Ariba's (NASDAQ:ARBA) been walking a tricky tech tightrope, shifting its business model from traditional software sales to subscription-based on-demand programs delivered online. Last week, Ariba signed a deal that should help the company keep its balance, shelling out $93 million for privately held Procuri.
Both firms develop technologies to help companies manage their spending, but only Procuri's been on-demand from the beginning. Its more than 300 customers include Domino's Pizza (NYSE:DPZ), JetBlue Airways (NASDAQ:JBLU), and Sun Microsystems (NASDAQ:JAVA). More than two-thirds of its customer base is in the middle market, where Ariba foresees strong growth opportunities.
On its conference call, Ariba's management was quite bullish on the deal's synergies. Within three quarters, the company expects the transaction to contribute roughly $0.10 per share in annual earnings.
Besides cost savings, the deal will also let Ariba more effectively leverage its strong global platform of partners, consultants, and customers. The company's software runs on 4 million desktops, processing roughly $170 billion in transactions over the past year.
All the same, tech deals can have complications. One aggressive spending-management rival, Emptoris, is already attempting to lure Ariba and Procuri customers to switch to its service with a credit for one year's subscription. Ariba must also contend with megacompetitors such as SAP (NYSE:SAP) and Oracle (NASDAQ:ORCL).
As I've said before, I'm cautious about Ariba. The company's made important strides, but its rocky transition isn't over yet, and it'll take some time for the Procuri deal's benefits to kick in. Until then, I'm content to wait and see how this stock fares before I consider jumping in.
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