Hi, Danny!
>Last quarter when ARBA reported, its stock was north of
100, but this time around, it is around 40. Certainly,
street was not looking for a repeat of that kind of
performance.
ARBA's past valuations likely reflect bubble pricing and may not be relevant in an environment more driven by fundamentals. I don't think people's expectations for the company came down, just the price that people were willing to pay for their stock. High P/e stocks have gone out of fashion IMO.
The following 3 articles mention some more issues for ARBA. The Upside article is worth reading in full.
>Although Deutsche Banc analysts James Moore and Charles Chen said the company continued to impress them
with a strong financial performance, they expressed concern about signs of decelerating growth in the core
procurement business and about the overall economic outlook.
Moore and Chen, who cut Ariba to buy from strong buy, noted that its deferred revenue growth slowed to 18
percent in the first quarter from 30 percent in the previous quarter and 80 percent in the second and third
quarters of the last fiscal year.
dailynews.yahoo.com
>Then there are those pesky term licenses.
Traditional software sales mean selling software license
for a set price. You pay the publisher and keep the
software forever, end of story. The seller typically
recognizes the sale over a few quarters, the idea being
that you record the revenue over the product's lifespan.
Under term licenses, you have the right to use the
software for a set period -- two to three years, Ariba's
case. You pay a little less, but the company comes
back when the term expires to hit you up for more
money. It's a good model for network-based technology
models like B2B commerce software.
But term license revenue recognition makes the picture
blurry. Unlike a perpetual license, term license money
is all up front. Juices revenue nicely in the short term,
but it also makes it harder to predict revenue down the
road because everything was paid in one shot.
And analysts don't like that new degree of
unpredictability.
"Our inability to accurately analyze the company's
growth increases our uneasiness," ABN Amro's Rober
zdii.com
>Calderoni also refused to answer directly analysts questions about
Ariba's allowance for doubtful accounts, which tracks sales the
company has made to customers, but believes it may have a hard
time collecting. Calderoni, in fact, got downright prickly with this
line of questioning, refusing to disclose a first quarter number.
upside.com (This Upside article is the best. Timely too) |
