Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨ (not applicable to registrant)

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August ~~1, 2008,~~3, 2009, the Registrant had ~~21,567,303~~22,426,471 shares of $0.00025 par value Common Stock outstanding.


							June 30, 2009			December 31, 2008
	June 30, 2008			December 31, 2007						(as restated, see Note 10)
ASSETS
Current assets:
Cash and cash equivalents	$	143,061		$	120,978		$	174,878		$	238,013
Restricted cash		6,668			8,456			6,654			5,777
Accounts receivable, net		29,020			25,108			20,989			25,846
Other current assets		91,868			7,746			7,203			9,477

Total current assets		270,617			162,288			209,724			279,113

Premises and equipment, net		6,081			7,559			3,772			4,915
Goodwill		16,684			16,684			16,684			16,684
Non-current deferred tax asset		7,192			8,454			5,312			7,289
Other non-current assets		6,945			7,168			3,789			5,024

Total assets	$	307,519		$	202,153		$	239,281		$	313,025


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,958		$	4,741		$	3,587		$	4,855
Accrued liabilities		15,696			14,631			14,768			15,116
Accrued compensation and related expenses		17,354			17,636			14,239			18,679
Deferred revenue		72,408			61,715			52,202			53,028

Total current liabilities		111,416			98,723			84,796			91,678

Total long-term debt, net		84,768			84,453			—			64,520
Taxes payable		6,278			4,484			5,503			6,948

Total liabilities		202,462			187,660			90,299			163,146

Commitments and contingencies

Stockholders’ equity:
Preferred Stock, $0.001 par value, 5,000 shares authorized, none issued and outstanding		—			—			—			—
Series A junior participating preferred stock, $0.001 par value, 2,000 shares authorized, none issued and outstanding		—			—			—			—
Series B 2.5% convertible preferred stock, $1,000 par value, 150 shares authorized, 108 issued and outstanding at June 30, 2008 and 107 issued and outstanding December 31, 2007		105,003			103,450
Common stock, $0.00025 par value, 2,000,000 shares authorized, 21,560 and 21,448 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		5			5
Series B 2.5% convertible preferred stock, $1,000 par value, 150 shares authorized 111 issued and outstanding at June 30, 2009 and 109 issued and outstanding at December 31, 2008								108,177			106,591
Common stock, $0.00025 par value, 2,000,000 shares authorized, 22,063 and 21,895 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively								6			5
Additional paid-in capital		10,464,084			10,458,101			10,483,619			10,498,453
Accumulated other comprehensive income		9,649			9,963			2,196			1,509
Accumulated deficit		(10,473,684	)		(10,557,026	)		(10,445,016	)		(10,456,679	)

Net stockholders’ equity		105,057			14,493			148,982			149,879

Total liabilities and stockholders’ equity	$	307,519		$	202,153		$	239,281		$	313,025

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


													Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended June 30,						Six Months Ended June 30,						2009			2008			2009			2008
	2008			2007			2008			2007						(as restated, see Note 10)						(as restated, see Note 10)
Revenues:
Software solutions	$	12,569		$	11,412		$	24,241		$	24,845		$	15,269		$	12,569		$	25,472		$	24,241
Services		30,508			31,553			59,350			60,248			23,598			30,508			50,351			59,350
Maintenance		21,651			22,018			43,713			43,027			18,188			21,651			37,608			43,713
Contract		—			—			—			2,450

Total revenues		64,728			64,983			127,304			130,570			57,055			64,728			113,431			127,304


Costs and expenses:
Cost of revenues:
Software solutions		2,874			2,175			5,488			4,649			2,625			2,874			4,322			5,488
Services		23,624			24,467			46,095			48,310			14,990			23,624			32,576			46,095
Maintenance		2,655			2,800			5,498			5,737			2,137			2,655			4,623			5,498
Amortization of acquired technology		—			6			4			12
Amortization of aquired technology														—			—			—			4
Sales and marketing		13,072			12,957			25,022			24,654			9,047			13,072			18,956			25,022
Research and development		7,541			8,750			15,174			17,555			6,689			7,541			13,764			15,174
General and administrative		10,919			10,549			20,428			20,928			8,294			10,919			17,263			20,428
Amortization of intangibles		25			25			50			28			—			25			25			50
Restructuring charges and adjustments		—			(49	)		—			(75	)		(11	)		—			2,995			—

Costs and expenses, subtotal		60,710			61,680			117,759			121,798			43,771			60,710			94,524			117,759
Intellectual property settlement, net		(81,315	)		—			(79,860	)		—			192			(81,315	)		192			(79,860	)

Total (benefit) costs and expenses		(20,605	)		61,680			37,899			121,798
Total costs and expenses (benefit)														43,963			(20,605	)		94,716			37,899


Operating income		85,333			3,303			89,405			8,772			13,092			85,333			18,715			89,405

Non-operating expense, net:

Non-operating income (expense), net:
Interest income		932			1,302			2,127			2,648			66			932			196			2,127
Interest expense		(1,236	)		(1,236	)		(2,475	)		(2,476	)		—			(1,864	)		(899	)		(3,725	)
Foreign currency hedge and transaction losses, net		(464	)		(74	)		(605	)		(191	)		(290	)		(464	)		(831	)		(605	)
Other (expense) income, net		(335	)		(231	)		284			(553	)
Loss on extinguishment of debt														—			—			(892	)		—
Other income (expense), net														64			(236	)		(79	)		481

Total non-operating expense, net		(1,103	)		(239	)		(669	)		(572	)		(160	)		(1,632	)		(2,505	)		(1,722	)


Income before income taxes		84,230			3,064			88,736			8,200			12,932			83,701			16,210			87,683
Income tax expense		2,714			740			3,842			1,598			2,344			2,714			2,961			3,842


Net income	$	81,516		$	2,324		$	84,894		$	6,602			10,588			80,987			13,249			83,841


Preferred stock dividend and accretion of discount		776			765			1,552			1,524			797			776			1,586			1,552


Net income applicable to common stockholders	$	80,740		$	1,559		$	83,342		$	5,078		$	9,791		$	80,211		$	11,663		$	82,289


Net income per common share applicable to common stockholders:
Basic	$	3.09		$	0.06		$	3.20		$	0.20		$	0.37		$	3.07		$	0.44		$	3.16
Diluted	$	3.05		$	0.06		$	3.15		$	0.19		$	0.36		$	3.03		$	0.43		$	3.11

Weighted-average common shares outstanding:
Basic		26,105			25,770			26,080			25,690			26,814			26,105			26,774			26,080
Diluted		26,475			26,806			26,459			26,870			27,166			26,475			26,886			26,459


											Three Months Ended June 30,					Six Months Ended June 30,
	Three Months Ended June 30,					Six Months Ended June 30,					2009		2008			2009		2008
	2008			2007		2008			2007				(as restated, see Note 10)					(as restated, see Note 10)
Comprehensive income:
Net income applicable to common stockholders	$	80,740		$	1,559	$	83,342		$	5,078	$	9,791	$	80,211		$	11,663	$	82,289

Other comprehensive income:
Foreign currency translation adjustments		(2,019	)		2,918		(313	)		3,643		3,727		(2,019	)		687		(313	)

Total other comprehensive income		(2,019	)		2,918		(313	)		3,643
Total other comprehensive income (loss)												3,727		(2,019	)		687		(313	)

Total comprehensive income	$	78,721		$	4,477	$	83,029		$	8,721	$	13,518	$	78,192		$	12,350	$	81,976


							Six Months Ended June 30,
	Six Months Ended June 30,						2009			2008
	2008			2007						(as restated, see Note 10)
Cash flows from operating activities:
Net income	$	84,894		$	6,602		$	13,249		$	83,841
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance expense		541			504			84			344
Warrant accretion		315			315
Debt discount accretion								389			1,565
Loss on extinguishment of debt								892			—
Depreciation and amortization		1,850			2,471			1,494			1,850
Stock based compensation		5,872			7,347			5,045			5,872
Loss on disposal of premises and equipment		144			222			234			144
Expense (credit) for bad debts charged to costs and expenses		173			(116	)
(Benefit) provision for bad debts charged to costs and expenses								(24	)		173
Deferred income taxes		1,398			(92	)		1,465			1,398
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		(4,033	)		(440	)		4,795			(4,033	)
Other assets		(86,212	)		3,791			2,634			(86,212	)
Accounts payable		1,769			(854	)		(1,414	)		1,769
Taxes payable		2,055			(9	)		(865	)		2,055
Accrued liabilities		1,178			(5,442	)		(405	)		1,178
Accrued compensation and related expenses		(119	)		(7,516	)		(4,535	)		(119	)
Deferred revenue		10,575			(1,688	)		(702	)		10,575

Net cash provided by operating activities		20,400			5,095			22,336			20,400

Cash flows provided by (used in) investing activities:

Cash flows (used in) provided by investing activities:
Restrictions (placed) released on cash		1,788			(1,656	)		(877	)		1,788
Purchases of premises and equipment		(562	)		(1,209	)		(622	)		(562	)
Proceeds from sale of premises and equipment		17			12			68			17
Business acquisitions		—			(2,125	)

Net cash provided by (used in) investing activities		1,243			(4,978	)
Net cash (used in) provided by investing activities								(1,431	)		1,243

Cash flows provided by financing activities:
Cash dividends paid - preferred stock		—			(1,307	)

Cash flows (used in) provided by financing activities:
Repurchase of debt and equity conversion feature								(84,814	)		—
Net proceeds from common stock issuance from options and employee stock purchase plans		112			2,960			375			112

Net cash provided by financing activities		112			1,653
Net cash (used in) provided by financing activities								(84,439	)		112

Effect of exchange rates on cash		328			(200	)		399			328

Net change in cash and cash equivalents		22,083			1,570			(63,135	)		22,083
Cash and cash equivalents at beginning of period		120,978			109,419			238,013			120,978

Cash and cash equivalents at end of period	$	143,061		$	110,989		$	174,878		$	143,061


Supplemental cash flow information
Interest paid	$	2,156		$	2,156		$	1,053		$	2,156
Income taxes paid (net of refunds received)	$	882		$	1,772		$	3,078		$	882

Schedule of non-cash financing activities
Preferred stock dividend and accretion of discount	$	1,552		$	217		$	1,586		$	1,552

Nature of Operations.We operate our business in one segment, supply chain management solutions, that are designed to help enterprises optimize business processes both internally and among trading partners. 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~~Our service offerings include business optimization and licensed 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 business goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, and improving operational ~~visibility, increasing operating velocity and integrating planning and execution.~~visibility. Our offerings are designed to help customers better achieve the following critical business objectives:

Basis of Presentation.Our unaudited condensed consolidated financial statements have been prepared by management and reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, ~~2008.~~2009. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted under the Securities and Exchange Commission’s (SEC) rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, presented in our Annual Report on Form 10-K for the year ended December 31, ~~2007~~2008 filed on March ~~17, 2008~~12, 2009 with the SEC ~~(2007~~(2008 Annual Report on Form 10-K).

Recent Accounting Pronouncements.~~We adopted SFAS No. 157,~~~~Fair Value Measurements~~, on January 1, 2008. The statement creates a single definition of fair value, establishes a framework for measuring fair value, and expands disclosure requirements about items measured at fair value. SFAS No. 157 applies to both items recognized and reported at fair value in the financial statements and items disclosed at fair value in the notes to the financial statements. The statement does not change existing accounting rules governing what can or what must be recognized and reported at fair value in our financial statements, or disclosed at fair value in our notes to the financial statements. Additionally, SFAS No. 157 does not eliminate practicability exceptions that exist in accounting pronouncements amended by this Statement when measuring fair value. As a result, we are not required to recognize any new assets or liabilities at fair value.

Prior to SFAS No. 157, certain measurements of fair value were based on the price that would be paid to acquire an asset, or received to assume a liability (an entry price). The statement clarifies the definition of fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (that is, an exit price). The exit price is based on the amount that the holder of the asset or liability would receive or need to pay in an actual transaction (or in a hypothetical transaction if an actual transaction does not exist) at the measurement date. In some circumstances, the entry and exit price may be the same; however, they are conceptually different.

Fair value is generally determined based on quoted market prices in active markets for identical assets or liabilities. If quoted market prices are not available, the Company uses valuation techniques that place greater reliance on observable inputs and less reliance on unobservable inputs. In measuring fair value, the Company may make adjustments for risks and uncertainties, if a market participant would include such an adjustment in its pricing. Adoption of SFAS No. 157 did not have a material impact on our financial statements.

~~We adopted SFAS No. 159,~~~~The Fair Value Option for Financial Assets and Financial Liabilities~~, on January 1, 2008. This statement permits but does not require entities to measure many financial instruments and certain other items at fair value. Once an entity has elected the fair value option for designated financial instruments and other items, changes in fair value must be recognized in the statement of operations. The election is irrevocable once made. Adoption of SFAS No. 159 did not have a material impact on the Company’s financial statements.

In December 2007, the FASB issued Statement No. 141R, Business Combinations (“SFAS No. 141R) which changes how an entity accounts for the acquisition of a business. When effective, SFAS No. 141R will replace existing SFAS No. 141 in its entirety, will amend SFAS No. 109 and Interpretation 48 and also will amend the goodwill impairment test requirements in SFAS No. 142. SFAS No. 141R is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008. Early adoption is prohibited.

We currently record all changes to a valuation allowance for acquired deferred tax assets or the effect of changes in an acquired tax position that occur after the acquisition date by initially reducing the related goodwill to zero, next by reducing other noncurrent intangible assets related to the acquisition to zero and lastly by reducing income tax expense. However, SFAS No. 141R amends SFAS No. 109 and Interpretation 48 to require us to recognize changes to the valuation allowance for an acquired deferred tax asset or the effect of changes to an acquired tax position as adjustments to income tax expense or contributed capital, as appropriate, and not as adjustments to goodwill. This accounting will be required when SFAS No. 141R becomes effective (January 1, 2009) and applies to valuation allowances and tax positions related to acquisitions accounted for originally under SFAS No. 141 as well as those accounted for under SFAS No. 141R.

We intend to adopt SFAS No. 141R effective January 1, 2009 and apply its provisions prospectively. We are evaluating the impact that the adoption of SFAS No. 141R will have on our financial statements.

In May 2008, the FASB issued Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (“GAAP”). The pronouncement mandates that the GAAP hierarchy reside in the accounting literature as opposed to audit literature. This pronouncement will become effective 60 days following SEC approval. The Company does not believe this pronouncement will impact its financial statements.

In May 2008, the FASB issued FASB staff position (FSP) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s nonconvertible debt borrowing rate. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and shall be applied retrospectively to all periods presented. Early adoption of FSP APB 14-1 iswas not permitted.

Our 5% Senior Convertible Notes (“Notes”) ~~are~~were within the scope of FSP APB 14-1. ~~During~~In the ~~first quarter of 2009,~~accompanying condensed financial statements, we ~~will be required to report~~reported the debt ~~components~~component of the Notes at fair value as of the date of issuance and ~~amortize~~amortized the discount as an increase to interest expense over the expected life of the debt. The implementation of this standard ~~will result~~resulted in a decrease to net income and earnings per share for all prior periods presented; however, there is no effect on our cash interest payments. WeThe incremental non-cash expense associated with adoption for the three months ended June 30, 2008 was $0.5 million and was zero for the three months ended June 30, 2009 due to the repurchase of the Notes. The incremental non-cash expense associated with adoption for the six months ended June 30, 2009 and 2008 was $0.3 and $1.0 million, respectively, seeNote 10, Restatement of Financial Statements.

In March 2008, FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133(“SFAS 161”). SFAS 161 applies to all derivative instruments within the scope of SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities(“SFAS 133”). It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under SFAS 133. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of this statement in the first quarter of 2009 did not have a material impact on the Company’s financial statements, seeNote 7, Commitments and Contingencies.

In January 2009, the FASB issued Staff Position (“FSP”) EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). Under FSP EITF 03-6-1, unvested share-based payment awards which receive non-forfeitable dividend rights, or dividend equivalents, are ~~currently assessing~~considered participating securities and are required to be included in computing EPS under the two-class method. The adoption of this provision in the six months ended 2009 had no effect on the Company’s financial statements.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), which requires public entities to disclose in their interim financial statements the fair value of all financial instruments within the scope of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”), as well as the method(s) and significant assumptions used to estimate the fair value of those financial instruments. The Company has adopted the provisions of FSP FAS 107-1 and APB 28-1. The adoption of FSP FAS 107-1 and APB 28-1 had no impact on the Company’s financial position or results of ~~adopting FSP APB 14-1 on~~operations.

In May 2009, the FASB issued SFAS No. 165,Subsequent Events(“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. SFAS No. 165 requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. Accordingly, the Company adopted SFAS No. 165 as of June 30, 2009 and evaluated its financial statements for subsequent events through August 7, 2009, the filing date of our financial ~~condition and results~~statements. The Company is not aware of ~~operations.~~any such events, which would require recognition or disclosure in the financial statements.

From time to time, new accounting pronouncements applicable to the Company are issued by the FASB or other standards setting bodies, which we will adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

Short-term time deposits and other liquid investments in debt securities with original maturities of less than three months when acquired are ~~classified as available-for-sale and~~ reported as cash and cash equivalents on our condensed consolidated balance sheet. Based on their maturities, interest rate movements do not affect the balance sheet valuation of these investments. ~~Investment securities reported as cash and cash equivalents as of June 30, 2008 and December 31, 2007 were as follows:~~

~~We typically invest~~Historically, we have invested our cash in a variety of interest-earning financial instruments, including bank time deposits, money market funds, ~~and~~ taxable and tax-exempt variable-rate, ~~and~~ fixed-rate obligations of corporations, ~~and~~ federal, state and local ~~governmental~~government entities, and agencies. These investments are primarily denominated in U.S. Dollars.

Due to current economic volatility, we have elected to keep our cash balances in overnight funds comprised of a combination of Treasury and government agency money market mutual funds (“MMMF”). These MMMF have the stated goal of maintaining a net asset value of $1 per share and their interest rate resets daily to achieve this goal. These MMMF are considered Level 1 securities because they are actively traded and they are valued on our condensed consolidated balance sheets at quoted market prices. The balances held as MMMF reported as cash and cash equivalents were $167.1 million and $230.0 million as of June 30, 2009 and December 31, 2008, respectively. The balances held as time deposits reported as cash and cash equivalents were $1.6 million and $1.8 million as of June 30, 2009 and December 31, 2008, respectively.

The following table summarizes the outstanding debt and related capitalized debt issuance costs recorded on our condensed consolidated balance sheet at June 30, ~~2008~~2009 and December 31, ~~2007.~~2008.


	June 30, 2008			December 31, 2007			June 30, 2009		December 31, 2008
Senior convertible notes, 5% annual rate payable semi-annually, due November 15, 2015.....		86,250			86,250
									(as restated, see Note 10)
Senior convertible notes, 5% annual rate payable semi-annually, due November 15, 2015								—		86,250
Unamortized discount on 5% notes		(1,482	)		(1,797	)		—		(21,730	)

Total debt	$	84,768		$	84,453		$	—	$	64,520

Capitalized debt issuance costs, net	$	2,620		$	3,161		$	—	$	1,322

We recorded capitalized debt issuance costs, net of accumulated amortization, in other non-current assets and ~~are~~were amortizing these costs over a five-year period, beginning in November 2005.

We were required to adopt FASB staff position (FSP) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) on January 1, 2009. FSP APB 14-1 requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s nonconvertible debt borrowing rate. Based on our analysis of comparable nonconvertible debt issuances by similar-sized technology companies at or near the time of our debt issuance, we determined our borrowing rate would have been 9.5% for nonconvertible debt versus the stated 5% coupon rate of the Notes.

Upon adoption, we allocated the original debt proceeds between debt and the debt’s conversion feature based on the fair value of the liability component at issuance. This results in the debt being recorded at a discount to its face value. This discount is amortized as additional interest expense using the effective interest method over the 10-year life of the debt, which is the estimated life of a similar debt instrument without a related equity conversion feature. The effect on our financial statements is to record additional non-cash interest expense in each historical period in which our Notes were outstanding. We also were required to reallocate our capitalized debt issuance costs between cost of debt and cost of equity based on the relative values of the debt and the conversion feature. The result of this change is to reduce the original balance of capitalized debt issuance costs, as well as to reduce the amortization of such costs in each historical period in which our Notes were outstanding. The accompanying condensed consolidated financial statements have been restated to reflect the net increase to non-cash expense and balance sheet reclassifications. SeeNote 10, Restatement of Financial Statements, for the effect of FSP APB 14-1 on the historical financial statements included herein.

As of June 30, 2009, all Notes have been repurchased, the majority of which occurred in the first quarter of 2009. The total cash paid for the debt repurchase of $84.8 million was allocated, based on the fair values of the liability component as required by FSP APB 14-1, $64.5 million to the repurchased debt and $20.3 million to the conversion feature included in equity.

In connection with the issuance of our 5% senior convertible notes, we issued ~~certain~~484,449 warrants to purchase our common stock. We assessed the characteristics of the warrants and determined that they should be included in additional paid in capital in the stockholders’ equity portion of our condensed consolidated balance sheet, valued using a Black-Scholes model. The effect of recording the warrants as equity iswas that the 5% senior convertible notes ~~are~~were recorded at an original discount to their face value. The discount recorded was originally $3.1 million, and this discount iswas being accreted through earnings over five years. We determined a five-year life to be appropriate due to the conversion features of the 5% senior convertible notes and our assessment of the probability that the debt would be converted prior to the scheduled maturity. All of the warrants remain outstanding as of June 30, 2009.

Restructuring Plans.In prior periods, we implemented restructuring plans, which included the elimination of personnel as well as other targeted cost reductions. SeeNote 11, Restructuring Charges and Adjustments, in our Notes to Consolidated Financial Statements in our ~~2007~~2008 Annual Report on Form 10-K for a description of our previous restructuring plans. In the first quarter of 2009, we eliminated approximately 80 positions, resulting in severance costs of $3.0 million.

The following table summarizes the changes to our restructuring accruals, as well as the components of the remaining restructuring accruals at June 30, ~~2008~~2009 and June 30, ~~2007.~~2008.


	Employee Severance and Termination						Office Closure and Consolidation					Total						Employee Severance and Termination
	2008			2007			2008		2007			2008			2007			2009			2008
January 1,	$	283		$	192			—	$	123		$	283		$	315		$	6		$	283

Adjustments to restructuring plans		—			(8	)		—		(17	)		—			(25	)

Restructuring charges																			3,006			—
Cash payments		(108	)		—			—		(32	)		(108	)		(32	)		(1,776	)		(108	)

Remaining accrual balance at March 31,	$	175		$	184		$	—	$	74		$	175		$	258		$	1,236		$	175


Adjustments to restructuring plans		—			—			—		(49	)		—			(49	)		(11	)		—
Cash payments		(46	)		—			—		10			(46	)		10			(1,101	)		(46	)

Remaining accrual balance at June 30,	$	129		$	184		$	—	$	35		$	129		$	219		$	124		$	129

Net Income Per Common Share. Basic net income per common share was computed by dividing net income applicable to common stockholders by the weighted average number of common shares outstanding for the reporting period following the two-class method. Our Series B Convertible Preferred Stock is a participating security because in the event dividends are declared on our common stock it participates in those dividends on a 1:1 ratio on an as converted basis. Under the two-class method, participating convertible securities are required to be included in the calculation of basic net income per common share when the effect is dilutive. Accordingly, for the periods presented, the effect of the convertible preferred stock is included in the calculation of basic net income per common share.

Diluted net income per common share includes the dilutive effect of stock options, share rights awards, and warrants granted using the treasury stock method, and the effect of contingently issuable shares earned during the period and shares issuable under the conversion feature of our convertible debt and convertible preferred stock using the if-converted method. A loss causes all common stock equivalents to be anti-dilutive due to an increase of the weighted average shares from the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. EITF 04-8 requires the inclusion of the effect of contingently convertible instruments in the calculation of diluted income per share including when the market price of our common stock is below the conversion price of the convertible security and the effect is not anti-dilutive. Accordingly, the effect of our convertible debt is included in the calculation of diluted earnings per share. ~~Convertible instruments are anti-dilutive when conversion would cause diluted earnings per share to be greater than basic earnings per share.~~ The effect of our convertible preferred stock is included in basic earnings per share under the two-class method per EITF 03-6, “Participating Securities and the Two-Class Method” under FASB No. 128 —Earnings per Share; therefore, it is similarly included in diluted income per share when the effect is dilutive.

The following is a reconciliation of the number of shares used in the calculation of basic income per share under the two-class method and diluted earnings per share and the number of anti-dilutive shares excluded from such computations for the three and six months ended June 30, ~~2008~~2009 and June 30, ~~2007.~~2008.


	Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended June 30,		Six Months Ended June 30,
	2008	2007	2008	2007	2009	2008	2009	2008
Common and common equivalent shares outstanding using two-class method - basic:
Weighted average common shares outstanding	21,500	21,222	21,475	21,142	22,012	21,500	21,972	21,475
Unissued vested RSUs to be included in basic					80	—	80	—
Participating convertible preferred stock	4,605	4,548	4,605	4,548	4,722	4,605	4,722	4,605


Total common and common equivalent shares outstanding using two-class method - basic	26,105	25,770	26,080	25,690	26,814	26,105	26,774	26,080

Effect of dilutive securities:
Outstanding stock option and share right awards	370	916	379	1,031	352	370	112	379
Warrants associated with 5% debt	—	120	—	149
Weighted average common and common equivalent shares outstanding - diluted					27,166	26,475	26,886	26,459

Weighted average common and common equivalent shares outstanding - diluted	26,475	26,806	26,459	26,870

Anti-dilutive shares excluded from calculation:
Outstanding stock option and share right awards	3,723	1,686	3,612	1,570	2,897	3,723	3,334	3,612
Convertible debt	—	949	—	949

Total anti-dilutive shares excluded from calculation	3,723	2,635	3,612	2,519	2,897	3,723	3,334	3,612

We operate our business in one segment, supply chain management solutions, that are designed to help enterprises optimize business processes both internally and among trading partners. SFAS No. 131,“Disclosures About Segments of an Enterprise and Related Information,” establishes standards for the reporting of information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, who is our Chief Executive Officer (CEO), in deciding how to allocate resources and in assessing performance.

We market our software and services primarily through our worldwide sales organization augmented by other service providers, including both domestic and international systems consulting and integration firms and other industry-related partners. Our ~~chief executive officer~~CEO evaluates resource allocation decisions and our performance based on financial information, presented on a consolidated basis, accompanied by disaggregated information by geographic regions. Sales to our customers generally include products from some or all of our product suites. We have not consistently allocated revenues from such sales to individual products for internal or general-purpose financial statements.

Revenues are attributable to regions based on the locations of the customers’ operations. Total revenues by geographic region, as reported to our CEO, were as follows:


	Three Months Ended June 30,						Six Months Ended June 30						Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007			2009			2008			2009			2008
United States	$	36,058		$	37,005		$	74,425		$	75,046		$	28,566		$	36,058		$	58,180		$	74,425
International revenue:
Non-US Americas		1,297			1,959			2,276			3,307			1,522			1,297			3,405			2,276
Europe, Middle East and Africa		15,294			13,205			27,867			29,391			11,488			15,294			22,339			27,867
Greater Asia Pacific		12,079			12,814			22,736			22,826			15,479			12,079			29,507			22,736

Total international revenue		28,670			27,978			52,879			55,524			28,489			28,670			55,251			52,879

Total Revenue	$	64,728		$	64,983		$	127,304		$	130,570		$	57,055		$	64,728		$	113,431		$	127,304


International revenue as a percent of total revenue		44	%		43	%		42	%		43	%		50	%		44	%		49	%		42	%

No individual customer accounted for more than 10% of our total revenues during the periods presented.

Long-lived assets by geographic region excluding deferred taxes, as reported to our CEO, were as follows:


					June 30, 2009		December 31, 2008
	June 30, 2008		December 31, 2007				(as restated, see Note 10)
United States	$	27,692	$	29,251	$	19,251	$	21,344
Europe, Middle East, Africa		94		113
Europe, Middle East and Africa						125		137
Greater Asia Pacific		1,924		2,047		4,870		5,140

Total Long Lived Assets	$	29,710	$	31,411
Total Long-lived Assets					$	24,246	$	26,621

On March 7, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, entitledGeorge Keritsis and Mark Kert v. Michael E. McGrath, Michael J. Berry, Pallab K. Chatterjee, Robert C. Donohoo, Hiten D. Varia, M. Miriam Wardak, Sanjiv S. Sidhu, Stephen P. Bradley, Harvey B. Cash, Richard L. Clemmer, Lloyd G. Waterhouse, Jackson L. Wilson Jr., Robert L. Crandall and i2 Technologies, Inc., alleges breach of fiduciary duty and unjust enrichment in connection with stock option grants to certain of the defendant officers and directors on three dates in 2004 and 2005. The complaint states that those stock option grants were manipulated so as to work to the recipients’ favor when material non-public information about the company was later disclosed to positive or negative effect. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. We have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law. Based on the stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.

On October 23, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, originallyentitled John McPadden, Sr. v. Sanjiv S. Sidhu, Stephen Bradley, Harvey B. Cash, Richard L. Clemmer, Michael E. McGrath, Lloyd G. Waterhouse, Jackson L. Wilson, Jr., Robert L. Crandall and Anthony Dubreville and i2 Technologies, Inc.,alleges breach of fiduciary duty and unjust enrichment based upon allegations that the company sold its wholly-owned subsidiary, Trade Services Corporation, for an inadequate price in 2005. Since the filing of the complaint, Eugene Singer has been substituted for John McPadden as plaintiff. The defendants moved to dismiss the complaint on December 28, 2007. On August 29, 2008, the court granted the motion to dismiss as to all defendants but Mr. Dubreville (one of our former officers). The complaint, is derivative in nature, ~~and~~ does not seek relief from the company, but does seek damages and other relief from the sole remaining defendant, ~~officers~~Mr. Dubreville. On June 23, 2009, a related derivative action was filed in the Superior Court for the State of California, County of San Diego, styledEugene Singer v. Sunrise Ventures, LLC; James A. Simpson; Trade Service Holdings LLC; Trade Service Holdings, Inc.; Steven Borgardt; and ~~directors.~~Does 1-50;and i2 Technologies, Inc as a nominal defendant. This action purports to arise out of the same set of facts as the aforementionedSinger v. Dubreville action pending in Delaware, and asserts a claim for aiding and abetting breach of fiduciary duty. The complaint, derivative in nature, does not seek relief from the company, but does seek damages and other relief from the named defendants.

On August 11, 2008, two suits were filed in state district court in Texas against (among others) the Company and certain members of its Board of Directors. Each of the two suits sought injunctive relief prohibiting the closing of the sale of the Company’s common stock to an affiliate of JDA Software Group, Inc. (“JDA”), and each of the named plaintiffs purported to represent a class of holders of the Company’s common stock. One of the two suits was thereafter dismissed by the plaintiff; the other, styledJohn D. Norsworthy, on Behalf of Himself and All Others Similarly Situated, v. i2 Technologies, Inc., et al., remained pending in the 134th District Court of Dallas County, Texas. On November 5, 2008, the District Court held a hearing on Plaintiff Norsworthy’s motion for a temporary restraining order, and at the conclusion of the hearing denied the motion in its entirety. On May 29, 2009, Mr. Norsworthy non-suited this action as to all defendants.

On April 29, 2009, the Company filed a lawsuit for patent infringement against Oracle Corporation (NASDAQ: ORCL). The lawsuit, filed in the United States District Court for the Eastern District of Texas, alleges infringement of 11 patents related to supply chain management, available to promise software and other enterprise software applications. We incurred expenses related to this matter of $0.2 million for the three and six months ended June 30, 2009.

We have indemnification agreements with certain of our officers, directors and employees that may require us, among other things, to indemnify such officers, directors and employees against certain liabilities that may arise by reason of their status or service as directors, officers or employees and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. We have also entered into agreements regarding the advancement of costs with certain other officers and employees.

Pursuant to these indemnification and cost-advancement agreements, we have advanced fees and expenses incurred by certain current and former directors, officers and employees in connection with the governmental investigations and actions related to the 2003 restatement of our consolidated financial statements and other matters. We incurred no such expenses during the three months ended June 30, 2008 and June 30, 2007, and incurred no such expense in the six months ended June 30, 2008 and incurred approximately $0.1 million of such expenses during the six months ended June 30, 2007.

We may continue to advance fees and expenses incurred by certain current and former directors, officers and employees in the future. The maximum potential amount of future payments we could be required to make under these indemnification and cost-advancement agreements is unlimited. Additionally, our corporate by-laws allow us to choose to indemnify any employee for certain events or occurrences while the employee is, or was, serving at our request in such capacity. We incurred $0.2 million of expenses during the three and six months ended June 30, 2009.

Under the terms of our software license agreements with our customers, we agree that in the event the licensed software infringes upon any patent, copyright, trademark, or any other proprietary right of a third-party, we will indemnify our customer licensees against any loss, expense, or liability from any damages that may be awarded against our customer. We include this infringement indemnification in substantially all of our software license agreements and selected managed service arrangements. In the event the customer cannot use the software or service due to infringement and we ~~can not~~cannot obtain the right to use, replace or modify the software or service in a commercially feasible manner so that it no longer infringes, then we may terminate the license and provide the customer a pro-rata refund of the fees paid by the customer for the infringing software or service. We believe the estimated fair value of these intellectual property indemnification clauses is minimal.

We currently are under income tax examinations in India primarily related to our intercompany pricing for services rendered by our Indian subsidiary to other i2 companies, the taxability of certain payments received from our Indian customers, and our statutory qualification for a tax holiday. AnThe tax authorities have assessed an aggregate of approximately ~~$7.0~~$8.1 million ~~has been assessed by the tax authorities~~ for the Indian statutory fiscal years ended March 31, 2002 ~~2003 and 2004.~~ through March 31, 2005.

We believe the Indian tax authorities’ positions regarding these matters to be without merit, that all intercompany transactions were conducted at arm’s length pricing levels, all payments received from our Indian customers have been properly treated for tax purposes, and that our operations qualify for the tax holiday claimed. Accordingly, we appealed all of these assessments and sought assistance from the United States competent authority under the mutual agreement procedure of the income tax treaty between the United States and the Republic of India. This provides us with an opportunity to resolve these matters in a forum that includes governmental representatives of both countries.

Pending resolution of these matters, we have paid approximately ~~$3.7~~$3.0 million of the assessed amount and have arranged for ~~$2.9~~$4.2 million in bank guarantees in favor of the Indian government in respect of a portion of the balance as required. The bank guarantees are supported by letters of credit issued in the United ~~States and are~~States. Cash that is collateralizing these letters of credit is reflected on our condensed consolidated balance sheet as restricted cash.

We expect subsequent tax years to be examined, ~~and~~ assessments made similar to those discussed above, and no assurances can be given that these issues ultimately will be resolved in our favor. We continue to monitor and assess these issues as they progress through the relevant processes and believe that the ultimate resolution of these matters will not exceed the tax contingency reserves we have established for them.

On ~~June 23, 2008~~January 1, 2009, we ~~entered into~~adopted FASB Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement 133. The adoption of Statement 161 had no financial impact on our consolidated financial statements and only required additional financial statement disclosures. We have applied the requirements of Statement 161 on a ~~settlement agreement with SAP America, Inc., a Delaware corporation, and SAP AG, a German corporation and the parent of SAP America, Inc.,~~prospective basis. Accordingly, disclosures related to ~~settle existing patent litigation between us and the SAP companies.~~

~~Under the terms of the settlement agreement, each party license~~s to the other party certain patents in exchange for a one-time cash payment to i2 of $83.3 million. In addition, each party has agreed not to pursue legal action against the other party for its actions taken to enforce any of the licensed patentsinterim periods prior to the ~~effective~~ date of adoption have not been presented.

The Company utilizes a foreign currency risk mitigation program that uses foreign currency forward exchange contracts “(Contracts”) to economically reduce exposure to various amounts denominated in nonfunctional currencies. These foreign currency exposures typically arise from intercompany transactions, cash balances and accounts receivable held in non-functional currencies. The objective of this program is to reduce the ~~agreement. The agreement also provides~~effect of changes in foreign currency exchange rates on our results of operations. Although the Company does not designate these Contracts as hedges for ~~general releases, indemnification for its violation, and dismisses~~accounting purposes, the ~~existing litigations between the parties with prejudice. We have satisfied all our obligations under the agreement and no additional contingencies exist with respect to receipt~~objective of the ~~settlement proceeds.~~program is to offset foreign currency transaction gains and losses recorded for accounting purposes with gains and losses realized on the Contracts.

~~During~~Our Contracts generally settle within 30 days, maturing at month end. We do not use these forward contracts for trading purposes. We do not designate these forward contracts as hedging instruments pursuant to Statement 133. Accordingly, we record the ~~second quarter~~fair value of ~~2008, we~~these contracts as of the end of our reporting period to our consolidated balance sheet with changes in fair value recorded ~~income from an intellectual property lawsuit settlement.~~in our consolidated statement of operations. The ~~settlement was for $83.3 million and was recorded net of external litigation expenses of $2.0 million and $3.5 million~~balance sheet classification for the ~~three~~fair values of these forward contracts is to other current assets for unrealized gains and ~~six month periods ending June 30, 2008, respectively.~~to accrued liabilities for unrealized losses. The ~~patent licenses received~~statement of operations classification for the fair values of these forward contracts is to other income (expense), net, for both realized and unrealized gains and losses.

The tables below summarize the Company’s outstanding forward contracts held in ~~the settlement have no significant value.~~

We have accrued for estimated losses in the accompanying condensed consolidated financial statements for matters where we believe the likelihood of an adverse outcome is probable and the amount of the loss is reasonably estimable.

We are subject to various claims and legal proceedings that arise in the ordinary course of our business from time to time, including claims and legal proceedings that have been asserted against us by former employees and certain customers, and have been in negotiations to settle certain of those contingencies. The adverse resolution of any one or more of those matters or the matters described above, over and above the amount, if any, that has been estimated and accrued in our condensed consolidated financial statements could have a material adverse effect on our business, financial condition, results of operations and/or cash flows.

For a description of our stock-based compensation plans, seeNote 10, Stock-Based Compensation, in our Notes to Consolidated Financial Statements filed in our ~~2007~~2008 Annual Report on Form 10-K.

Stock-based compensation expense for the ~~three-month~~three and ~~six-month periods~~six months ended June 30, ~~2008~~2009 and June 30, ~~2007~~2008 is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007		2009		2008		2009		2008
Services	$	432	$	597	$	1,043	$	1,187	$	201	$	432	$	381	$	1,043
Maintenance		61		57		130	$	130		49		61		95		130
Sales and marketing		760		676		1,386		1,774		549		760		1,348		1,386
Research and development		627		713		1,382		1,604		477		627		935		1,382
General and administrative		1,090		1,125		1,931		2,652		1,191		1,090		2,286		1,931

Total	$	2,970	$	3,168	$	5,872	$	7,347	$	2,467	$	2,970	$	5,045	$	5,872

Included in stock-based compensation expense was restricted stock expense of ~~$1.0~~$1.3 million and ~~$0.2~~$1.0 million for the three-month periods ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, respectively, and ~~$1.9~~$2.2 million and ~~$1.2~~$1.9 million for the six-month periods ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, respectively.

In February 2007, we granted Restricted Stock Units (“RSUs”) to certain key employees that ~~vest~~contain vesting provisions based on specified performance over a two-year performance period. This performance period is from January 1, 2008 to December 31, 2009. The grant vested 33% on February 19, 2009 based on the increase of our Generally Accepted Accounting Principles (GAAP) EPS of more than 40% over the 2-year period from the close of calendar year 2006 to the close of calendar year 2008. The remaining 67% of the performance RSU grant shares are scheduled to vest on February 19, 2010, subject to the Company’s EPS as of the close of the 2009 calendar year increasing by 60% or more over the 2006 calendar year GAAP EPS. This would require achieving GAAP EPS of more than $1.20 in 2009.

We are required to assess whether the performance criteria isare probable of being achieved, and only recognize compensation expense if the vesting is considered probable. On a quarterly basis, we assess whether vesting is probable and based on that assessment record the appropriate ~~expense.~~expense, if any. Based on our ~~second quarter 2008 and prior assessments, no~~current assessment of 2009 GAAP EPS vesting is not probable; therefore, the Company has not recorded compensation expense ~~associated with these performance-based~~for the remaining unvested portion of this award in its 2008 or 2009 annual financial statements.

In February 2009, we granted RSUs to two key executives that contain vesting provisions based on achieving specified performance criteria. The RSUs vest upon completion of the defined objectives as determined by the Board’s Compensation Committee in its sole discretion on or before December 31, 2010. In April 2009, we granted RSUs to additional key employees that contain vesting provisions based on achieving specified performance criteria. The RSUs vest upon completion of the defined objectives for each year as determined by the Board’s Compensation Committee in its sole discretion as to one-third of the shares per year on or before December 31, 2009, 2010 and 2011. Based on our assessment that vesting of the awards is ~~reflected in our results~~probable as of ~~operations~~June 30, 2009, we recognized compensation expense in the ~~three-month periods or~~ six-month ~~periods~~period ended June 30, ~~2008 and June 30, 2007.~~2009 for the performance based 2009 RSUs based on the time period such awards were outstanding.

Fair values of stock options ~~and employee stock purchase plan (ESPP) shares~~ are estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Income taxes are provided using the liability method in accordance with SFAS No. 109,Accounting for Income Taxes (“SFAS 109”). In accordance with Accounting Principles Board Opinion No. 28,Interim Financial Reporting (“APB 28”), and FASB Interpretation No. 18, Accounting for Income Taxes in Interim Periods – an interpretation of APB Opinion No. 28 (“FIN 18”), the provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted by any discrete events which are reported in the period in which they occur. This estimate is re-evaluated each quarter based on our estimated tax expense for the year.

We ~~recorded~~recognized income tax expense of approximately $2.3 million and $2.7 million for the three months ended June 30, 2009 and 2008, ~~and $0.7 million for the three months ended June 30, 2007,~~respectively, representing effective income tax rates of ~~3.2%~~18.1% and ~~24.1%~~3.2%, ~~respectively.~~for the corresponding periods. We recognized income tax expense of approximately $3.0 million and $3.8 million for the six months ended June 30, 2009 and 2008, respectively, representing effective income tax rates of 18.3% and 4.3% for the corresponding periods. Various factors affect our effective income tax rate including, among others, changes in our valuation allowance, the effect of foreign operations, state income taxes (net of federal income tax benefits), ~~certain~~ non-deductible meals and entertainment expenses, research and development tax credits, and the effect of foreign withholding taxes. Our effective income tax rates during the three months and six months ended June 30, ~~2008~~2009 and June 30, ~~2007~~2008 differ from the U.S. statutory rate primarily due to the effect these items have on our valuation allowance.

Income tax expense included the effect of foreign withholding taxes of $0.3 million for the three months ended June 30, 2009 and $0.6 million for the three months ended June 30, 2008 and ~~$1.0~~$0.6 million for the six months ended June 30, 2009 and $1.1 million for the three months ended June 30, ~~2007.~~2008. Foreign withholding taxes are incurred on certain payments from international customers and are recorded upon receipt of such payments that are received net of the withheld taxes. Foreign withholding taxes generally are available to reduce domestic income tax. Due to our net operating loss carryforwards and associated valuation allowance against our domestic deferred tax assets, these withholding taxes increase our income tax expense.

During the ~~three~~six months ended June 30, 2008, we recorded a benefit to operating expense of approximately $83.3 million related to the settlement of the SAP patent litigation. We utilized net operating loss carryforwards and other tax attributes to reduce taxes on the settlement. We recorded federal and state alternative minimum tax (AMT) of approximately $1.1 million and $0.1 million, respectively, and other state income taxes of approximately $0.2 million in income tax expense during the three months and six months ended June 30, 2008 related to the settlement. Alternative minimum tax generally is available to reduce regular income tax in the future. Due to our net operating loss carryforwards and associated valuation allowance against our domestic deferred tax assets, these AMT amounts increase our income tax expense.

Income tax expense during the three months ended June 30, 2007 included a benefit of approximately $0.8 million resulting from the favorable resolution of our United Kingdom tax examination related to the 2003 tax year.

Estimated potential interest and penalties related to our unrecognized tax benefits within our global organization are recorded in income tax expense and totaled approximately ~~$0.1 million and $0.3~~$0.2 million for the three months ended June 30, 2009 and resulted in a benefit of approximately $0.1 million for the six months ended June 30, ~~2008, respectively.~~2009. Accrued interest and penalties were approximately ~~$1.9~~$2.1 million at June 30, ~~2008.~~2009. Management believes recording interest and penalties related to income tax uncertainties as income tax expense better reflects income tax expense and provides better information reporting.

We or one of our subsidiaries file income tax returns in the United States (U.S.) federal jurisdiction and various state and foreign jurisdictions. We have open tax years for the U.S. federal return back to ~~1992~~1993 with respect to our net operating loss (“NOL”) carryforwards, where the IRS may not raise tax for these years, but can reduce NOLs. Otherwise, with few exceptions, we are no longer subject to federal, state, local or foreign income tax examinations for years prior to ~~2003.~~2004.

We are subject to potential ~~challenges and assessments~~change by various tax jurisdictions toin the inter-company pricing at which we have conducted business within our global related group of ~~companies or our tax treatment of certain types of revenue generated in the conduct of business with our international customers.~~companies. Additional tax examinations may be opened or existing examinations may be resolved within the next 12 months. We closely monitor developments in ~~these areas~~this area and make changes as necessary in the accruals we have ~~recorded~~made for what we believe will be the ultimate outcome of any tax ~~adjustments resulting from such examinations.~~adjustments. It is not possible to reasonably estimate a range of potential increases or decreases of such changes.

As part of the process of preparing unaudited condensed consolidated financial statements, we are required to estimate our full-year income and the related income tax expense in each jurisdiction in which we operate. Changes in the geographical mix or estimated level of annual pre-tax income can ~~impact~~affect our effective tax rate. This process involves estimating our current tax liabilities in each jurisdiction in which we operate, including the impact, if any, of additional taxes resulting from tax examinations, as well as making judgments regarding the recoverability of deferred tax assets. To the extent recovery of deferred tax assets is not likely based on, among other things, our estimation of future taxable income in each jurisdiction, a valuation allowance is established. Tax controversies often involve complex issues across multiple jurisdictions and may require an extended period to resolve.

As discussed inNote 3, Borrowings and Debt Issuance Costs, we adopted FSP APB 14-1 in the six months ended June 30, 2009. The accompanying condensed consolidated financial statements have been restated to reflect the resulting increase to non-cash expense and balance sheet reclassifications.

Following is a summary of the effects of the restatement described above (in thousands, except per share data).

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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:

~~Certain large stockholders~~Beginning in the third quarter of 2008 and continuing through and beyond our second quarter of 2009, we have ~~called~~experienced purchasing delays and a reduction in maintenance services by some customers and prospects attributable to the current economic environment, uncertainties caused by the termination of our planned merger in the fourth quarter of 2008 and continued speculation about our future strategic direction. The current economic downturn may result in customers and prospects reducing their capital and maintenance expenditures, filing for ~~the public sale of the Company,~~bankruptcy protection or ceasing operations, which would negatively affect our bookings, revenue and the Board of Directors of i2 has formed a Strategic Review Committee in connection with an ongoing review of i2’s management, operations and strategy. Continued pressure by activist stockholders for the sale of the Company and/or the Company’s ongoing exploration of strategic options, could create distractions for our management, sales staff and other employees and create uncertainty in existing and potential customers regarding our ability to meet our contractual obligations. Such distractions and uncertainty could harm our business, results of operations, cash ~~flow and financial condition.~~flows.

Holders of our 5% senior convertible notes may convert the senior convertible 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 senior convertible 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.

The indenture governing our 5% senior convertible notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur. 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.stockholders.

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.

We operate our business in one segment, supply chain management solutions, that are designed to help enterprises optimize business processes both internally and among trading partners. 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~~Our service offerings include business optimization and licensed 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 business goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, and improving operational ~~visibility, increasing operating velocity and integrating planning and execution.~~visibility. Our offerings are designed to help customers better achieve the following critical business objectives:

Planning – supply chain optimization to match supply and demand while 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

We recognize revenue for software and our related service offerings in accordance withStatement 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,” andSAB 103, “Update of Codification of Staff Accounting Bulletins,” andSEC Staff Accounting Bulletin “Topic 13, Revenue ~~Recognition~~Recognition.”.”

Software Solutions.Software solutions revenue includes core ~~license revenue,~~and recurring license revenue, and ~~fees received~~revenue 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, consulting, hosting, and ~~consulting,~~managed services, 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.

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.

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 June 30, ~~2008~~2009 and June 30, ~~2007~~2008 were ~~$64.1~~$61.6 million and ~~$75.0~~$64.1 million, respectively, a decrease of ~~15%~~4% or ~~$10.9~~$2.5 million. Included in total bookings ~~for the second quarter~~are $23.5 million and $4.2 million of ~~2007 are $13.1 million related to the renewal of two supply chain leader agreements from 2004.~~multi-year contracts, respectively. Total bookings for the six months ended June 30, ~~2008~~2009 and June 30, ~~2007~~2008 were ~~$130.5~~ $128.1

million and ~~$136.5~~$130.5 million, respectively, a decline of approximately 4%2% or ~~$6.0~~$2.4 million. This includes $32.1 million and $7.7 million of multi-year contracts, respectively. The multi-year contracts in the three months ended June 30, 2009 include approximately $13.5 million in maintenance agreements and $10 million in software solutions, which is higher than in previous quarters. The average term of these multi-year agreements is slightly less than 3 years.

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 June 30, ~~2008 operating~~2009, total revenue ~~(total revenue excluding contract revenue) was down 0.4%~~decreased by 12% or ~~$0.3~~$7.7 million compared to the same period in ~~2007,~~2008 and decreased by 11% or $13.9 million for the six months ended June 30, ~~2008 operating revenue was down 0.6% or $0.8 million~~2009 compared to the same period in ~~2007. Our annual operating revenue was approximately $257.9 million, $275.6 million and $294.3 million~~2008. The changes in ~~2007, 2006 and 2005, respectively. These declines represent annual declines of 6% for~~ each ~~period. As part~~category 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.~~are described below.

Software solutions revenue increased ~~10%~~21% or ~~$1.2~~$2.7 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007,~~2008, and ~~declined 2%~~increased 5% or ~~$0.6~~$1.2 million for the six months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008 due to revenue recognized from our SOP 81-1 transactions. The ~~primary reason for~~increase primarily resulted from the ~~increase is that during~~significant software solutions bookings in the ~~second~~first quarter of 2008 we recognized approximately $5.5 million from prior period bookings versus approximately $3.4 million in the second quarter of 2007. During the 12 months ended December 31, 2006 and the six months ended June 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.

Services revenue decreased 3%23% or ~~$1.0~~$6.9 million for the three months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007,~~2008 and decreased 1%15% or ~~$0.9~~$9.0 million for the six months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007~~.~~This~~2008. The decrease was driven by a decline in demand for our services ~~revenue is primarily~~ due to our customers’ economic constraints, resulting in a ~~mix shift~~20% and 14% reduction in ~~the type~~billable hours, respectively. We adjusted our services capacity accordingly through cost reductions including decreasing our average headcount by 10% and 9%, respectively, as well as reducing our usage of services work performed in the second quarter of 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.third party contractors.

Maintenance revenue ~~declined 2%~~decreased 16% or ~~$0.4~~$3.5 million for the three months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007,~~2008 and ~~increased 2%~~decreased 14% or ~~$0.7~~$6.1 million for the six months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007. Declines~~2008. This decrease was primarily due to the impact of lower renewal rates as well as cancellations of certain contracts by customers who previously had multiple maintenance agreements. In addition, a significant maintenance-paying customer decided not to renew maintenance in the second quarter of 2009, which resulted in a $1.0 million reduction in maintenance revenue ~~occur~~for the three and six months ended June 30, 2009 when compared to the same period in 2008. This trend of lower renewal rates and customer losses may continue if our customers ~~fail to renew~~reduce their ~~maintenance agreements or renew them at lower rates.~~expenditures during the current economic downturn.

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 six months ended June 30, ~~2008~~2009 was ~~approximately $20.4~~$22.3 million compared to operating cash flow of ~~$5.1~~$20.4 million in the six months ended June 30, ~~2007. The main components~~2008 primarily due to our cost reductions as a result of our ~~cash flow improvement are as follows: Higher cash inflows of approximately $7.1 million, which includes higher collections of approximately $4.8 million~~restructuring and a net tax refund from an international tax authority of approximately $1.0 million for previously paid taxes, and lower cash disbursements of approximately $7.9 million, consisting of lower annual bonus payments and lower non-operating legal and legal-litigation payments.reorganization efforts.

Our working capital was ~~approximately $159.2~~$124.9 million at June 30, ~~2008, an improvement from~~2009, compared to the ~~$73.8~~$106.5 million balance at March 31, ~~2008~~2009 and the ~~$63.6~~$187.4 million at December 31, ~~2007. The increase in current assets during~~2008. In the ~~second~~first quarter of ~~2008 includes the effect of the SAP litigation settlement for $83.3 million.~~ 2009, we used $84.8 million to repurchase debt, seeNote 3, Borrowings and Debt Issuance Cost.

The chart below shows the components of our working capital and the dollar changes from ~~period to period for 2006 and 2007 and~~December 31, 2008 through the first and second quarters of ~~2008.~~


WORKING CAPITAL.									WORKING CAPITAL.
	December 31, 2006		December 31, 2007		March 31, 2008		June 30, 2008			June 30, 2009		March 31, 2009		December 31, 2008
Total cash	$	114,045	$	129,434	$	138,862	$	149,729		$	181,532	$	166,580	$	243,790
Accounts receivable		25,677		25,108		27,446		29,020			20,989		22,980		25,846
Other current assets, net		9,231		7,746		10,797		91,868			7,203		7,418		9,477

Total current assets		148,953		162,288		177,105		270,617			209,724		196,978		279,113


Current liabilities		57,538		37,008		34,314		39,008			32,594		31,865		38,650
Deferred revenue		74,047		61,715		68,986		72,408			52,202		58,597		53,028
Current portion long-term debt		—		—		—		—

Total current liabilities		131,585		98,723		103,300		111,416			84,796		90,462		91,678


Working capital	$	17,368	$	63,565	$	73,805	$	159,201		$	124,928	$	106,516	$	187,435

Dollar change from previous period	$	51,704	$	46,197	$	10,240	$	85,396

Net cash	$	30,223	$	44,981	$	54,252	$	64,961		$	181,532	$	166,579	$	157,540

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 the face value of our ~~total short-term and long-term~~ debt. ~~As the table above indicates, our cash position and net cash position has improved.~~

There have been no changes during the second quarter of ~~2008~~2009 to the critical accounting policies or the areas that involve the use of significant judgments and estimates we described in our ~~2007~~2008 Annual Report on Form 10-K.

Analysis of Financial Results – Three Months Ended June 30, ~~2008~~2009 Compared to Three Months Ended June 30, ~~2007.~~2008.

The following table sets forth revenues and the percentages of total revenues of selected items reflected in our condensed consolidated statements of operations and comprehensive income for the three months ended June 30, ~~2008~~2009 and June 30, ~~2007.~~2008. The period-to-period comparisons of financial results are not necessarily indicative of future results.


														Three Months				Three Months
	Three Months Ended June 30, 2008		Percent of Revenue		Three Months Ended June 30, 2007		Percent of Revenue		Change 2008 versus 2007					Ended				Ended				Change 2009 versus 2008
									Three months ended June 30					June 30,		Percent of		June 30,		Percent of		Three months ended June 30
									$ Change			% Change		2009		Revenue		2008		Revenue		$ Change			% Change
SOP 97-2 recognition	$	1,427	2	%	$	3,180	5	%	$	(1,753	)	-55	%	$	979	2	%	$	1,427	2	%	$	(448	)	-31	%
SOP 81-1 recognition		5,392	8	%		2,552	4	%		2,840		111	%		9,689	17	%		5,392	8	%		4,297		80	%
Recurring items		5,750	9	%		5,680	9	%		70		1	%		4,601	8	%		5,750	9	%		(1,149	)	-20	%

Total Software solutions		12,569	19	%		11,412	18	%		1,157		10	%		15,269	27	%		12,569	19	%		2,700		21	%
Services		30,508	48	%		31,553	48	%		(1,045	)	-3	%		23,598	41	%		30,508	47	%		(6,910	)	-23	%
Maintenance		21,651	33	%		22,018	34	%		(367	)	-2	%		18,188	32	%		21,651	33	%		(3,463	)	-16	%

Total revenues	$	64,728	100	%	$	64,983	100	%	$	(255	)	—		$	57,055	100	%	$	64,728	100	%	$	(7,673	)	-12	%

Software Solutions Revenue. Total software solutions revenue increased ~~10%~~21% or ~~$1.2~~$2.7 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. The components of the changes in software solutions revenue are explained below.

~~The primary cause of the decline in revenue~~Revenue recognized under SOP 97-2 for the three months ended June 30, ~~2008 is due~~2009 decreased 31% or $0.5 million compared to ~~declines~~the same period in ~~the number and size of deals being recognized from current quarter bookings as well as a decrease in the number and size of deals recognized from backlog.~~2008. During the three months ended June 30, ~~2008~~2009 we recognized revenue related to 136 contracts at an average of ~~$0.1~~$0.15 million per contract compared to 2012 contracts at an average of ~~$0.2~~$0.12 million ~~per contract~~ in the ~~comparable~~same period of ~~2007.~~2008.

Revenue recognized under SOP 81-1 is dependent upon the amount of work performed on software solutions projects and milestones met during the applicable period on projects booked in both current and prior periods and typically has a longer recognition period than revenue recognized under SOP 97-2. During the three months ended June 30, 2008 we recognized revenue related to 23 projects at an average of $0.2 million per project compared to 13 projects at an average of $0.2 million in the comparable period of 2007.

~~Revenue from recurring items was relatively unchanged, increasing $0.1~~increased 80% or $4.3 million for the three months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007.~~2008, primarily due to a significant increase in SOP 81-1 bookings in the first quarter of 2009. During the three months ended June 30, 2009, we recognized revenue related to 15 projects at an average of $0.64 million per project compared to 23 projects at an average of $0.23 million in the same period of 2008. Approximately $9.6 million of the software solutions revenue in the three months ended June 30, 2009, including revenue associated with essential services was from prior period bookings compared to $5.5 million recognized from prior period bookings for the same period in 2008. This amount was impacted by the significant software solutions bookings recorded in the first quarter of 2009.

~~Services Revenue.~~~~Services revenue~~Revenue from recurring items decreased 3%by 20% or ~~$1.0~~$1.1 million for the three months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007~~2008. This decrease resulted primarily from a license arrangement that was required to be recognized ratably over the 12 months ended December 31, 2008 based on its terms. That arrangement is subject to a maintenance agreement in 2009.

Services Revenue.Services revenue decreased 23% or $6.9 million for the three months ended June 30, 2009 compared to the same period in 2008. The decrease was driven by a decline in demand for our services due to our customers’ economic constraints, resulting in a ~~lower number~~20% reduction in billable hours. We adjusted our services capacity accordingly through cost reductions including decreasing our average headcount by 10% as well as reducing our usage of ~~hours worked on services projects, due to personal working on software solutions projects,~~third party contractors.

Maintenance Revenue.Maintenance revenue ~~was relatively unchanged, decreasing 2%~~decreased by 16% or ~~$0.4~~$3.5 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. This decrease was ~~partially related~~primarily due to the ~~delay~~impact of ~~some~~lower renewal rates as well as cancellations of certain contracts by customers who previously had multiple maintenance ~~renewals that had been expected~~agreements. This trend of lower renewal rates and customer losses may continue if our customers reduce their expenditures during the current economic downturn. In addition, a significant maintenance-paying customer decided not to renew maintenance in the second quarter of ~~2008,~~2009, which ~~are subject~~resulted in a $1.0 million reduction in maintenance revenue for the three months ended June 30, 2009 when compared to ~~continued renewal efforts~~the same period in ~~the third quarter of~~ 2008.

Maintenance revenue varies from period-to-period based on several factors, including:

International Revenue. Our international revenues included in the categories discussed above are primarily generated from customers located in Europe, Asia, Latin America and Canada. International revenue totaled ~~$28.7~~$28.5 million, or ~~44%~~50% of total revenue, in the three months ended June 30, ~~2008~~2009 compared to ~~$28.0~~$28.7 million, or ~~43%~~44% of total revenue, in the same period in ~~2007.~~2008.

Customer Concentration.During the periods presented, no individual customer accounted for more than 10% of total revenues.

~~Assuming~~A large portion of our employee base is located in India, and as a ~~constant currency~~result, a significant portion of our fixed expenses is denominated in the Indian Rupee (INR). Therefore, as the INR exchange rate ~~for~~fluctuates against the U.S. Dollar (USD), the resulting impact on our ~~rupee expenditures in 2008 as we experienced in 2007, the~~consolidated USD expenses can be significant. The impact of the depreciation in the value of the rupee ~~depreciation~~ was approximately ~~$0.1~~$0.9 million less expense for the three months ended June 30, ~~2008.~~2009, when compared to current period rupee expenditures at the prior year foreign exchange rates.

The following table sets forth cost of revenues and the gross margins of selected items reflected in our condensed consolidated statements of operations and comprehensive income for the three months ended June 30, ~~2008~~2009 and June 30, ~~2007.~~2008. The period-to period comparisons of financial results are not necessarily indicative of future results.


														Three Months				Three Months
	Three Months Ended June 30, 2008		Gross Margin		Three Months Ended June 30, 2007		Gross Margin		Change 2008 versus 2007					Ended				Ended				Change 2009 versus 2008
									Three months ended June 30					June 30,				June 30,				Three months ended June 30
									$ Change			% Change		2009		Margin		2008		Margin		$ Change			% Change
Software solutions	$	2,874	77	%	$	2,175	81	%	$	699		32	%	$	2,625	83	%	$	2,874	77	%	$	(249	)	-9	%
Services		23,624	23	%		24,467	22	%		(843	)	-3	%		14,990	36	%		23,624	23	%		(8,634	)	-37	%
Maintenance		2,655	88	%		2,800	87	%		(145	)	-5	%		2,137	88	%		2,655	88	%		(518	)	-20	%
Amortization of acquired technology		—	—			6	—			(6	)	-100	%

Total cost of revenues	$	29,153			$	29,448			$	(295	)	-1	%	$	19,752	65	%	$	29,153	55	%	$	(9,401	)	-32	%

Cost of software solutions ~~increased 32%~~decreased by 9% or ~~$0.7~~$0.2 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007~~2008. The decrease was primarily ~~because~~related to a reduction of $0.3 million in affiliate commission and royalty expense offset by an increase in ~~the number of~~costs associated with hours worked on projects requiring essential ~~services.~~services of $0.1 million.

During the three months ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, the costs attributable to the performance of essential services related to SOP 81-1 was ~~$1.9~~$2.0 million and ~~$0.8~~$1.9 million, respectively. The remaining costs of software solutions are not directly attributable to specific arrangements, so we do not believe there is a reasonable basis to calculate the cost of each type of software solutions transaction or the resulting contribution margin.

Cost of Services. These costs consist of expenses associated with the delivery of non-essential services, such as implementation, integration, process consulting and training. Cost of services decreased 3%37% or ~~$0.8~~$8.6 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. This decrease was related primarily to a decrease in employee-related costs of ~~$2.2~~$4.8 million ~~partially offset~~(inclusive of a decrease in utilization of shared resources of $1.3 million primarily from our research and development group), a decrease in contractor related costs of $1.3 million and by ~~an increase~~a decrease in travel and entertainment expense of ~~$0.8~~$1.5 million. The decrease in ~~employee related~~employee-related costs ~~was driven by a shift of approximately 28 associates from the services organization to the sales organization. This shift was done as part of our refocus in late 2007~~is also attributable to a ~~sales approach centered on customer business units.~~10% decrease in headcount.

Cost of Maintenance. These costs consist of expenses including support services such as telephone support and unspecified upgrades/enhancements provided on a when-and-if-available basis. Cost of maintenance decreased 5%20% or ~~$0.1~~$0.5 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. This decrease was primarily related to a decrease in ~~travel and entertainment expense.~~employee-related costs inclusive of a decrease in average headcount of 9%.

~~Amortization~~Total gross margin in the second quarter of ~~Acquired Technology~~~~. In connection with our business acquisitions, we acquired developed technology that we offer as a part~~2009 was 65%, up 10 percentage points from the second quarter of ~~our solutions. In accordance with applicable accounting standards, the amortization of acquired technology is included as a part of our~~2008. The year over year decline in total cost of revenues ~~because it relates~~was primarily due to ~~software products that are marketed~~the decrease in cost of services as explained above. Due to ~~potential customers.~~variations from period to period depending on the mix of revenues, the Company will continue to focus on our consolidated gross margin when evaluating efficiency metrics.

The following table sets forth operating expenses and the percentages of total revenue for those operating expenses as reported in our condensed consolidated statements of operations and comprehensive income. The period-to-period comparisons of financial results are not necessarily indicative of future results.


																			Three Months						Three Months
	Three Months Ended June 30, 2008			Percent of Revenue			Three Months Ended June 30, 2007				Percent of Revenue		Change 2008 versus 2007						Ended						Ended						Change 2009 versus 2008
										Three months ended June 30						June 30,			Percent of			June 30,			Percent of			Three months ended June 30
										$ Change				% Change			2009			Revenue			2008			Revenue			$ Change			% Change
Sales and marketing	$	13,072				20	%		$	12,957				20	%		$	115		1	%		$	9,047		16	%		$	13,072		20	%	$	(4,025	)		-31	%
Research and development		7,541				12	%			8,750			13	%			(1,209	)	-14	%			6,689		12	%			7,541		12	%		(852	)		-11	%
General and administrative		10,919		17	%			10,549			16	%		370			4	%		8,294			14	%		10,919			17	%		(2,625	)	-24	%
Amortization of intangibles		25		—				25			—			—			—			—			—			25			—			(25	)	-100	%
Restructuring charges and adjustments		—		—				(49	)		—			49			-100	%		(11	)		—			—			—			(11	)	100	%

Costs and expenses, subtotal		31,557						32,232						(675	)		-2	%		24,019						31,557						(7,538	)	-24	%
Intellectual property settlement, net		(81,315	)					—						(81,315	)		—			192						(81,315	)					81,507		-100	%

Total operating (benefit), expense	$	(49,758	)				$	32,232					$	(81,990	)		-254	%
Total operating expense																			$	24,211					$	(49,758	)				$	73,969		-149	%

Sales and Marketing Expense.These expenses consist primarily of personnel costs, commissions, office facilities, travel and promotional events such as trade shows, seminars, technical conferences, advertising and public relations programs. For the three months ended June 30, ~~2008,~~2009, sales and marketing expense ~~increased 1%~~decreased 31% or ~~$0.1~~$4.0 million when compared to the same period in ~~2007.~~2008. The decrease was primarily related to a decrease in trade show events costs of $1.8 million, a reduction in employee-related costs of $1.4 million, and a decrease in travel and entertainment costs of $0.8 million. The decrease in trade show events is due to the cancellation of our 2009 Planet event typically held in the second quarter. The Company will continue to evaluate Planet and other customer events in the future in light of then-current economic conditions. The decrease in employee-related costs is associated with our restructuring and reorganization efforts. The decrease in travel and entertainment is attributable to the implementation of cost control initiatives.

Research and Development Expense. These expenses consist of costs related to software development and product enhancements to existing software. Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. To date, the establishment of technological feasibility of our products and general release of such software has substantially coincided. As a result, software development costs qualifying for capitalization have been insignificant; therefore, we have not capitalized any software development costs other than those recorded in connection with our acquisitions. The primary component of research and development expense is employee-related cost. For the three months ended June 30, ~~2008,~~2009, the decrease in research and development expense included a $0.4 million decrease in ~~subcontractor expense~~employee-related costs and a ~~$0.2~~$0.3 million decrease in ~~employee-related~~facilities costs. The decrease in employee-related expenses is due to ~~a 14%~~an 8% decrease in average headcount when compared to the same period in ~~2007.~~2008 offset by a decrease in shared resources utilized on Services projects of $1.0 million.

General and Administrative Expense. These expenses include the personnel and other costs of our finance, legal, accounting, human resources, information systems and executive departments, as well as external legal costs. General and administrative expense for the three months ended June 30, ~~2008 increased 4%~~2009 decreased 24% or ~~$0.4~~$2.6 million compared to the same period in ~~2007~~2008 primarily due to ~~an increase~~a reduction in legal and litigation related expenses of ~~$2.1 million, partially offset by decreases in employee-related expense of $0.7 million, a decrease in non-income taxes of $0.7~~$1.8 million, and ~~a decrease in travel and entertainment expense~~facilities costs of ~~$0.3~~$0.9 million. The ~~increase~~reduction in legal and litigation related expenses is ~~primarily~~ due to $1.8 million of expenses related to the resolution of certain non-patent litigation activities in 2008, which date back to 2005. The decrease in ~~employee related expenses~~facilities costs is ~~reflective of a decrease of 11% in average headcount when compared~~mostly due to the ~~same period in 2007.~~renegotiation of the Dallas facilities lease for less square footage and a lower per square foot rate.

Amortization of Intangible Assets and Impairment of Intangible Assets. From time to time, we have sought to enhance our product offerings through technology and business acquisitions. When an acquisition of a business is accounted for using the purchase method, the amount of the purchase price is allocated to the fair value of assets acquired, net of liabilities assumed. Any excess purchase price is allocated to goodwill. Intangible assets are amortized over their estimated useful lives, while goodwill is only written down if and when it is deemed to be impaired.

~~Restructuring Expense.~~Intellectual Property Settlement, Net.~~During~~For the three months ended June 30, ~~2008~~2009, we incurred ~~no restructuring expense. In~~$0.2 million of costs related the ~~three months ended June 30, 2007 we made adjustments to our restructuring accrual.~~

~~Intellectual Property Settlement, Net.~~Oracle patent suit. On June 23, 2008, we reached a settlement with SAP to settle existing patent litigation between i2 and SAP. Under the terms of the settlement, SAP agreed to pay i2 $83.3 million. We recorded the $83.3 million net of external patent litigation expenses of $2.0 million for the three months ended June 30, 2008.

For the three months ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, non-operating (expense), net, was as follows:


														Three Months				Three Months
														Ended				Ended				Change 2009 versus 2008
	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007				Change 2008 versus 2007						June 30,				June 30,				Three months ended June 30
							Three months ended June 30						2009				2008				$ Change				% Change
							$ Change			% Change							(as restated, see Note 10)
Interest income	$	932			$	1,302			(370	)		-28	%		$	66			$	932			$	(866	)		-93	%
Interest expense		(1,236	)			(1,236	)		—			—				—				(1,864	)			(1,864	)		-100	%
Foreign currency hedge and transaction losses, net		(464	)		(74	)		390			527	%			(290	)			(464	)			(174	)		-38	%
Other income (expense), net		(335	)		(231	)		(104	)		-45	%
Other income , net															64				(236	)			300			127	%

Total non-operating income (expense), net	$	(1,103	)	$	(239	)		(864	)		-362	%
Total non-operating (expense), net														$	(160	)		$	(1,632	)		$	(1,472	)		-90	%

Total non-operating (expense) decreased $1.5 million for the three months ended June 30, 2009 as compared to the same period in 2008.

Interest income decreased in the three-month period ended June 30, ~~2008~~2009, compared to the same period in ~~2007~~2008 due to lower ~~investment~~ yields on average cash balances, partially offset ~~partially~~ by higher average cash balances. For the three months, ended June 30, ~~2008,~~2009, average cash balances increased ~~26.4% from the three months ended June 30, 2007.~~21.7%. The average rate earned for the three months ended June 30, ~~2008~~2009, was ~~2.5%~~0.16%, and for June 30, ~~2007~~2008, was ~~4.56%~~2.50%. The lower interest rates are due to changes in the general direction of market interest rates in the U.S., where the majority of our cash is held, and a change in the mix of our holdings. Due to the demand nature of our money market funds and the short-term nature of our time deposits and debt securities portfolio, these assets are sensitive to changes in the Federal Funds rate. The Federal Funds rate decreased from 2.00% at June 30, 2008, to between 0.00% and 0.25% at June 30, 2009. During the first half of 2009, substantially all of our cash was held in Treasury and government agency money market mutual funds.

Interest expense ~~was flat~~decreased $1.9 million in the period ended June 30, 2009 as compared to the same period in 2008. The decline is due to our Convertible Notes repurchases; seeNote 3, Borrowings and Debt Issuance Cost. The incremental non-cash interest expense associated with the adoption of FSP APB 14-1 for the three months ended June 30, 2008 ~~as compared to~~was $0.6 million. The incremental non-cash other income associated with the ~~same period in 2007.~~adoption of FSP APB 14-1 for the three months ended June 30, 2009 was $0.1 million.

The market interest rates on investments and the relative exchange values of foreign currencies are influenced by the monetary and fiscal policies of the governments in the countries in which we operate. The nature, timing and extent of any impact on our financial statements resulting from changes in those governments’ policies are not predictable. Risks associated with market interest rates and foreign exchange rates are discussed below under the section captioned “Sensitivity to Market Risks.”

We ~~recorded~~recognized income tax expense of approximately $2.3 and $2.7 million for the three months ended June 30, 2009 and 2008, ~~and $0.7 million for the three months ended June 30, 2007,~~respectively, representing effective income tax rates of 18.1% and 3.2% ~~and 24.1%, respectively.~~for the corresponding periods. Various factors affect our effective income tax rate including, among others, changes in our valuation allowance, the effect of foreign operations, state income taxes (net of federal income tax benefits), certain non-deductible meals and entertainment expenses, research and development tax credits, and the effect of foreign withholding taxes. Our effective income tax rates during the three months ended June 30, ~~2008~~2009 and June 30, ~~2007~~2008 differ from the U.S. statutory rate primarily due to the effect these items have on our valuation allowance.

Income tax expense included the effect of foreign withholding taxes of $0.3 million for the three months ended June 30, 2009 and $0.6 million for the three months ended June 30, ~~2008 and $1.0 million for the three months ended June 30, 2007.~~2008. Foreign withholding taxes are incurred on certain payments from international customers and are recorded upon receipt of such payments ~~which~~that are received net of the withheld taxes. Foreign withholding taxes generally are available to reduce domestic ~~federal regular~~ income tax. Due to our net operating loss carryforwards and associated valuation allowance against our domestic deferred tax assets, these ~~withheld~~withholding taxes increase our income tax expense.

During the three months ended June 30, 2008, we recorded a benefit to operating expense of approximately $83.3 million related to the settlement of the SAP patent litigation. We utilized net operating loss carryforwards and other tax attributes to reduce taxes on the settlement. Accordingly, we recorded federal and state alternative minimum tax (AMT) of approximately $1.1 million and $0.1 million, respectively, and other state income taxes of approximately $0.2 million in income tax expense during the three months ended June 30, 2008 related to the settlement. Alternative minimum tax generally is available to reduce regular income tax in the future. Due to our net operating loss carryforwards and associated valuation allowance against our domestic deferred tax assets, these amounts increase our income tax expense.

~~Income~~Estimated potential interest and penalties related to our unrecognized tax benefits within our global organization are recorded in income tax expense ~~during~~and totaled approximately $0.2 million for the three months ended June 30, ~~2007 included a benefit of~~2009. Accrued interest and penalties were approximately ~~$0.8~~$2.1 million ~~as a result of the favorable resolution of our United Kingdom tax examination~~at June 30, 2009. Management believes recording interest and penalties related to ~~the 2003~~income tax ~~year.~~uncertainties as income tax expense better reflects income tax expense and provides better information reporting.

Analysis of Financial ~~Results—~~Results - Six Months Ended June 30, ~~2008~~2009 Compared to the Six Months Ended June 30, ~~2007~~2008

The following table sets forth revenues and the percentages of total revenues of selected items reflected in our condensed consolidated statements of operations and comprehensive income for the six months ended June 30, ~~2008~~2009 and June 30, ~~2007.~~2008. The period-to-period comparisons of financial results are not necessarily indicative of future results.


														Six Months				Six Months
	Six Months Ended June 30, 2008		Percent of Revenue		Six Months Ended June 30, 2007		Percent of Revenue		Change 2008 versus 2007					Ended				Ended				Change 2009 versus 2008
									Six months ended June 30					June 30,		Percent of		June 30,		Percent of		Six months ended June 30
									$ Change			% Change		2009		Revenue		2008		Revenue		$ Change			% Change
SOP 97-2 recognition	$	1,803	2	%	$	5,785	4	%	$	(3,982	)	-69	%	$	1,553	1	%	$	1,803	1	%	$	(250	)	-14	%
SOP 81-1 recognition		10,460	8	%		7,457	6	%		3,003		40	%		14,007	12	%		10,460	8	%		3,547		34	%
Recurring items		11,978	9	%		11,603	9	%		375		3	%		9,912	9	%		11,978	9	%		(2,066	)	-17	%

Total Software solutions		24,241	19	%		24,845	19	%		(604	)	-2	%		25,472	22	%		24,241	19	%		1,231		5	%
Services		59,350	47	%		60,248	46	%		(898	)	-1	%		50,351	44	%		59,350	47	%		(8,999	)	-15	%
Maintenance		43,713	34	%		43,027	33	%		686		2	%		37,608	33	%		43,713	34	%		(6,105	)	-14	%
Contract		—	—			2,450	2	%		(2,450	)	-100	%

Total revenues	$	127,304	100	%	$	130,570	100	%	$	(3,266	)	-3	%	$	113,431	100	%	$	127,304	100	%	$	(13,873	)	-11	%

Software Solutions Revenue.Total software solutions revenue ~~decreased 2%~~increased 5% or ~~$0.6~~$1.2 million for the six months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. The components of the changes in software solutions revenue are explained below.

~~The primary cause of the decline in revenue~~Revenue recognized under SOP 97-2 decreased 14% or $0.25 million for the six months ended June 30, ~~2008 is due~~2009 compared to ~~declines in~~ the ~~number and size~~same period of ~~deals being recognized from current quarter bookings as well as a decrease in the number and size of deals recognized from backlog.~~2008. During the six months ended June 30, ~~2008~~2009 we recognized revenue related to 10 contracts at an average of $0.15 million per contract compared to 19 contracts at an average of ~~$0.1~~$0.10 million ~~per contract compared to 36 contracts at an average of $0.2 million per contract~~ in the ~~comparable~~same period of ~~2007.~~2008.

Revenue recognized under SOP 81-1 is dependent upon the amount of work performed on software solutions projects and milestones met during the applicable period on projects booked in prior periods. ~~During the six months ended June 30, 2008 we~~Revenue recognized ~~revenue~~ under ~~23 projects at an average of $0.5 million per project compared to 25 projects at an average of $0.3 million per project in the comparable period of 2007.~~

~~Revenue from recurring items was relatively unchanged, increasing $0.4~~SOP 81-1 increased 34% or $3.5 million for the six months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007.~~2008. During the six months ended June 30, 2009, we recognized revenue related to 31 projects at an average of $0.45 million per project compared to 23 projects at an average of $0.45 million per project in the same period of 2008.The increase primarily resulted from the significant software solutions bookings in the first quarter of 2009.

~~Services Revenue.~~~~Services revenue was relatively unchanged decreasing 1%~~Revenue from recurring items decreased by 17% or ~~$0.9~~$2.1 million for the six months ended June 30, ~~2008~~2009 when compared to the same period in ~~2007.~~2008. This decrease resulted primarily from a license arrangement that was required to be recognized ratably over the 12 months ended December 31, 2008 based on its terms. This arrangement is subject to a maintenance agreement in 2009.

~~Maintenance~~Services Revenue.~~Maintenance~~Services revenue ~~increased 2%~~decreased 15% or ~~$0.7~~$9.0 million for the six months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. The decrease was driven by a decline in demand for our services due to our customers’ economic constraints, resulting in a 14% reduction in billable hours. We adjusted our services capacity accordingly through cost reductions including decreasing our average headcount by 9% as well as reducing our usage of third party contractors.

Maintenance Revenue.Maintenance revenue decreased 14% or $6.1 million for the six months ended June 30, 2009 compared to the same period in 2008. This decrease was primarily due to the impact of lower renewal rates as well as cancellations of certain contracts by customers who previously had multiple maintenance agreements. This trend of lower renewal rates and customer losses may continue if our customers reduce their expenditures during the current economic downturn. In addition, a significant maintenance-paying customer decided not to renew maintenance in the second quarter of 2009, which resulted in a $1.0 million reduction in maintenance revenue for the six months ended June 30, 2009 when compared to the same period in 2008.

International Revenue. Our international revenues included in the categories discussed above are primarily generated from customers located in Europe, Asia, Latin America and Canada. International revenue totaled ~~$52.9~~$55.3 million, or ~~42%~~49% of total revenue, in the six months ended June 30, ~~2008~~2009 compared to ~~$55.5~~$52.9 million, or ~~43%~~42% of total revenue, in the same period in ~~2007. International revenue remained relatively consistent in the six-month periods ended June 30, 2008 and June 30, 2007.~~2008.

Customer Concentration. During the periods presented, no individual customer accounted for more than 10% of total revenues.

~~During the six months ended June 30, 2008 we experienced margin compression compared to the six months ended June 30, 2007,~~A large portion of our employee base is located in India, and as a result, a significant portion of ~~appreciation~~our fixed expenses is denominated in the Indian ~~rupee. Our rupee-denominated expenses increased modestly during 2008, but this translated into a 14% increase in our dollar-denominated expenses in our India operations. If we assume~~Rupee (INR). Therefore, as the ~~same currency~~INR exchange rate ~~for~~fluctuates against the U.S. Dollar (USD), the resulting impact on our ~~rupee expenditures in 2008 as we experienced in 2007, the~~consolidated USD expenses can be significant. The impact of the depreciation in the value of the rupee ~~appreciation~~ was approximately ~~$0.6~~$2.2 million less expense for the six months ended June 30, ~~2008.~~2009, when compared to current period rupee expenditures at the prior year foreign exchange rates.

The following table sets forth cost of revenues and the gross margins of selected items reflected in our condensed consolidated statements of operations and comprehensive income for the six months ended June 30, ~~2008~~2009 and June 30, ~~2007.~~2008. The period-to period comparisons of financial results are not necessarily indicative of future results.


														Six Months				Six Months
	Six Months Ended June 30, 2008		Gross Margin		Six Months Ended June 30, 2007		Gross Margin		Change 2008 versus 2007					Ended				Ended				Change 2009 versus 2008
									Six months ended June 30					June 30,				June 30,				Six months ended June 30
									$ Change			% Change		2009		Margin		2008		Margin		$ Change			% Change
Software solutions	$	5,488	77	%	$	4,649	81	%	$	839		18	%	$	4,322	83	%	$	5,488	77	%	$	(1,166	)	-21	%
Services		46,095	22	%		48,310	20	%		(2,215	)	-5	%		32,576	35	%		46,095	22	%		(13,519	)	-29	%
Maintenance		5,498	87	%		5,737	87	%		(239	)	-4	%		4,623	88	%		5,498	87	%		(875	)	-16	%
Amortization of acquired technology		4	—			12	—			(8	)	-67	%		—	—			4	—			(4	)	-100	%

Total cost of revenues	$	57,085			$	58,708			$	(1,623	)	-3	%	$	41,521	63	%	$	57,085	55	%	$	(15,564	)	-27	%

Cost of Software Solutions. Cost of software solutions ~~increased 18%~~decreased 21% or ~~$0.8~~$1.2 million for the six months ended June 30, ~~2008~~2009 compared to the same period in ~~2007~~2008. This decrease was primarily ~~because~~caused by a lower average cost rate of ~~an increase~~the resource mix working on software solutions projects compared to the same period in ~~the number of hours worked on projects requiring essential services.~~2008 and a reduction in affiliate commission and royalty expense.

During the six months ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, the costs attributable to the performance of essential services related to software solutions projects recognized under SOP 81-1 was ~~$3.8~~$3.2 million and ~~$1.2~~$3.8 million, respectively.

Cost of Services. These costs consist of expenses associated with the delivery of non-essential services, such as implementation, integration, process consulting and training. Cost of services decreased 5%29% or ~~$2.2~~$13.5 million for the six months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. This decrease was primarily related to a decrease in employee related costs of ~~$3.1 million partially offset by an increase~~$6.8 (inclusive of a decrease in average headcount of 9% and a decrease in utilization of shared resources primarily from the research and development group of $1.5 million), a decrease in contractor costs of $2.1 and a decrease in travel and entertainment of ~~$0.8~~$2.6 million. The decrease in employee related costs was driven by a shift of approximately 28 associates from the services organization to the sales organization. This shift was done as part of our refocus in late 2007 to a sales approach centered on customer business units.

Cost of Maintenance. These costs consist of expenses including support services such as telephone support and unspecified upgrades/enhancements provided on a when-and-if-available basis. Cost of maintenance decreased 4%16% or ~~$0.2~~$0.9 million for the three months ended June 30, ~~2008~~2009 compared to the same period in ~~2007.~~2008. This decrease was primarily related to a decrease in ~~travel and entertainment expense.~~employee-related costs inclusive of a decrease in average headcount of 9%.

Amortization of Acquired Technology. In connection with our business acquisitions, we acquired developed technology that we offer as a part of our solutions. In accordance with applicable accounting standards, the amortization of acquired technology is included as a part of our cost of revenues because it relates to software products that are marketed to potential customers.


																				Six Months						Six Months
	Six Months Ended June 30, 2008			Percent of Revenue			Six Months Ended June 30, 2007				Percent of Revenue		Change 2008 versus 2007							Ended						Ended						Change 2009 versus 2008
										Six months ended June 30						June 30,			Percent of			June 30,				Percent of			Six months ended June 30
										$ Change				% Change			2009			Revenue			2008				Revenue			$ Change			% Change
Sales and marketing	$	25,022				20	%		$	24,654				19	%		$	368			1	%		$	18,956		17	%		$	25,022		20	%	$	(6,066	)	-24	%
Research and development .		15,174				12	%			17,555			13	%			(2,381	)		-14	%
Research and development																					13,764		12	%			15,174			12	%		(1,410	)	-9	%
General and administrative		20,428		16	%			20,928			16	%		(500	)		-2	%			17,263		15	%			20,428			16	%		(3,165	)	-15	%
Amortization of intangibles		50		—				28			—			22			79	%			25		—				50			—			(25	)	-50	%
Restructuring charges and adjustments.		—		—				(75	)		—			75			-100	%
Restructuring charges and adjustments																					2,995		3	%			—			—			2,995		100	%

Costs and expenses, subtotal		60,674						63,090						(2,416	)		-4	%			53,003						60,674						(7,671	)	-13	%
Intellectual property settlement, net		(79,860	)					—						(79,860	)		—				192						(79,860	)					80,052		-100	%

Total operating (benefit), expense	$	(19,186	)				$	63,090					$	(82,276	)		-130	%
Total operating expense																				$	53,195					$	(19,186	)				$	72,381		-377	%

Sales and Marketing Expense.For the six months ended June 30, ~~2008,~~2009, sales and marketing expense decreased 24% or $6.1 million when compared to the ~~increase~~same period in 2008. The decrease in sales and marketing expense included ~~an increase~~a decrease in employee related costs of ~~$1.6~~$3.2 million, ~~(including $1.4~~a decrease in travel and entertainment expense of $1.3 million ~~of employee commissions expense~~ and ~~$0.7 million of benefits expense). This increase in employee related costs was partially offset by~~ a decrease in trade show ~~expense~~and events of ~~$0.2~~$1.5 million. The decrease in trade show events is due to the cancellation of our 2009 Planet event typically held in the second quarter. The Company will continue to evaluate Planet and other customer events in the future in light of then-current economic conditions. The decrease in employee-related costs is associated with our restructuring and reorganization efforts. The decrease in travel and entertainment is attributable to the implementation of cost control initiatives.

Research and Development Expense.For the six months ended June 30, ~~2008,~~2009, the decrease in research and development expense included a decrease in employee-related costs ~~$0.8 million, a decrease in subcontractor cost of~~ $0.6 ~~million, a decrease in travel and entertainment of $0.2~~ million and a decrease in ~~equipment~~facilities cost of ~~$0.2~~$0.5 million. The decrease in employee-related expenses is due to a 6% decrease in average headcount when compared to the same period in 2008 offset by a decrease in shared resources utilized on Services projects of $1.7 million.

General and Administrative Expense.General and administrative expense for the six months ended June 30, ~~2008~~2009 decreased 2%15% or ~~$0.5~~$3.2 million compared to the same period in ~~2007~~2008. The decrease is primarily due to a decrease in employee related expense of ~~$1.7~~$0.3 million, a decrease in ~~equipment expense~~facilities cost of ~~$0.9 million, a decrease in subcontractor expense of $0.6~~$1.2 million and a decrease in ~~travel and entertainment expense of $0.5. These decreases in expenses were partially offset by an increase~~ legal and litigation related expenses of $1.8 million related to the resolution of certain non-patent litigation activities, which date back to 2005. The decrease in ~~employee related expenses~~facilities costs is ~~reflective of a decrease of 16% in average headcount when compared~~mostly due to the ~~same period in 2007.~~renegotiation of the Dallas facilities lease for less square footage and a lower per square foot rate.

Restructuring Expense.During the six months ended June 30, ~~2008~~2009 we had $3.0 million in restructuring expense related to the involuntary termination of approximately 80 associates and no ~~restructuring expense. In~~expense in the ~~three~~six months ended June 30, ~~2007 we had adjustments to our restructuring accrual.~~2008.

Intellectual Property Settlement, Net.For the six months ended June 30, 2009, we incurred $0.2 million of costs related the Oracle patent suit. On June 23, 2008, we reached a settlement with SAP to settle existing patent litigation between i2 and SAP. Under the terms of the settlement, SAP agreed to pay i2 $83.3 million. We recorded the $83.3 million net of ~~legal~~external patent litigation expense of $3.5 million for the six months ended June 30, 2008.

For the six months ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, non-operating (expense), net, was as follows:


														Six Months				Months
														Ended				Ended				Change 2009 versus 2008
	Six Months Ended June 30, 2008			Six Months Ended June 30, 2007				Change 2008 versus 2007						June 30,				June 30,				Six months ended June 30
							Six months ended June 30						2009				2008				$ Change				% Change
							$ Change			% Change							restated, see Note
Interest income	$	2,127			$	2,648			(521	)		-20	%		$	196			$	2,127			$	(1,931	)		-91	%
Interest expense		(2,475	)			(2,476	)		(1	)		—				(899	)			(3,725	)			(2,826	)		-76	%
Foreign currency hedge and transaction losses, net.		(605	)		(191	)		414			217	%
Other income (expense), net		284			(553	)		837			151	%
Foreign currency hedge and transaction losses, net															(831	)			(605	)			226			37	%
Loss on extinguishment of debt															(892	)			—				892			100	%
Other (expense) income, net															(79	)			481				560			116	%

Total non-operating (expense), net	$	(669	)	$	(572	)		(97	)		-17	%		$	(2,505	)		$	(1,722	)		$	783			45	%

Total non-operating (expense) increased $0.8 million for the six months ended June 30, 2009 as compared to the same period in 2008.

Interest income decreased in the six-month period ended June 30, ~~2008~~2009, compared to the same period in ~~2007~~2008 due to lower yields on average cash balances, partially offset by higher average cash balances. For the six months, ended June 30, ~~2008,~~2009, average cash balances increased ~~25.4%~~38.1%. The average rate earned for the six months ended June 30, ~~2008~~2009, was ~~2.85%~~0.17%, and for June 30, ~~2007~~2008, was ~~4.61%~~2.85%. The lower interest rates are due to changes in the general direction of market interest rates in the U.S., where the majority of our cash is held, and a change in the mix of our holdings. Due to the demand nature of our money market funds and the short-term nature of our time deposits and debt securities portfolio, these assets are sensitive to changes in the Federal Funds rate. The Federal Funds rate decreased from 2.00% at June 30, 2008, to between 0.00% and 0.25% at June 30, 2009. During the first half of 2009, substantially all of our cash was held in money market accounts invested in Treasury and agency securities.

Interest expense ~~was unchanged for~~decreased $2.8 million in the ~~three months~~period ended June 30, ~~2008~~2009 as compared to the same period in ~~2007.~~2008. The decline is due to our Convertible Notes repurchases; seeNote 3, Borrowings and Debt Issuance Cost. The incremental non-cash interest expense associated with the adoption of FSP APB 14-1 for the six months ended June 30, 2009 and 2008 is $0.3 million and $1.2 million respectively.

The repurchase of the notes resulted in a $0.9 million loss on extinguishment of debt.

The change in other income (expense) is primarily related to a refund of payroll tax interest of $0.7 million received in the first quarter of 2008. The incremental non-cash other income associated with the adoption of FSP APB 14-1 for the six months ended June 30, 2009 and 2008 is $0.05 million and $0.2 million respectively.

We ~~recorded~~recognized income tax expense of approximately $3.0 million and $3.8 million for the six months ended June 30, 2009 and 2008, ~~and $1.6 million for the six months ended June 30, 2007,~~respectively, representing effective income tax rates of 18.3% and 4.3% ~~and 19.5%, respectively.~~for the corresponding periods. Various factors affect our effective income tax rate including, among others, changes in our valuation allowance, the effect of foreign operations, state income taxes (net of federal income tax benefits), certain non-deductible meals and entertainment expenses, research and development tax credits, and the effect of foreign withholding taxes. Our effective income tax rates during the six months ended June 30, ~~2008~~2009 and June 30, ~~2007~~2008 differ from the U.S. statutory rate primarily due to the effect these items have on our valuation allowance.

Income tax expense included the effect of foreign withholding taxes of $0.6 million for the six months ended June 30, 2009 and $1.1 million for the six months ended June 30, ~~2008 and $1.3 million for the six months ended June 30, 2007.~~2008. Foreign withholding taxes are incurred on certain payments from international customers and are recorded upon receipt of such payments which are received net of the withheld taxes Foreign withholding taxes generally are available to reduce domestic federal regular income tax. Due to our net operating loss carryforwards and associated valuation allowance against our domestic deferred tax assets, these withheld taxes increase our income tax expense.

The six months ended June 30, 2009 include a benefit resulting from adjustments to our global transfer pricing accruals, including the expiration of certain tax years related to international operations. The six months ended June 30, 2008 include the effect of a tax refund of approximately $1.0 million related to our international operations.

During the six months ended June 30, 2008, we recorded a benefit to operating expense of approximately $83.3 million related to the settlement of the SAP patent litigation. We utilized net operating loss carryforwards and other tax attributes to reduce taxes on the settlement. Accordingly, we recorded federal and state alternative minimum tax (AMT) of approximately $1.1 million and $0.1 million, respectively, and other state income taxes of approximately $0.2 million in income tax expense during the six months ended June 30, 2008 related to the settlement. Alternative minimum tax generally is available to reduce regular income tax in the future. Due to our net operating loss carryforwards and associated valuation allowance against our domestic deferred tax assets, these amounts increase our income tax expense.

~~Income~~Estimated potential interest and penalties related to our unrecognized tax benefits within our global organization are recorded in income tax expense ~~during~~and resulted in a benefit of approximately $0.1 million for the six months ended June 30, ~~2008 includes~~2009. The benefit resulted from the ~~effect of a refund of~~reduction in interest and penalties associated with the adjustments to our global transfer pricing accruals mentioned above. Accrued interest and penalties were approximately ~~$1.0~~$2.1 million at June 30, 2009. Management believes recording interest and penalties related to ~~our international operations.~~

~~Income~~income tax uncertainties as income tax expense ~~during the six months ended June 30, 2007 included a benefit of approximately $0.8 million as a result of the favorable resolution of our United Kingdom~~better reflects income tax ~~examination related to the 2003 tax year.~~expense and provides better information reporting.

During the three-month and six-month periods ended June 30, ~~2008,~~2009, there were no material changes outside the ordinary course of business in the specified contractual obligations set forth in our ~~2007~~2008 Annual Report on Form 10-K.

As of June 30, ~~2008,~~2009, we did not have any ~~significant~~ off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Our working capital was ~~$159.2~~$124.9 million at June 30, ~~2008~~2009 compared to ~~$63.6~~$187.4 million at December 31, ~~2007, an improvement~~2008, a reduction of ~~$95.6~~$62.5 million or ~~150.3%~~33%. The ~~improvement~~reduction in working capital was principally attributable to the cash required for the convertible note repurchases during the first quarter of 2009. The reduction resulted from a ~~$108.3~~$69.2 million ~~increase~~decrease in current assets ~~comprised~~(comprised of ~~an increase~~a decrease of ~~$84.1 million in other current assets, $20.3~~$62.3 million in cash, including restricted cash, ~~and an increase~~a decrease of ~~$3.9~~$2.3 million ~~in accounts receivable. The increase~~ in other current assets ~~reflects the effect~~and a decrease of ~~the SAP litigation settlement of $83.3 million.~~$4.9 million in accounts receivable). This ~~increase~~decrease in current assets was partially offset by ~~an increase~~a decrease in current liabilities of $12.7 million (comprised of an increase in deferred revenue of $10.7 million, an increase in accounts payable of $1.2 million, and an increase in accrued liabilities of $1.1 million partially offset by a decrease in accrued compensation and related expenses of $0.3 million).$6.9 million.

Our working capital balance at June 30, ~~2008~~2009 and December 31, ~~2007~~2008 included deferred revenue. At June 30, ~~2008~~2009 and December 31, ~~2007,~~2008, we had approximately ~~$72.4~~$52.2 million and ~~$61.7~~$53.0 million, respectively, of deferred revenue recorded as a current liability, representing pre-paid revenue for all of our different revenue categories. Our deferred revenue balance includes a margin to be earned when it is recognized, so the conversion of the liability to revenue will require cash outflows that are less than the amount of the liability.

Our cash and cash equivalents ~~increased $22.1~~decreased $63.1 million during the six months ended June 30, 2008. This ~~increase~~decrease is primarily the result of ~~$20.4 million~~cash used in financing activities of ~~cash provided by operating activities~~$84.8 million; seeNote 3, Borrowings and ~~$1.2 million of cash provided by investing activities.~~Debt Issuance Cost.

During the six months, ended June 30, ~~2008,~~2009, cash provided by operating activities was approximately ~~$20.4~~$22.3 million. Management tracks projected cash collections and projected cash outflows to monitor short-term liquidity requirements and to make decisions about future resource allocations and take actions to adjust our expenses with the goal of remaining cash flow positive from operations on an annual basis. We believe that, as of June 30, 2009, the Company’s cash resources will be sufficient to meet our operating requirements for the next twelve months.

Cash ~~provided by~~used in investing activities was approximately ~~$1.2~~$1.4 million during the six months ended June 30, ~~2008.~~2009. We had ~~a decrease~~an increase in restricted cash of approximately ~~$1.8~~$0.9 million ~~partially offset by~~and purchases of property, plant and equipment of $0.6 million.

During the six months, ended June 30, ~~2008,~~2009, cash ~~provided by~~used in financing activities was ~~minimal and related to proceeds for the issuance of common stock~~$84.4 million. The cash used is related to the ~~exercise~~repurchase of ~~stock options.~~our convertible notes.

At June 30, ~~2008,~~2009, we had a net cash balance of ~~$65.0~~$181.5 million compared to a net cash balance of ~~$45.0~~$157.5 million at December 31, ~~2007.~~2008. We define net cash as the sum of our total cash and cash equivalents and restricted cash minus the face value of our ~~total short-term and long-term~~ debt.

We maintain a $15.0 million letter of credit line. Under this line, we are required to maintain restricted cash (in an amount equal to 125% of the outstanding letters of credit) in a depository account maintained by the lender to secure letters of credit issued in connection with the line. The line has no financial covenants and expires on December 15, 2008. As of June 30, ~~2008, $4.4~~2009, $5.4 million in letters of credit were outstanding ~~under this line~~ and ~~$5.6~~$5.9 million in restricted cash was pledged as collateral.

We had $86.3 million in face value of our 5% senior convertible notes outstanding at June 30, 2008. Holders of our senior convertible notes have the right to require us to repurchase all or any portion of the senior convertible notes on November 15, 2010 and may convert the senior convertible notes at any time on or after May 15, 2010. In addition, holders of the senior convertible notes may convert the senior convertible notes prior to May 15, 2010 upon the occurrence of any of the following events:

Upon conversion of the senior convertible notes, we will be required to satisfy our conversion obligation with respect to the principal amount of the senior convertible notes to be converted in cash, with any remaining amount to be satisfied in shares of our common stock.

The indenture governing the 5% senior convertible notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur. Such covenant specifies that we shall not, and that we shall not permit any of our subsidiaries to, directly or indirectly, incur or guarantee or assume any indebtedness other than “permitted indebtedness.” Permitted indebtedness is defined in the indenture to include, among others, the following categories of indebtedness: (i) all indebtedness outstanding on November 23, 2005; (ii) indebtedness under the senior convertible notes; (iii) indebtedness under our $15.0 million letter of credit line; (iv) between $25.0 million and $50.0 million of additional senior secured indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture); and (v) at least $100.0 million of additional subordinated indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture).

Foreign Currency Risk. Revenues originating outside of the United States, a portion of which are denominated in foreign currencies, totaled ~~44%~~50% and ~~43%~~44% for the three months ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, respectively, and totaled ~~42%~~49% and ~~43%~~42% for the six months ended June 30, ~~2008~~2009 and June 30, ~~2007,~~2008, respectively. Since we conduct business on a global basis in various foreign currencies, we are exposed to movements in foreign currency exchange rates. We utilize a foreign currency-hedging program that uses foreign currency forward exchange contracts to hedge various nonfunctional currency exposures. The objective of this program is to reduce the effect of changes in foreign currency exchange rates on our results of operations. Furthermore, our goal is to offset foreign currency transaction gains and losses recorded for accounting purposes with gains and losses realized on the forward contracts. Our hedging activities cannot completely protect us from the risk of foreign currency losses as our currency exposures are constantly changing and not all of these exposures are hedged. A large portion of our employee base is located in India, and as a result, a significant portion of our fixed expenses ~~are~~is denominated in the Indian Rupee (INR). Therefore, as the INR exchange rate fluctuates against the U.S. Dollar (USD), the resulting impact on our consolidated USD expenses can be significant.

Interest Rate Risk.Our investments are subject to interest rate risk. Interest rate risk is the risk that our financial condition and results of operations could be adversely affected due to movements in interest rates. We typically invest our cash in a variety of interest-earning financial instruments, including bank time deposits, money market funds and taxable and tax-exempt variable-rate and fixed-rate obligations of corporations and federal, state and local governmental entities and agencies. These investments are primarily denominated in U.S. Dollars. Cash balances in foreign currencies overseas are primarily operating balances and are generally invested in short-term time deposits of the local operating bank. Due to the demand nature of our money market funds and the short-term nature of our time deposits and debt securities portfolio, these assets are sensitive to changes in interest rates. The Federal Reserve Board influences the general direction of market interest rates in the U.S. where the majority of our cash and investments are held. The Federal Funds rate decreased from 2.00% at June 30, 2008, to between 0.00% and 0.25% at June 30, 2009. As of June 30, ~~2008~~2009 and ~~2007,~~2008, the weighted-average yield on cash and cash equivalent balances was ~~2.5%~~0.16% and ~~5.2%~~2.50%, respectively. If overall interest rates fell by 100 basis points in the third quarter of 2008, our interest income would decline approximately $0.4 million for the quarter, assuming cash and cash equivalent levels consistent with June 30, 2008 levels.

Credit Risk. Financial assets that potentially subject us to a concentration of credit risk consist principally of investments and accounts receivable. ~~During the third quarter of 2007, we shifted our investments from commercial paper into money-market instruments due to the volatility in the commercial paper markets.~~ Cash on deposit is held with financial institutions with high credit standings. ~~Debt security investments~~Investments are generally in ~~highly-rated corporations~~money market funds comprised of a combination of Treasury and ~~municipalities as well as agencies of the U.S. government; however, a significant portion of these investments are~~government agency obligations. We limit our investment in ~~corporate debt securities, which carry a higher level of risk compared~~individual funds and with individual financial institutions to ~~municipal~~mitigate risk. We attempt to limit our restricted cash and ~~U.S. government-backed securities.~~ cash balances held in foreign locations.

Our customer base consists of large numbers of geographically diverse enterprises dispersed across many industries. As a result, concentration of credit risk with respect to accounts receivable is not significant. However, we periodically perform credit evaluations for ~~most of our~~significant customers and maintain reserves for potential losses. In certain situations, we may seek letters of credit to be issued on behalf of some customers to mitigate our exposure to credit risk. We currently use foreign exchange contracts to ~~hedge~~reduce the ~~risk~~effects of the foreign exchange risks associated with receivables denominated in ~~foreign~~non-functional currencies. Risk of non-performance by counterparties to such contracts is minimal due to the size and credit standings of the financial institutions involved. One of our large customers filed for bankruptcy and began liquidation proceedings in the three months ended March 31, 2009. We did not have a bad debt exposure associated with this customer because we had previously identified the potential collection risk and consequently only recognized revenue upon receipt of cash.

The current unprecedented disruptions in the financial markets may adversely affect the availability of credit already arranged and the availability and cost of credit in the future, which could result in bankruptcy or insolvency for customers, which would affect our cash collections from our accounts receivable. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and globally.

Inflation. Inflation has not had a material impact on our results of operations or financial condition.

This information is included in the section captioned “Sensitivity to Market Risks,” included in Item 2 —-- Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (Exchange Act), our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” as of the end of the period covered by this report. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures of our company that are designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our company’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our CEO and CFO concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to provide reasonable assurance that such information is accumulated and communicated to our company’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that any system of controls, however well designed and operated, is based in part upon certain assumptions and can provide only reasonable, and not absolute, assurance that the objectives of the system are met.

Changes in Internal Control over Financial Reporting.As required by Rule 13a-15(d) under the Exchange Act, our management, including our CEO and CFO, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on our evaluation, during our most recent fiscal quarter there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended March 31, 2008, we did not timely file an Item 5.02 Form 8-K related to the resignation of an officer of the Company. We have implemented improvements to our disclosure controls, including a notification process which is designed to provide for the timely disclosure of executive resignations. We plan to formalize these improvements with the audit committee during the quarter ending September 30, 2008. We have re-evaluated our internal controls in light of these matters and concluded the late filing did not occur as a result of a material weakness.

The information set forth inNote 7 – Commitments and Contingencies in our Notes to Condensed Consolidated Financial Statements is incorporated herein by reference.

There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A of our ~~2007~~2008 Annual Report on Form 10-K.

On May ~~29, 2008,~~28, 2009, we held an annual meeting of our stockholders for the following purpose:

To elect ~~J. Coley Clark, Richard~~Jackson L. ~~Hunter and Lloyd G. Waterhouse~~Wilson, Jr. as Class ~~II directors~~III director to serve until the annual stockholders’ meeting in ~~2011,~~2012, and ~~until their respective successors have been elected and qualified.~~to vote on a proposal to ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.

Mr. ~~Clark~~Wilson was elected with ~~17,255,914~~19,096,323 common shares voting for his election ~~all outstanding Series B preferred shares voting for his election~~ and ~~143,416~~719,737 common shares withholding their vote. ~~Mr. Hunter~~The proposal to ratify appointment of Grant Thornton LLP was ~~elected~~passed with ~~17,255,975~~19,722,057 common shares voting for ~~his election, all outstanding Series B preferred shares voting for his election and 143,355 common shares withholding their vote. Mr. Waterhouse was elected with 17,212,654~~the proposal, 71,590 common shares voting ~~for his election, all outstanding Series B preferred shares voting for his election~~against the proposal and ~~186,676~~22,413 common shares ~~withholding their~~abstaining from the vote.

The terms of office of Stephen P. Bradley and Richard L. Clemmer, both Class I directors; J. Coley Clark, Richard Hunter and Lloyd G. Waterhouse, all Class II directors; and Michael J. Simmons a Class III director, continued after the meeting. Sanjiv S. Sidhu (a Class III director) and David L. Pope ~~all~~(a Class I ~~directors and Sanjiv S. Sidhu, Michael J. Simmons and Jackson L. Wilson, Jr. all Class III directors, continued after the meeting. Harvey B. Cash and Michael E. McGrath~~director) did not stand for re-election at the annual meeting.



~~10.2~~		~~— Amended and Restated Executive Retention Agreement between the Company and Pallab K. Chatterjee (filed as Exhibit 10.2 to the 8-K filed by i2 on May 23, 2008).~~

~~10.3~~		~~— Amendment to Executive Retention Agreement between the Company and Michael J. Berry (filed as Exhibit 10.3 to the 8-K filed by i2 on May 23, 2008).~~

~~10.4~~		~~— Settlement~~Second Lease Modification Agreement dated ~~June 23, 2008~~effective April 3, 2009 by and between ~~the Company~~PW Commerce Center, LP and ~~SAP America,~~i2 Technologies US, Inc. ~~and SAP AG..~~

31.1		— Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of ~~Pallab K. Chatterjee,~~Jackson L. Wilson, Jr., Chairman and Chief Executive Officer ~~(Principal Executive Officer)~~ of i2.

31.2		— Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of Michael J. Berry, Executive Vice President, Finance and Accounting, and Chief Financial Officer ~~(Principal Accounting and Financial Officer) of~~(of i2.

32.1		— Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of ~~Pallab K. Chatterjee,~~Jackson L. Wilson, Jr., Chairman and Chief Executive Officer ~~(Principal Executive Officer)~~ of i2.

32.2		— Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Michael J. Berry, Executive Vice President, Finance and Accounting, and Chief Financial Officer ~~(Principal Accounting and Financial Officer) of~~(of i2.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware		75-2294945
(State or other jurisdiction of		~~(I.R.S. Employer Identification No.)~~
incorporation or organization)		(I.R.S. Employer Identification No.)


~~One i2 Place~~
11701 Luna Road
Dallas, Texas		75234
(Address of principal executive offices)		(Zip code)



		Page
PART I	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)
	~~Condensed Consolidated Balance Sheets~~	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1618

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3335

Item 4.	Controls and Procedures	3335

PART II	OTHER INFORMATION	37

Item 1.	Legal Proceedings	3437

Item 1A.	Risk Factors	3437

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3437

Item 3.	Defaults Upon Senior Securities	3437

Item 4.	Submission of Matters to a Vote of Security Holders	3437

Item 5.	Other Information	3437

Item 6.	Exhibits	3438

SIGNATURES			3639


	June 30, 2009				December 31, 2008
	Notional		Estimated Fair Value*		Notional		Estimated Fair Value*
Commitments to purchase foreign currency	$	35,118	$	—	$	41,399	$	—
Commitments to sell foreign currency		76		—		1,133		—

Total	$	35,194	$	—	$	42,532	$	—


	Location	Amount of Gain (Loss) Recognized in Income
		Three Months Ended June 30,				Six Months Ended June 30,
Derivatives Not Designated as Hedging Instruments		2009	2008			2009		2008
Foreign Currency Forward Contracts	Other Income(Expense)	2,338	$	(1,468	)	$	467	$	(1,657	)


	Stock Options Three Months Ended June 30,				ESPP Three Months Ended June 30,			Stock Options Six Months Ended June 30,				ESPP Six Months Ended June 30,
	2008		2007		2008	2007		2008		2007		2008	2007
Expected term (years)	4		4		*	0.5		4		4		*	0.5
Volatility factor	66	%	78	%	*	36	%	67	%	81	%	*	34	%
Risk-free interest rate	2.95	%	4.77	%	*	4.64	%	2.74	%	4.70	%	*	4.66	%
Dividend yield	0	%	0	%	*	0	%	0	%	0	%	*	0	%


	As of December 31, 2008
	As Previously Reported		Adjustment		As Restated
Other non-current assets	5,775		(751	)	5,024
Total assets	313,776		(751	)	313,025

Total long-term debt, net	85,084		(20,564	)	64,520
Total liabilities	183,710		(20,564	)	163,146

Additional paid-in capital	10,472,323		26,130		10,498,453
Accumulated deficit	(10,450,362	)	(6,317	)	(10,456,679	)


	Three Months Ended June 30, 2008									Six Months Ended June 30, 2008
	As Previously Reported			Adjustment			As Restated			As Previously Reported			Adjustment			As Restated
Non-operating income (expense), net:
Interest expense		(1,236	)		(628	)		(1,864	)		(2,475	)		(1,250	)		(3,725	)
Other (expense) income, net		(335	)		99			(236	)		284			197			481
Total non-operating income (expense), net		(1,103	)		(529	)		(1,632	)		(669	)		(1,053	)		(1,722	)

Income before income taxes		84,230			(529	)		83,701			88,736			(1,053	)		87,683
Net income		81,516			(529	)		80,987			84,894			(1,053	)		83,841
Net income applicable to common stockholders		80,740			(529	)		80,211			83,342			(1,053	)		82,289

Net income per common share applicable to common stockholders:
Basic	$	3.09		$	(0.02	)	$	3.07		$	3.20		$	(0.04	)	$	3.16
Diluted	$	3.05		$	(0.02	)	$	3.03		$	3.15		$	(0.04	)	$	3.11

Total comprehensive income		78,721			(529	)		78,192			83,029			(1,053	)		81,976


	Three Months Ended					Twelve Months Ended
	June 30, 2009			March 31, 2009		December 31, 2008			December 31, 2007
Additions to Backlog:
Software Solutions Bookings	$	14,815		$	24,062	$	29,812		$	54,556
Platform Technology/Source Code Bookings		—			—		—			500

Net Additions to Backlog		14,815			24,062		29,812			55,056
Less: Software Solutions Revenue Recognized		15,269			10,203		46,852			47,721

Increase/(Decrease) in Backlog	$	(454	)	$	13,859	$	(17,040	)	$	7,335


	Twelve Months Ended					Six Months Ended
	December 31, 2006			December 31, 2007		June 30, 2008
Additions to Backlog:
Software Solutions Bookings	$	49,540		$	54,556	$	16,940
Platform Technology/Source Code Bookings		10,480			500		—

Net Additions to Backlog		60,020			55,056		16,940
Less: Software Solutions Revenue Recognized		76,243			47,721		24,241

Increase/(Decrease) in Backlog	$	(16,223	)	$	7,335	$	(7,301	)


Exhibit Number		Description

~~3.1~~		— Amended and Restated Bylaws of the Company that amended the advance notice provisions of Section 2.5 of the Bylaws relating to stockholder proposals and stockholder nominees to the Company’s Board of Directors (filed as exhibit 9.1 to the 8-K filed by i2 on April 29, 2008).

10.1		— ~~Employment Agreement between the Company and Jackson L. Wilson, Jr. (filed as Exhibit 10.1 to the 8-K filed by i2 on May 23, 2008).~~


	i2 TECHNOLOGIES, INC.

August 7, 2009	By:	/s/ Michael J. Berry
		~~i2 TECHNOLOGIES, INC.~~

	~~August 7, 2008~~		~~By:~~	~~/s/~~ Michael J. Berry
		Executive Vice President, Finance and Accounting, and Chief Financial Officer
		~~Michael J. Berry~~ ~~Executive Vice President, Finance and~~ ~~Accounting, and Chief Financial Officer~~ (On behalf of the Registrant and as Principal Accounting and Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

~~Accelerated filer~~ x¨

~~Non-accelerated filer~~ (Do not check if a smaller reporting company)¨

Smaller reporting company