Can Ariba pull out of its slump?
February 20, 2001 03:00 AM ET
What I think I know about the b-to-b sector:
Ariba (ARBA) has lost its Wall Street
luster, and it's going to take a lot of work to
get it back.
On Thursday afternoon at the Robertson
Stephens technology conference, Ariba
CFO Bob Calderoni faced a withering
barrage of skeptical questions and
comments from money managers. These
guys (and gals) carry a big money clip, so
their mood is usually a good predictor for a stock's performance.
And guess what, these money managers were downright cranky.
Sure, the market is full of bad news, so you wouldn't expect to see
a whole lot of shiny, happy people. But the negative sentiments
expressed in the Ariba conference room -- namely that Ariba has
fallen behind its b-to-b software rivals -- goes a long way toward
explaining the company's plunging stock price.
Winning back the Street
Thursday's event also makes clear just how high Ariba executives
need to jump if they want to regain the Street's admiration. This is a
company that, one year ago, seemed incapable of doing anything
wrong. Today, it seems that every move it makes -- or doesn't make
-- is being called into question.
Ariba's planned acquisition of Agile Software is a perfect example.
(See "Ariba buys Agile to boost b-to-b credentials.") Announced
Jan. 29, the all-stock deal was valued at $2.5 billion, based on
Ariba's $40 per share stock price. On Feb. 16, Ariba's stock had
plunged to $21.50 per share. In other words, more than $1 billion
has been shaved off the Agile deal in a little more than two weeks.
In fact, Ariba shares are now worth less than Agile, which was
trading at $28.38 on Feb. 16.
Calderoni spent a good portion of his time Thursday explaining the
strategy behind the Agile deal, trying to convince the audience that
this was a positive step for the company. But the assembled
money managers seemed unconvinced. Several people rose to ask
Calderoni why Ariba had not acquired a supply chain management
company. They asked how Ariba was going to compete with rival i2
Technologies (ITWO). And when Calderoni tried to answer, they
asked the same question again.
Small hiccups
Even rather small hiccups, like Dell's (DELL) decision to shut down
its Ariba-powered office supplies marketplace, had the money
managers in a lather. Dell is still a big internal user of Ariba
software, but that more important fact was overshadowed by the
closure of this rather insignificant marketplace venture.
And while all these doubts about Ariba bubbled to the surface at the
Robbie Stephens conference, there was still more
behind-the-scenes muttering. One of the rumors making the rounds
was that Ariba's sales force is angry about a sharp jump in the
company's annual sales quota. Resumes are on the street, is the
word.
Calderoni fielded a question about the quotas, acknowledging that
they had, in fact, been increased, but he didn't say by how much.
It's fairly routine for software companies to crank up the heat on
their sales force every January, so Ariba's move, depending on the
size of the quota increase, may not be unusual. But if the
company's loses its top salespeople, revenue growth could be
impacted.
The sort-of bright side
This might seem like unfair piling on. After all, Ariba has performed
well by many measures. It's one of the fastest-growing software
companies ever birthed in Silicon Valley. Unlike many of its peers,
the company is profitable. Growth rates, while trimmed recently, are
still fairly bullish. And the b-to-b software sector, by most accounts,
should weather the economic downturn well.
But guess what, all this matters less than the sentiment on the
Street. And these days, the Street is giving Ariba the cold shoulder.
The widely held view is that Ariba no longer defines b-to-b. That
envious position has been ceded to i2 and its supply chain
wizardry. I2 is the good-looking quarterback who's invited to all the
big parties and gets all the chicks. Ariba is the lonely nerd who
spends Saturday nights watching videos with his parents.
Is this fair? No. Does it mean that i2 really has the goods on Ariba
-- that its software and strategy are superior? Not necessarily. But if
the situation is to change, Ariba has got to get some its former
swagger back. It has to sack the quarterback and steal his girl.
Let's try this again
At the end of the month, Ariba is holding a shindig in New York
where it promises to roll out a new strategy. The company is
keeping a lid on details, but maybe the event will begin to erase
some of the Street's skepticism. Maybe this will be the start of a
turnaround.
With Ariba setting new 52-week lows with seemingly every trading
session, something big has to happen soon.
Gruß Dampf
February 20, 2001 03:00 AM ET
What I think I know about the b-to-b sector:
Ariba (ARBA) has lost its Wall Street
luster, and it's going to take a lot of work to
get it back.
On Thursday afternoon at the Robertson
Stephens technology conference, Ariba
CFO Bob Calderoni faced a withering
barrage of skeptical questions and
comments from money managers. These
guys (and gals) carry a big money clip, so
their mood is usually a good predictor for a stock's performance.
And guess what, these money managers were downright cranky.
Sure, the market is full of bad news, so you wouldn't expect to see
a whole lot of shiny, happy people. But the negative sentiments
expressed in the Ariba conference room -- namely that Ariba has
fallen behind its b-to-b software rivals -- goes a long way toward
explaining the company's plunging stock price.
Winning back the Street
Thursday's event also makes clear just how high Ariba executives
need to jump if they want to regain the Street's admiration. This is a
company that, one year ago, seemed incapable of doing anything
wrong. Today, it seems that every move it makes -- or doesn't make
-- is being called into question.
Ariba's planned acquisition of Agile Software is a perfect example.
(See "Ariba buys Agile to boost b-to-b credentials.") Announced
Jan. 29, the all-stock deal was valued at $2.5 billion, based on
Ariba's $40 per share stock price. On Feb. 16, Ariba's stock had
plunged to $21.50 per share. In other words, more than $1 billion
has been shaved off the Agile deal in a little more than two weeks.
In fact, Ariba shares are now worth less than Agile, which was
trading at $28.38 on Feb. 16.
Calderoni spent a good portion of his time Thursday explaining the
strategy behind the Agile deal, trying to convince the audience that
this was a positive step for the company. But the assembled
money managers seemed unconvinced. Several people rose to ask
Calderoni why Ariba had not acquired a supply chain management
company. They asked how Ariba was going to compete with rival i2
Technologies (ITWO). And when Calderoni tried to answer, they
asked the same question again.
Small hiccups
Even rather small hiccups, like Dell's (DELL) decision to shut down
its Ariba-powered office supplies marketplace, had the money
managers in a lather. Dell is still a big internal user of Ariba
software, but that more important fact was overshadowed by the
closure of this rather insignificant marketplace venture.
And while all these doubts about Ariba bubbled to the surface at the
Robbie Stephens conference, there was still more
behind-the-scenes muttering. One of the rumors making the rounds
was that Ariba's sales force is angry about a sharp jump in the
company's annual sales quota. Resumes are on the street, is the
word.
Calderoni fielded a question about the quotas, acknowledging that
they had, in fact, been increased, but he didn't say by how much.
It's fairly routine for software companies to crank up the heat on
their sales force every January, so Ariba's move, depending on the
size of the quota increase, may not be unusual. But if the
company's loses its top salespeople, revenue growth could be
impacted.
The sort-of bright side
This might seem like unfair piling on. After all, Ariba has performed
well by many measures. It's one of the fastest-growing software
companies ever birthed in Silicon Valley. Unlike many of its peers,
the company is profitable. Growth rates, while trimmed recently, are
still fairly bullish. And the b-to-b software sector, by most accounts,
should weather the economic downturn well.
But guess what, all this matters less than the sentiment on the
Street. And these days, the Street is giving Ariba the cold shoulder.
The widely held view is that Ariba no longer defines b-to-b. That
envious position has been ceded to i2 and its supply chain
wizardry. I2 is the good-looking quarterback who's invited to all the
big parties and gets all the chicks. Ariba is the lonely nerd who
spends Saturday nights watching videos with his parents.
Is this fair? No. Does it mean that i2 really has the goods on Ariba
-- that its software and strategy are superior? Not necessarily. But if
the situation is to change, Ariba has got to get some its former
swagger back. It has to sack the quarterback and steal his girl.
Let's try this again
At the end of the month, Ariba is holding a shindig in New York
where it promises to roll out a new strategy. The company is
keeping a lid on details, but maybe the event will begin to erase
some of the Street's skepticism. Maybe this will be the start of a
turnaround.
With Ariba setting new 52-week lows with seemingly every trading
session, something big has to happen soon.
Gruß Dampf
