Ariba suffers another losing quarter

Enterprise software vendor Ariba Inc., whose focus switched from procurement software to spend management software early this year, on Thursday posted a fourth quarter loss of US$142.5 million or $0.54 per share on revenue of $58 million.

The results compare with a net loss of $224.3 million, or $0.89 cents per share, in the fourth quarter of 2001.

On a pro forma basis, excluding certain noncash and special charges totaling $147.5 million, Ariba said it had a net income of $5 million, or 2 cents per share, for the quarter. That compares with a pro forma net loss of $27.7 million, or $0.11 per share, in the fourth quarter of 2001, company officials said in a conference call.

For its fiscal year, the Sunnyvale, California-based vendor suffered a loss of $660.8 million, or $2.55 per share, on revenue of $229.2 million. That compares with a $2.68 billion net loss, or $10.96 per share, on $401.6 million in revenue in fiscal year 2001.

Pro forma net income for fiscal year 2002, excluding certain noncash and special charges, was $1.1 million, or zero cents per share. Ariba's fiscal year 2002 pro forma operating results exclude expenses of $579.7 million of amortization of goodwill and other intangible assets, $5.6 million of business partner warrants, $14 million of stock-based compensation and $62.6 million of restructuring and lease abandonment costs.

Pro forma net loss for fiscal year 2001 was $88.1 million, or a loss of 36 cents per share, excluding certain non-cash and special charges.

In a conference call Ariba President and Chief Executive Officer Bob Calderoni highlighted the pro forma results for the year and expressed confidence in the company's new spend management software strategy.

"If you take a look at the entire year, we are reporting pro forma bottom line results which are up nearly $90 million from last year," Calderoni said. "The company experienced a $180 million decline in high-margin revenues, but at the same time improved pro forma profits $90 million. I don't believe something like this has ever happened before, certainly not in the same year."

The company's spend management strategy, which includes a suite of products designed to provide companies a single point of control over the spend life cycle from analysis, through sourcing, to procurement, "is coming to life with some great customers," Calderoni said, citing new contract wins during the quarter with ExxonMobil Corp. and Dell Computer Corp., both of which were existing customers of the Ariba Buyer component.

Spend management "is a foundation that allowed us to focus the organization on a clear and competitive path going forward," he said. Four new products were announced within the first six months after the shift. "All these new products are in production, and we are just beginning to see what is possible," Calderoni said.

Among the new customers that bought components of the suite during the fourth quarter are the Washington, D.C. city government, which bought Ariba Buyer, Ariba Sourcing and Ariba Analysis. Calderoni also said the Australian State of Victoria Department of Education and Training and J.P. Morgan Chase & Co. became new customers during the quarter.

Companies see a tremendous value in strategic procurement, but have long struggled to tap that value in a sustainable way, Calderoni said.

"Some of the best companies are looking for a breakthrough in spend management and they want to develop the core competency and use it for strategic advantage," he said.

The next major Ariba spend management product release will take place in New York City on Nov. 12. Calderoni said the new product has been named Colorado, which Calderoni described as the "glue that ties all the steps of strategic procurement together." Colorado fits into the suite at a layer above all existing applications and ties them all together, he said. The product will be offered separately, but Calderoni said "to get the value out of Colorado you have to be using other modules in the spend management suite."

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