To: Logain Ablar who wrote (3663 ) 4/3/2001 2:26:47 PM From: John Pitera Respond to Tim, thanks for the accounting view, this ARBA morning missive reads like the RIOT ACT: unexpected drop-off in its sales closure at the end of the quarter, ARBA indicated that it expects to post a significant loss from operations of approximately $0.20 per share. The significance of that loss rings loud and clear considering the current First Call consensus is $0.05. Interestingly enough, there have been 13 downward revisions to EPS estimates in the past 30 days, but those revisions still didn't come anywhere close to accounting for the deterioration in ARBA's business. Of the 40 analysts covering the stock, the lowest EPS estimate for ARBA's fiscal Q2 was a net loss of $0.01 per share. Revenue expectations have also proven to be well off the mark as the consensus currently stands at $175.2 mln versus ARBA's revised guidance of approximately $90 mln. Although the latter figure represents yr/yr growth of roughly 125%, it will be down close to 50% on a sequential basis . License revenues, the company said, should account for $55-$60 mln of that total with services revenues making up the bulk of the remaining portion. Since going public in June 1999, ARBA has never experienced a sequential decline in revenues, but this first simply underscores the dramatic slowdown in IT spending that is hitting just about every technology company in one way or another right now. Unfortunately, ARBA didn't have any real sense as to when conditions would improve, saying that it is too difficult to give any guidance. It was even more alarming to hear the company acknowledge that the slowdown in North America was beginning to be felt in Europe as well, and that it is expected to expand to Asia. Subsequently, ARBA will be taking steps to curtail its operating expenses. Like so many other companies, it plans to do so as soon as possible by reducing its workforce. Specifically, ARBA intends to layoff 700 people, or about 1/3 of its total workforce -- a move that is expected to result in a $15-$20 mln charge in fiscal Q3. In addition, ARBA expects to incur a one-time charge of $50-$75 mln related to write-offs of investments and real estate commitments, and to take an additional non-cash charge due to a significant write down of goodwill related to acquisitions. Separately, ARBA also announced the dissolution of its proposed acquisition of Agile Software (AGIL 9 5/16 -1 13/64). With ARBA already down 96% from its 52-wk high reached in September, it's hard to believe things could get much worse for its stock, but alas, they have. ARBA is trading 13% lower in after hours action, and its problems are spilling over to peer companies such as Commerce One (CMRC 7.10 -0.75), PurchasePro (PPRO 6 -7/16), i2 Technologies (ITWO 14 15/16 -1/2), Manugistics (MANU 18 5/16 -13/16), Microsoft (MSFT 55 3/8 -7/16), Oracle (ORCL 15.10 -0.22) and PeopleSoft (PSFT 23 3/4 -5/16). Fortunately, ARBA has a strong balance sheet, highlighted by no debt and $400 mln in cash, but that fact has done little to support the stock as there is an underlying fear the harsh operating environment will not only lead to an acceleration in the company's burn rate, but also to an inability to borrow funds to fund the growth of its business . These are challenging times to be sure, but some companies, like Ariba, appear to be more challenged than others.--
