there was too much hot money in ARBA waiting for earnings.
this is a pretty good analysis---and of course the table does not translate to the bizzarro multiple posting world of SI -g-
Ariba (ARBA) 43 3/8: Nobody really knew what to expect from Ariba last night when Q1 results were released. Software companies have been hit by IT spending cuts and weaker PC sales, but B2B software companies were claiming immunity because they contend that their products provide a high ROI to customers looking to lower costs. When B2B colleague, i2 (ITWO) issued an upside preannouncement, ARBA and CMRC stocks benefitted, and the high ROI argument was lent credence. Ariba came out and beat their bottom line number by $0.03, beat revenue estimates by 5-15% by posting sales of $170.2 mln, representing 625% Y/Y and 26% sequential growth -- solid, but hardly blowout by Ariba standards. The company issued a slight upside projection for Q2, saying it expects to beat EPS estimate of $0.04 by two cents on revenues in the range of $180-$185. Sounds like great news right? So why were the shares down five points after hours? First, Ariba announced they will change their revenue recognition policy to recognize contract revenue up front, rather than over the life of the deal. While it may generate higher revenues per customer in the long run, in the short-term, it decreases deferred revenues, thereby reducing visibility of future sales. Deferred revenue was $235 mln, up only 18% vs 550% in Q4. Wall Street loves visibility, and the decision to recognize more sales up front raises questions. Also worth noting is the fact that A/R was up 94%, DSO rose to 63 from 41, a sign that the company may be experiencing difficulties collecting. Rising DSOs has been a common theme in ebusiness software recently, but Briefing.com contends that it's not an issue here. ARBA disclosed in their 10-K from last quarter that their allowance for bad accounts was to increase, the company's dotcom exposure is less than 10%, and as international sales ramp, collection periods increase. Management has targeted the industry average, 70 days for DSOs going forward. The accounting issues may have scared some off, but the real story here is that Ariba is maturing, their growth curve is flattening and anytime that happens, hot money will depart. The table below, extracted from a Robertson Stephens note, tells the growth story. - Matt Gould, Briefing.com
Revenue Mix (thousands) 1Q01 % of Revs Prior Quarter (4Q00) % Change Q/Q % of Revs Prior Year Quarter (1Q00) % Change Prior Year % of Revs
Product Licenses 128.9 75.7% 99.1 30% 73.5% 15.8 717% 67.2%
Network Revenues 25.9 15.2% 20.1 29% 14.9% 3.3 692% 13.9%
Service/Other 15.4 9.0% 15.6 -1% 11.6% 4.4 248% 18.8%
Total 170.2
134.9
26%
23.5
625%
Source: Robertson Stephens |
