B2B Firms Drop on Ariba Results

A weak outlook from Ariba, Inc. (Nasdaq: ARBA) pulled shares of otherbusiness-to-business (B2B) e-commerce software makers lower on Friday, asthe company’s quarterly report sparked a rash of analyst downgrades andquestions about future growth of the sector.

Ariba fell 8.19 to 35.19. Other B2B stocks fell as well, including Commerce One Corp. (Nasdaq: CMRC), which dropped3.44 to 21.25. Freemarkets, Inc. (Nasdaq: FMKT) lost 2.31 to 19.06, andPurchasePro (Nasdaq: PPRO) fell 1.25 to 17.12.

Ariba reported a profit before charges of US$14.0 million, or 5 cents pershare, compared with a loss of $5.6 million, or 4 cents, in the same quartera year earlier. Revenue rose 625 percent to $170.2 million. Including non-cash charges, however, Ariba recorded a net loss for thequarter of $347.6 million, or $1.48 per share.

Ariba was the first in the sector to report quarterly earnings. Other B2B firms are scheduled to report in coming weeks.

Analysts at half a dozen firms cut their ratings on Aribafollowing the company’s report, including Robinson Humphrey, Friedman Billings, Deutsche Banc Alex. Brown,ABN Amro Wasserstein Perella and SG Cowen.

Reports said the company’s non-cash charges and recent move to license its productsfor specific terms, rather than granting lifetime licenses, is creatingconcern among analysts about the company’s actual revenue growth rate.

B2B stocks are trading well below their highs, amid a slowdown in growth forthe technology sector as a whole. Nevertheless, analysts are optimisticabout the future of the companies’ business.

Jupiter Research expectsspending on B2B e-commerce to rise to $137.2 billion in 2005 from $2.6billion in 2000, and Forrester Research projects global online exports willreach $1.4 trillion by 2004.

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