operations, as well as the company’s investment in revenue generating areas of its business. 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 November 7, 2006 and the Annual Report on Form 10-K filed March 15, 2006. i2 expressly disclaims any current intention to update the forward-looking information contained in this news release.

For further information, please contact:

Tom Ward
i2 Investor Relations
469-357-3854
tom_ward@i2.com

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