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Ariba Inc., once a high-flying software maker for online marketplaces, reported second-quarter earnings that show improvement despite the dismal software market. Ariba posted a loss of $154 million, or 60 cents per share, compared with $1.8 billion, or $7.60 a share, a year ago.
On a pro forma basis, the company reported net income of $1.1 million, or zero earnings per share, compared with a pro forma net loss of $48.3 million, or 20 cents per share, during the same period a year ago. The pro forma earnings excluded expenses related to the amortization of intangible assets, business partner warrants, restructuring and lease abandonment costs, and stock-based compensation.
Revenue on a year-to-year basis dropped to $57.2 million, from $90 million, but that was an increase of $1.9 million from the previous quarter. And license revenue increased to $25 million, from $24 million in the first quarter. Mike Schmitt, executive VP and chief marketing officer for Ariba, attributes the company's progress to its shift in focus from selling software that businesses can use to buy products from each other over the Internet to selling software that can cut the cost of procurement through better management of suppliers. "The E-marketplace market is a shadow of what it use to be," Schmitt says.
In the second quarter, half of Ariba's revenue came from new customers, and 40% was from the company's new Spend Management Suite, versus its older Buyer flagship software, Schmitt says. Ariba, which signed nine new deals of more than $1 million in the second quarter, estimates that half its revenue will come from products other than Buyer by the end of the fiscal year. The company is "cautiously optimistic" that the business-software market has reached bottom. "We see a flat market, but we do see what spending there is focused on high return-on-investment solutions," Schmitt says.
Shawn Willett, analyst for Current Analysis, says Ariba has stabilized after suffering dramatic drops in revenue. In terms of the market targeted by Ariba, demand is expected to increase. "There is a market out there," Willett says. "When the current business cycle ends, it will probably grow." Ariba shares were trading Wednesday on the Nasdaq at $3.48, up 51 cents, or 17.3%. The company's stock has a 52-week high of $9.69 and a low of $1.42.