Dow Jones Newswires -- January 5, 2001
Dow Jones Newswires
Ariba Dn 20% Amid Concerns About Reserves For Bad
Debt
Dow Jones Newswires
By Marcelo Prince
Of DOW JONES NEWSWIRES
NEW YORK -- In the midst of a nasty session for technology stocks, shares of Ariba Inc.
(ARBA) sank 20% in heavy trading Friday to their lowest price since September 1999 after an
analyst raised concerns about a sharp increase in the Internet software firm's reserves for bad debt.
In a recently filed 10-K for its fiscal year ended in September, Ariba disclosed that its allowance
for doubtful accounts was $13.8 million, up from just $20,000 in 1999. It now represents 18% of
total accounts receivables. Company officials weren't immediately available to comment.
In a research note Friday, Salomon Smith Barney analyst Gretchen Teagarden said "this sudden
and significant increase calls into question Ariba's potential exposure to dot-com customers."
Dot-com clients account for 8% of total sales, she estimates, within Ariba's targeted range of 5% to
10%.
In a worst-case scenario, if the company failed to collect any of this revenue - about $58.5 million
of the $770 million forecast for 2001 - Teagarden estimates it would trim her year 2001 earnings
estimate of 20 cents a share by 1 cent.
She also warned that since rival Commerce One Inc. (CRMC) gets 6.5% of its revenue from
dot-coms, it could reveal a similar phenomenon when it releases its 10-K form. Teagarden rates
both stocks at neutral.
Despite support from other brokerages, Ariba shares, which traded as high as $183 in March,
ended Friday's session at $34.19, down $8.69, or 20%, on volume of 21 million shares, nearly
double average volume. Earlier it hit $33.88, a 17-month low.
Meanwhile, Commerce One shares, which hit a high of nearly $138 in March, closed at $18.56,
down $3.38, or 15%, on average volume of 9.8 million shares.
-By Marcelo Prince, Dow Jones Newswires; 201-938-5244; marcelo.prince@dowjones.com |
