B2B Players Stumble Again in Q2

Those days must seem like eons for Ariba and Commerce One, which last week announced poor financial results for the second straight quarter. (See The Great B2B Software Race, in our May 28 issue.)

Despite topping its lowered forecast, Ariba suffered a loss of $273.5 million for the third quarter ended June 30. Excluding a number of special charges, including massive layoffs, the loss was $0.10 a share, two cents better than the Wall Street consensus. Ariba's sales were up just6 percent from a year earlier and license revenue for the quarter continued to fall.

To further darken the mood, Ariba CEO Larry Mueller left the company after just one quarter as the company's top executive. Mueller took over CEO duties from Ariba chairman Keith Krach, who is now serving as interim CEO.

Ariba rival Commerce One suffered even greater losses at $2.06 billion for the quarter, compared with a loss of $43.1 million a year earlier. One-time charges included a non-cash charge of $1.7 billion from the impairment of intangible assets and equity investments and a restructuring charge of $62 million.

Sales were $101.3 million, up 61 percent from a year ago, but Commerce One officials say they expect revenue to fall flat next quarter. Commerce One received a $222 million gift from German software maker SAP AG, a longtime ally. The investment gives SAP ownership of approximately 20 percent of Commerce One. Despite the infusion of funds, Commerce One officials have indicated the company will reduce its headcount.

The top executives at both software companies made similar statements regarding their respective fall from grace, blaming a slumping economy and the shift from public e-marketplaces to private exchanges in the Internet B2B market. Both companies tried to give optimistic long-term outlooks as well.

"Now, more than ever, I still believe in the opportunity of this company and feel confident we have the assets for long-term success,' says Krach.

"In spite of the short-term pressures, we remain confident in our vision for both public and private e-marketplaces,' says Commerce One chairman and CEO Mark Hoffman in a press statement.

Many industry analysts believe Internet B2B is still a lucrative market, but question whether Ariba and Commerce One can deliver the software that powers B2B systems and e-procurement.