B2B Firms Drop on Ariba Results

A weak outlook from Ariba, Inc. (Nasdaq: ARBA) pulled shares of other business-to-business (B2B) e-commerce software makers lower on Friday, as the company's quarterly report sparked a rash of analyst downgrades and questions 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 dropped 3.44 to 21.25. Freemarkets, Inc. (Nasdaq: FMKT) lost 2.31 to 19.06, and PurchasePro (Nasdaq: PPRO) fell 1.25 to 17.12.

Ariba reported a profit before charges of US$14.0 million, or 5 cents per share, compared with a loss of $5.6 million, or 4 cents, in the same quarter a year earlier. Revenue rose 625 percent to $170.2 million. Including non-cash charges, however, Ariba recorded a net loss for the quarter 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 Ariba following 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 products for specific terms, rather than granting lifetime licenses, is creating concern among analysts about the company's actual revenue growth rate.

B2B stocks are trading well below their highs, amid a slowdown in growth for the technology sector as a whole. Nevertheless, analysts are optimistic about the future of the companies' business.

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