Then Again, Maybe Not

Ariba announces earnings shortfall, calls off merger with Agile

It's not quite the equivalent of a spy plane being forced down, but Ariba managed to dominate tech headlines fairly well when they announced a major retrenchment in their business strategy.

In the first of two separate announcements, the Mountain View, Calif. company revealed that its second-quarter results would come in at approximately $90 million, or a $0.20 per share loss.

As many others are also realizing, the slowdown in both the economy and technology spending has been much more dramatic than we had previously expected. At the end of the quarter, we experienced a large, unexpected drop-off in our sales closure, said Keith Krach, Ariba's chairman and CEO, who went on to echo Oracle's Larry Ellison in at least partially blaming his company's shortfall on the shaky economy. (See I Know You Are, But What Am I?") While many customers selected Ariba's technology, spending decisions at the executive level were postponed as customers evaluated their budgets in light of the prevailing economic uncertainty. This impact was primarily in North America, but is beginning to be felt in Europe as well.

As part of a general cost-reduction plan, Ariba is also planning to lay off approximately 700 employees, or about one-third of the total current employee base. We are taking immediate and decisive action to ensure our business plans reflect today's economic realities, continued Mr. Krach. We have some of the best people in the industry at Ariba and this is certainly a difficult step to take. Unfortunately, like many other companies, we find ourselves having to make similar, painful moves.

Ariba also announced the mutual termination of the merger agreement it had signed with Agile Software Corp. "We are disappointed that adverse economic and market conditions prevent the merger with Agile from proceeding as planned, said Keith Krach, chairman and CEO of Ariba.

These are clearly difficult economic times. Focusing on customer success in implementing mission-critical systems for key business processes has always served Agile well, in good times or bad. As we go forward from here, we will redouble our efforts in this area," said Bryan Stolle, chairman and CEO of Agile. "Although disappointed in not being able to complete this merger, Agile and Ariba share a leadership position and vision for automating inter-enterprise business processes. We plan to continue to leverage our strengths and broaden our collaborative manufacturing commerce offerings to provide added value to our customers.