Nike said after the close of US stock markets that fiscal third-quarter profit will fall short of forecasts and that its shoe sales will be reduced by US$80 million to US$100 million because glitches implementing a new supply-chain management system caused shortages of some products and overstocking of others.
The shoemaker didn't identify the supplier of that software in a press release or in a conference call with investors. In an interview, Nike spokeswoman Leslye Mundy said that i2 technologies supplied the software for the system, which cost Nike about US$400 million.
"This is not great PR for i2," said Brent Thill, an Internet software industry analyst with Credit Suisse First Boston, who has a "strong buy" recommendation on i2.
Bradley Whitt, an analyst with Southwest Securities, said that i2's shares could fall about 20 percent Tuesday. "This sounds like a pretty big deal," said Whitt, who has a "neutral" recommendation on i2 shares.
i2 spokeswoman Monica Procter said she couldn't immediately comment on Nike's problems or reach company executives for comment. Other i2 officials couldn't be reached.
The shares of Dallas-based i2 rose US$5.94, or 20 percent, to US$35.50 in Nasdaq Stock Market trading after the company said that Intel Corp, the No 1 chipmaker, has agreed to sell server computers equipped with i2 software.
Customers
Even with today's gain, i2's stock has lost about a third of its value since Jan 17 when it reported earnings. At the time, the company forecast that profit for the March quarter would be US$0.06 a share, a penny less than analysts were expecting.
Whitt of Southwest Securities said that he i2 will have trouble meeting analysts' forecasts that it will report 2001 sales of about US$1.6 billion.
"They've got a problem with their customer base," Whitt said.
i2's customers have been reluctant to discuss such issues with him and other analysts "because nobody wants to admit they made a US$400 million mistake," Whitt said.
Nike only disclosed the problem after it became aware that it would cause the shoemaker to miss its earnings estimates, which prompted the company's executives to formally disclose the issue, he said.
"This is not a particularly fun hour for me," Nike chief executive Philip Knight said on a conference call with investors. "My immediate reaction is "This is what we get for our US$400 million?""
The problems could cause some potential i2 customers to question the return on investment that they can achieve by investing hundreds of millions of dollars in one of its supply-chain management systems, Thill said.
"All software companies are very promotional," Thill said. "i2 sometimes has been viewed as definitely leading the pack in being promotional."
Nike is also implementing a supply-chain management system for its apparel unit that it purchased from Manugistics Group Inc. Nike has had no problems with that implementation, Thill said.
"There are a lot of happy people inside the apparel division at Nike," Thill said. "Manu has always told their clients that there is no holy grail of implementing a project like this overnight."
Shares of Rockville, Maryland-based Manugistics rose US$2.56 to US$36.
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