Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Ariba Technologies (Nasdaq-ARBA) -- Ignore unavailable to you. Want to Upgrade?

To: D. K. G. who wrote (170)	8/25/1999 9:23:00 PM
From: D. K. G.	Read Replies (1) \| Respond to of 2110

BUY SIDE Ariba's Online Purchasing System Boosts Savings, Bargaining Clout Date: 8/25/99 Author: Alan R. Elliott Companies fork out roughly 35% of their revenues on nonproduction goods -anything that doesn't go into products sold. These items range from office supplies to machinery. Yearly corporate spending on office supplies alone tops $250 billion, says Giga Information Group. Ariba Inc.'s operating resource management system can cut those costs by 5% to 25%. ''And that can amount to tens or hundreds of millions of dollars on an annual basis,'' said CEO Keith Krach. How does the company do it? The first step is to standardize a client's buying habits. Sounds simple. But Ariba customers often have thousands of employees spending billions of dollars a year. Philips Electronics, for example, spends $8 billion a year. Hewlett-Packard Co. spends $7 billion. Ariba replaces age-old, paper-laden tasks - ordering, expense accounts and benefits records - by loading the client's purchasing process onto its corporate intranet. The system leads employees step-by-step through electronic catalogs and order forms. It then connects directly to suppliers via the Internet, transferring and recording product and transaction information. That streamlines order processing. More important, it discourages workers from running across the street to buy a new keyboard, then adding it to their next expense report. Companies get more control over spending and a clearer picture of where their money goes. ''The huge savings is in being able to channel all that purchasing power to your preferred set of suppliers,'' Krach said. Such channeled spending acts as a bargaining chip with which to negotiate better prices. But that chip isn't cheap. The most limited Ariba system costs $500,000, while more sophisticated setups can run into the millions. Despite such prices, clients like Chevron Corp., TransAmerica Corp., General Motors Corp. and Merck & Co. have beat a path to Ariba's door. Meanwhile, the company continues to pour money into growth. It has 375 employees - 282% more than a year ago - and 100 salespeople across six countries. Such heavy investment has delayed profits. Ariba lost 86 cents a share in its June 30 third quarter, vs. a 13-cent loss a year before. Sales, though, jumped 383% to $11.9 million. The market for resource management systems is growing rapidly as ever more businesses look for ways to cut costs. But big-name systems vendors are squaring off for a share of the wealth. Some 30 contenders have lined up to automate paper-based tasks. ''It's a lucrative spot,'' said analyst George Gilbert of CS First Boston. ''Oracle is stampeding into the space. SAP is desperately trying to get in.'' How lucrative? Forrester Research projects the market will balloon to $918 million in 2003, from $97 million this year. Ariba competes with CommerceOne Inc. and Intelisys Electronic Commerce at the high end of that market. What sets it apart is its new Ariba.com Network, which connects buyers and sellers over the Internet. The network gives buyers a way to cobble together orders from a growing list of suppliers. An order could be as simple as a stapler or as complex as a contract for temporary employees or legal services. Most important, the network creates a single point of gravity to attract both buyers and sellers. More buyers using Ariba's network gives suppliers more incentive to join the system, says analyst Stephen Sigmond of Dain Rauscher Wessels. That, in turn, makes the network more attractive to new buyers. ''It's kind of a self-fulfilling, reinforcing, snowball-rolling-downhill type phenomenon,'' Sigmond said. The ball had better roll fast. SAP's products may still be only rumblings. But Oracle is already a full-blown player, says Bob Chatham, senior e-commerce technology analyst at Forrester Research. ''They are a very real contender in this space.'' Plus, Chatham says, there's one sticking point: Who will maintain the images, pricing and content in each company's online catalog? ''It's a nightmare to maintain that stuff,'' Chatham said. ''Companies that jumped blithely in at the beginning quickly realized that it was a business they didn't want to be in.'' As a result, the market is heating up for companies that create and maintain online catalogs. Harbinger Corp., Aspect Development Inc. and Requisite Technology Inc. are among those duking it out in this field. Analysts expect Ariba to lose 99 cents a share in fiscal 1999 and 95 cents in fiscal 2000, First Call says. Sales, Sigmond says, should jump 402% to $41.7 million and 75% to $73 million in those years, respectively. It trades as ARBA near 135. investors.com Note: link changes day yo day.