Ariba is the crème de la crème of the B2B sector, and investors were paying close attention today when the company announced better-than-expected earnings, citing strong top-line growth and profitability. Given today's strong results and forward-looking guidance, it appears that Ariba's pipeline remains strong and the company is well-positioned to weather the IT slowdown.

	Format for printing Reuse/Reprint
	Related Links Inside the Ariba Announcement Industry Focus 2001
	Discussion Boards Ariba

By Mike Trigg (TMF Tonto)
January 11, 2001

In recent weeks, Ariba (Nasdaq: ARBA) management has been touting its ability to withstand the economic slowdown that has lowered information technology budgets because of its ability to provide customers with cost savings. According to business-to-business enthusiasts, applications that increase purchasing power and create efficiencies should remain a priority, as businesses strive to cuts costs and boost earnings growth in difficult conditions.

All the same, Ariba is the crème de la crème of the B2B sector and investors were paying close attention today when the company announced quarterly results. The B2B sector that has tanked of late -- Ariba is down nearly 70% since December 1 -- and a strong performance from its most formidable company would signal good times to come. Ariba indeed delivered after the market's close when it reported better than expected earnings, citing strong top-line growth and profitability.

The Mountain View, California-based Ariba reported revenue of $170.2 million, representing 625% year-over-year and 26% sequential growth. On the bottom-line, net income excluding non-cash charges came in at $14.0 million, or $0.05 per share, compared to a net loss of $5.6 million, or a loss of $0.04 per share, in the year-ago period. That beat the Street consensus of $0.02 per share and made Ariba the first Internet B2B to record a profit. Ariba's deferred revenue balance grew 18% to $235 million.

"Demand for Ariba eCommerce products and services continues to be strong as customers -- around the world -- are closely watching the bottom line and looking to realize immediate benefits,'' said Keith Krach, Ariba's chairman and chief executive officer. "Our revenue growth and profitability are the ultimate validation of a well-balanced strategy and Ariba's best-of-breed eCommerce applications.''

While the results were impressive, there will be more told in the company's conference call later today. One thing to pay close attention to will be the amount of network revenues the company reports. While e-procurement software has propelled initial growth, network revenues help indicate the traction of Ariba's Commerce Services Network, which consists of value-added services required by participants in support of marketplace transactions. In the fourth quarter, network revenue grew 24% sequentially to $20 million. However, that growth was light compared to the previous period when it increased 150% sequentially to $16 million.

The company also announced guidance for the next quarter and fiscal year 2001 as well. Ariba expects revenues next quarter to be between $180 million and $185 million and earnings to come in at $0.06 per share. The Street had been expecting $0.04 per share. For fiscal 2001, Ariba forecasts revenue of $780 million to $790 million and earnings between $0.25 per share and $0.26 per share. Given that guidance and today's strong results, it appears that Ariba's pipeline remains strong and the company is positioned to weather the IT slowdown.

(The Motley Fool examines the Internet B2B market in Industry Focus 2001.)

Feedback about News & Commentary? Please send mail to news@fool.com.