Commerce One, Ariba Post Sluggish Results

E-commerce software firms continued their struggle for profitability in a slowing economy as both Ariba (Nasdaq: ARBA) and Commerce One (Nasdaq: CMRC) reported quarterly losses and sharply lower sales on Tuesday.

Many business-to-business (B2B) firms have faced hard times as a one-time glut of customers has been thinned by the dot-com shakeout. According to experts, 2002 may be a year of widespread consolidation within the industry.

Ariba CEO Bob Calderoni said the results were solid "in light of the continued soft global economic environment" and predicted the company will turn profitable by mid-year.

"As I look out to the second half of this calendar year, I expect further reach from our new products," Calderoni said. "I feel this positions us well for pro-forma profitability and believe we could achieve pro-forma breakeven as early as June."

Last spring, Ariba slashed about one-third of its workforce in the face of slowing sales .

Markets Blamed

Sunnyvale, California-based Ariba said it lost US$6.9 million, or 3 cents per share, in the quarter ended December 31st. While the loss actually beat most analysts' expectations, revenue plunged, falling to $55.3 million from $170 million in the same period in 2000.

The story is much the same at Commerce One, which saw an even steeper decline in revenue. Fourth-quarter sales fell to $56 million, compared with $191 million recorded in the last three months of 2000.

Commerce One posted a loss of 23 cents per share, more than expected by analysts, who had been calling for a loss of 16 cents per share.

Seeking Turnaround

Most of the news of late has been bad for Commerce One.

Last October, the firm cut its workforce nearly in half, laying off 1,300 people and spinning off some divisions. And earlier this month, software giant SAP said it would terminate a long-standing software licensing agreement with Pleasanton, California-based Commerce One.

"We believe that Commerce One is taking the right steps to compete effectively as the economy improves," Commerce One CEO Mark Hoffman said. He added that the firm will focus on its new family of procurement software in the coming year as demand for marketplace products continues to dwindle.

Rays of Sunshine

One glimmer of hope for B2B firms came from FreeMarkets (Nasdaq: FMKT), which turned a profit in the fourth quarter and actually raised its guidance for all of 2002.

The Pittsburgh, Pennsylvania-based e-sourcing software firm said revenue increased 38 percent to $47 million for the quarter.

Meanwhile, a recent reportfrom Forrester Research and the Institute for Supply Management found that nearly half of all companies are using the Internet to cut down supply costs and are engaging in more widespread use of online marketplaces and auctions.