As this week's impressive quarterly report from showed, e-commerce is still growing at a heady pace. That's good news for Art Technology Group (NASDAQ:ARTG), whose shares enjoyed a nice 8% pop following its own earnings report.

ATG develops e-commerce systems for large clients like DaimlerChrysler (NYSE:DCX), Dell (NASDAQ:DELL), and Apple Computer (NASDAQ:AAPL). It's a competitive space, filled with fierce rivals such as IBM (NYSE:IBM), Oracle, and Microsoft (NASDAQ:MSFT).

Despite those headwinds, ATG continues to grow its top line. Fiscal first-quarter revenue rose 22% to $29.2 million. However, license revenue plunged 18% to $6.6 million, as ATG continued to shift its business model from licenses to recurring subscription fees. That's a smart move in the long run, but it's tough to pull off well, as the recent performance of RightNow (NASDAQ:RNOW) demonstrates.

On the bottom line, ATG posted a net loss of $1.5 million, or $0.01 per share, compared to $2.6 million, or $0.02 per share, in the year-ago period. In brighter news, the business cranked out operating cash flow of $8.1 million and increased its cash holdings to $37.5 million.

It also seems that ATG's $48.3 million acquisition of eStara is paying off. eStara contributed a strong customer list and new capabilities such as click-to-call, click-to-chat, and call tracking. Based on its projections, management thinks the unit will achieve 2007 revenues of $25 million or more; in Q1, eStara generated $5.2 million in revenue.

ATG trades at two times revenue, a typical value among its software peers. However, if ATG continues to wring more growth from eStara, and cross-sell its new products to existing customers, that current valuation could increasingly seem like a relative bargain.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 3,449 out of 27,827 in CAPS.