Forward-Looking Statements

This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical or current facts, including, without limitation, statements about our business strategy, plans, objectives and future prospects, are forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from these expectations, which could have a material adverse effect on our business, results of operations, cash flow and financial condition. Such risks and uncertainties include, without limitation, the following:

• On August 10, 2008, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with JDA Software Group, Inc., a Delaware corporation ("JDA"), and Iceberg Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of JDA (the "Merger Sub"). Under the Merger Agreement, the Merger Sub will be merged with and into i2 (the "Merger"), with i2 continuing after the Merger as a wholly-owned subsidiary of JDA. At the effective time of the Merger, each issued and outstanding share of our Common Stock, par value

• Beginning in the third quarter and continuing into the fourth quarter we have experienced purchasing delays by some customers attributable to the Merger and the customers' desire to have a better understanding of the combined companies product roadmap and related product support. Continued uncertainty will cause additional customer delays, potential customer losses, lower bookings, revenue, and cash flow and continued employee attrition.

• We have recently implemented restructuring and reorganization initiatives. Failure to achieve the desired results of our restructuring and reorganization initiatives could harm our business, results of operations, cash flow and financial condition.

• Our financial results have varied and may continue to vary significantly from quarter-to-quarter. We may fail to meet analysts' and investors' expectations.

• We experienced negative cash flows for the quarters ended March 31, 2007, September 30, 2006 and March 31, 2006, and for each of the five years ended December 31, 2005. A failure to maintain profitability and achieve consistent positive cash flows would have a significant adverse effect on our business, impair our ability to support our operations and adversely affect our liquidity.

• Holders of the Notes may convert the Notes upon the occurrence of certain events prior to May 15, 2010, and at any time on or after May 15, 2010, and have the right to require us to repurchase all or any portion of the Notes on November 15, 2010. There is no assurance that at the time of conversion or required repurchase, we will have the ability to satisfy the cash portion of any such conversion obligation or to make any such required repurchase.

• We may require additional private or public debt or equity financing. Such financing may only be available on disadvantageous terms, or may not be available at all. Any new financing could have a substantial dilutive effect on our existing stockholders.

• The indenture governing the Notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur other than as part of the Merger. The debt incurrence restrictions imposed by the indenture could restrict or impede our ability to incur additional debt, which in turn could impair our ability to support our operations, adversely affect our liquidity and threaten our ability to repay our debts when they become due.

• If we are unable to develop and generate additional demand for our products, serious harm could result to our business.

• We may not be competitive, and increased competition could seriously harm our business. Our focus on a solutions-oriented approach may not be successful.

• We face risks related to product quality and performance claims and other litigation that could have a material adverse effect on our relationships with customers and our business, results of operations, cash flow and financial condition. We may face other claims and litigation in the future that could harm our business and impair our liquidity.

• We face other risks indicated in Item 1A, "Risk Factors," in our 2007 Annual Report on Form 10-K.

Many of these risks and uncertainties are beyond our control and, in many cases, we cannot accurately predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. When used in this document, the words "believes," "plans," "expects," "anticipates," "intends," "continue," "may," "will," "should" or the negative of such terms and similar expressions as they relate to us, our customers or our management are intended to identify forward-looking statements.

References in this report to the terms "optimal" and "optimization" and words to that effect are not intended to connote the mathematically optimal solution, but may connote near-optimal solutions, which reflect practical considerations such as customer requirements as to response time, precision of the results and other commercial factors.

Overview

Merger of i2 with JDA Software

On August 10, 2008, we entered into a Merger Agreement with JDA and the Merger Sub. Under the Merger Agreement, the Merger Sub will be merged with and into i2 (the "Merger"), with i2 continuing after the Merger as a wholly-owned subsidiary of JDA. At the effective time of the Merger, each issued and outstanding share of our Common Stock, par value $0.00025 per share, will be converted into the right to receive $14.86 in cash, without interest. At the effective time of the Merger, each issued and outstanding share of our Series B Preferred Stock will be converted into the right to receive $1,095.3679 plus all accrued and unpaid dividends thereon through the effective time, in cash, without interest.

Late in the evening of November 4, 2008, we received a written request from JDA to adjourn the previously scheduled special meeting of our stockholders "to allow the two companies to negotiate a reduced purchase price to close the merger." In its request, JDA stated that "available credit terms would result in unacceptable risks and costs to the combined company." Our board of directors considered the request and, based on a number of factors, including that JDA's obligation to complete the merger is not subject to any financing contingency, did not believe adjourning the special meeting was in the best interests of our stockholders. As of November 5, 2008, proxies in favor of the merger had been received from stockholders representing more than 80 percent of all votes eligible to be cast at the special meeting.

On November 6, 2008, we held the previously scheduled special stockholder meeting and our stockholders voted to approve the merger with JDA pursuant to the Merger Agreement. The number of shares voted in favor of the merger represented more than 80 percent of the total shares outstanding and entitled to vote at the meeting. More than 99 percent of the shares voted at the special meeting were cast in favor of the merger.

Following the stockholder meeting, we received a written proposal from JDA to amend the common share consideration in the merger agreement significantly below $14.86 per share. Our board of directors has reviewed JDA's proposal and concluded that it is not in the best interest of i2's stockholders to pursue it.

With the successful stockholder vote of November 6, 2008, we completed all of our conditions to closing the existing merger agreement and have requested that JDA fulfill its obligations under the agreement. Despite the approval by i2's stockholders, there can be no assurance that the parties will close the Merger stipulated by the merger agreement.

Nature of Operations

We are a provider of supply chain management solutions, consisting of various software and service offerings. In addition to application software, we offer hosted software solutions, such as business optimization and technical consulting, managed services, training, solution maintenance, software upgrades and development. We operate our business in one business segment. Supply chain management is the set of processes, technology and expertise involved in managing supply, demand and fulfillment throughout divisions within a company and with its customers, suppliers

and partners. The goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, improving operational visibility, increasing operating velocity and integrating planning and execution. Our offerings are designed to help customers better achieve the following critical business objectives:

Visibility - a clear and unobstructed view up and down the supply chain

Planning - supply chain optimization to match supply and demand considering system-wide constraints

Collaboration - interoperability with supply chain partners and elimination of functional silos

Control - management of data and business processes across the extended supply chain

Revenue Categories

We recognize revenue for software and our related service offerings in accordance with Statement of Position (SOP) 81-1, "Accounting for Certain Construction Type and Certain Production Type Contracts," SOP 97-2, "Software Revenue Recognition," as modified by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions," SEC Staff Accounting Bulletin (SAB) 104, "Revenue Recognition," and SAB 103, "Update of Codification of Staff Accounting Bulletins," and SEC Staff Accounting Bulletin "Topic 13, Revenue Recognition."

Software Solutions. Software solutions revenue includes core license revenue, recurring license revenue, and fees received to develop the licensed functionality. We recognize these revenues under SOP 97-2 or SOP 81-1 based on our evaluation of whether the associated services are essential to the licensed software as described within SOP 97-2. If the services are considered essential, revenue is generally recognized on a percentage of completion basis under SOP 81-1. Services are considered essential to the software when they involve significant modifications or additions to the software features and functionality. In addition, we have several subscription and other recurring revenue transactions, which are recognized ratably over the life of each contract.

Services. Services revenue is primarily derived from fees for services that are not essential to the software, including implementation, integration, training and consulting, and is generally recognized when services are performed. In addition, services revenue may include fees received from arrangements to customize or enhance previously purchased licensed software, when such services are not essential to the previously licensed software. Services revenue also includes reimbursable expense revenue, with the related costs of reimbursable expenses included in cost of services.

Maintenance. Maintenance revenue consists of fees generated by providing support services, such as telephone support, and unspecified upgrades/enhancements on a when-and-if available basis. A customer typically prepays maintenance and support fees for an initial period, and the related revenue is deferred and generally recognized over the term of such initial period. Maintenance is renewable by the customer on an annual basis thereafter. Rates for maintenance, including subsequent renewal rates, are typically established based upon a specified percentage of net license fees as set forth in the contract.

Contract Revenue. As explained in more detail below, we do not consider contract revenue to be an indication of the current performance of our business. We collected the cash associated with contract revenue in prior periods and recorded the revenue as we fulfilled the contract obligations. As of March 31, 2007 our deferred contract revenue balance was zero.

Transition to a Solutions-Oriented Provider

Our software and service offerings have changed in recent years in response to market demands as well as the introduction of new technology and products. We are transitioning our business approach to being a solutions-oriented provider, and accordingly have experienced a shift to a greater level of services revenue versus software solutions revenue.

Beginning in 2006, we increased our hiring of services personnel based on our expectations regarding the demand for our services and our existing services backlog. In addition to generating increased services revenue from the increased headcount, we have also increased the utilization of our services personnel so more revenue is generated for each person and have been successful at strategically placing certain of our research and development staff on billable services projects when their skill sets are appropriate.

The focus on services impacts our mix of revenues and profitability because services will typically earn a lower margin than software solutions. These changes also influence the proportion of revenue recognized on a percentage of completion basis or subscription basis. We now expect a higher proportion of our software solutions revenue will be recognized under a percentage of completion basis or subscription basis, rather than being recognized in the period the contract is signed.

Key Performance Indicators and Operating Metrics

The markets in which we operate are highly competitive. Our competitors are diverse and offer a variety of solutions targeting various segments of the extended supply chain as well as the enterprise as a whole. Some competitors offer suites of applications, while most offer solutions designed to target specific processes or industries. We believe our principal competitors continue to strengthen, in part based on consolidation within the industry. In addition, our shift to a more solutions-oriented approach, where services are more critical, increases our exposure to competition from offshore providers and consulting companies. All of these factors are creating pricing pressure for our software and service offerings. However, we believe our focus on a solutions-oriented approach that leverages our deep supply chain expertise differentiates us from our competitors.

In managing our business and reviewing our results, management focuses most intently on our revenue generation process, including bookings, backlog, operating revenue (total revenue excluding contract revenue), cash flow from operations and liquidity.

Bookings. We define bookings as the total value of non-contingent fees payable to the company pursuant to the terms of duly executed contracts. Bookings are expected to result in revenue as products are delivered or services are performed, and may reflect contracts from which revenue will be recognized over multi-year periods, however there can be no assurance that bookings will result in future revenue. Bookings do not include amounts subject to contingencies, such as optional renewal periods, amounts subject to a customer's internal approvals, amounts subject to customer specific cancellation provisions and amounts that are refundable for reasons outside of our standard warranty provisions. Based on the nature of the transactions, certain of our subscription bookings have termination provisions upon payment of a penalty. Because our revenues are recognized under several different accounting standards and thus are subject to period-to-period variability, we closely monitor our bookings as a leading indicator of future revenues and the overall performance of our business.

Total bookings for the three months ended September 30, 2008 and September 30, 2007 were $46.5 million in each period. Total bookings for the nine months ended September 30, 2008 and September 30, 2007 were $177.0 million and $183.0 million, respectively, a decline of approximately 3% or $6.0 million.

Backlog. Backlog represents the balance of bookings that has not been recognized as revenue. The amount of backlog for which we have received payment is recorded as deferred revenue on our condensed consolidated balance sheet. We review our backlog to assess future revenue that may be recognized from bookings in previous fiscal periods. This review allows us to determine whether we are recognizing more or less revenue compared to the bookings in that period and whether our backlog is increasing or decreasing.

Revenue. In our internal analysis of revenue, we focus on operating revenue (total revenue excluding contract revenue). Contract revenue is the result of the recognition of certain revenue that was carried on our balance sheet as a portion of deferred revenue and was a result of our 2003 financial restatement. Inclusion of contract revenue in the evaluation of our performance would skew comparisons of our periodic results since recognition of that revenue was based on fulfillment of contractual obligations which often required only minimal cash outlays and generally did not involve any significant activity in the period of recognition. Additionally, the cash associated with contract revenue had been collected in prior periods. All remaining contract revenue was recognized by March 31, 2007, so it is not relevant to our on-going operations and we exclude it from comparisons to prior period results.

For the three months ended September 30, 2008 operating revenue (total revenue excluding contract revenue) was down 2.6% or $1.7 million compared to the same period in 2007, and for the nine months ended September 30, 2008 operating revenue was down 1.3% or $2.5 million compared to the same period in 2007. Our annual operating revenue was approximately $257.9 million, $275.6 million and $294.3 million in 2007, 2006 and 2005, respectively. These declines represent annual declines of 6% for each period. As part of our transition to being a solutions-oriented provider, we have experienced a shift to a greater level of services revenue, which has partially offset our decline in software solutions and maintenance revenue.

Software solutions revenue was relatively unchanged for the three months ended September 30, 2008 compared to the same period in 2007, and declined 2% or $0.6 million for the nine months ended September 30, 2008 compared to the same period in 2007. During the 12 months ended December 31, 2006 and the nine months ended September 30, 2008, we have recognized more revenue from backlog than from new software solutions bookings. We monitor whether we are recognizing more or less revenue in each period compared to the amount we book in that period as an indicator of whether we are adding to or subtracting from our backlog and deferred revenue. We have generally been recognizing more revenue in each quarter than the corresponding amount of bookings, leading to a decline in our backlog. As a result, in order to increase future revenues, our future bookings need to increase and consistently exceed our recognized revenue.

                                                   Twelve Months Ended                     Nine Months Ended
                                      December 31, 2006           December 31, 2007        September 30, 2008
Additions to Backlog:
Software Solutions Bookings          $             49,540        $            54,556      $             22,039
Platform Technology/Source Code
Bookings                                           10,480                        500                        -

Net Additions to Backlog                           60,020                     55,056                    22,039
Less: Software Solutions
Revenue Recognized                                 76,243                     47,721                    34,802

Increase/(Decrease) in Backlog       $            (16,223 )      $             7,335      $            (12,763 )

Services revenue was relatively unchanged for the three months ended September 30, 2008 when compared to the same period in 2007, and decreased 1% or $0.9 million for the nine months ended September 30, 2008 when compared to the same period in 2007. This decline in services revenue is primarily due to a mix shift in the type of services work performed in 2008. We expect services revenue to continue to be a larger percentage of our total revenue than it has been in previous years. Services revenue generally earns a lower margin than our other revenue types.

Maintenance revenue declined 8% or $1.7 million for the three months ended September 30, 2008 when compared to the same period in 2007, and decreased 2% or $1.0 million for the nine months ended September 30, 2008 when compared to the same period in 2007. Declines in maintenance revenue occur when customers fail to renew their maintenance agreements or renew them at lower rates.

Operating Cash Flow and Liquidity. We closely monitor our operating cash flow, working capital and cash levels. In doing so, we attempt to limit our restricted cash and cash balances held by foreign subsidiaries.

Our operating cash flow for the nine months ended September 30, 2008 was approximately $98.9 million compared to operating cash flow of $8.0 million in the nine months ended September 30, 2007. Included in operating cash flow for the nine months ended September 30, 2008, is $83.3 million related to the SAP litigation settlement we received in July 2008.

Our working capital was approximately $160.7 million at September 30, 2008, an improvement from the $63.6 million at December 31, 2007. The increase in current assets includes the effect of the SAP litigation settlement for $83.3 million. The chart below shows the components of our working capital and the dollar changes from period to period for 2006 and 2007 and the first, second and third quarters of 2008.

                                        December 31, 2006       December 31, 2007       September 30, 2008
Total cash                             $           114,045     $           129,434     $            227,808
Accounts receivable                                 25,677                  25,108                   26,991
Other current assets, net                            9,231                   7,746                    8,306

Total current assets                               148,953                 162,288                  263,105

Current liabilities                                 57,538                  37,008                   39,611
Deferred revenue                                    74,047                  61,715                   62,772
Current portion long-term debt                          -                       -                        -

Total current liabilities                          131,585                  98,723                  102,383

Working capital                        $            17,368     $            63,565     $            160,722

Dollar change from previous period     $            51,704     $            46,197     $              1,521

Net cash                               $            30,223     $            44,981     $            142,882

In addition to assessing our liquidity based on operating cash flow and working capital, management also considers our cash balances and our net cash balance, which we define as the sum of our total cash and cash equivalents and restricted cash minus our total short-term and long-term debt. As the table above indicates, our cash position and net cash position have improved during the periods presented.

Application of Critical Accounting Policies and Accounting Estimates

There have been no changes during the third quarter of 2008 to the critical accounting policies or the areas that involve the use of significant judgments and estimates we described in our 2007 Annual Report on Form 10-K.

Analysis of Financial Results - Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007.

Summary of Third Quarter 2008 Results

• Total revenue decreased $1.7 million from the same period in 2007

• Total costs and expenses decreased $4.6 million from the same period in 2007

• Net income applicable to common stockholders was $1.9 million compared to $4.5 million in the same period in 2007

• Diluted earnings per share were $0.07 for the third quarter of 2008 and $0.17 for the third quarter of 2007

• Cash flow from operations was $78.5 million reflecting the receipt of $83.3 million from the SAP litigation settlement versus cash flow from operations of $2.9 million in the same period of 2007

• Total bookings were $46.5 in the 2008 and the 2007 periods

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