The power of putting something in writing was on display Monday when
released a report that stated something people who watch business-to-business stocks had only talked about.
Analyst David Mahoney raised serious questions about whether
actually have the tools to attack the entire B2B market. Mahoney also downgraded the stocks to holds from buys. And his actions knocked 15% off Ariba's stock price and 8.3% off Commerce One's. (His firm hasn't done underwriting for either.)
Mahoney said Ariba and Commerce One offer great software for buying "indirect materials," or office supplies, over the Internet, something he called "low-hanging fruit."
But there's a lot more to B2B. For instance, companies need information on inventory projections and lead times, and they need to be able to swap information with suppliers. The real opportunities lie in software that offers these capabilities, he contends.
And companies like
, which make complex software to manage inventory and supply chains or to integrate systems that do, are better positioned, he says. (Wit rates i2 and Vitria strong buys, Manugistics a buy and doesn't cover Tibco. Of those companies, Wit has done underwriting only for Vitria.)
Ariba and Commerce One have taken stabs at this market, which mainly involves so-called direct materials, or stuff actually used in the manufacturing process. They've attacked it through various partnerships and by building software that allows companies to buy direct materials in electronic marketplaces on the Internet.
Lots of big companies hyped these marketplaces earlier this year as commerce panaceas that would bring buyers and sellers together like never before, saying that companies could control how much they spent on direct materials, which would ultimately lead to lower production costs.
The problem, in Mahoney's view, is that this "direct" part of B2B isn't really about buying things as much as it is about coordinating how and when they're bought. Most companies already have relationships with preferred suppliers -- and they're very picky about them. So bringing together buyers and suppliers isn't the problem. Getting them to work together efficiently is.
"We're talking about sharing information across the supply chain or marketplace so that your suppliers and your suppliers' suppliers know what's going into the end product that your customer is buying so they can plan accordingly," Mahoney says. "Then, having that information flow back up to the top so that planners get a much better sense of what the lead time is."
Mahoney says it's a lot easier for other companies to develop software that mimics what Ariba and Commerce One do than it is for those two to build the complex software that their partners have been working on for years. This in turn could give Ariba and Commerce One less pull in their partnerships. Analysts already
are talking about the coming demise of the Ariba partnership with i2 and
In addition, Mahoney says Ariba and Commerce One are being hit with backlash from the unbridled enthusiasm about B2B last spring.
Of course, there are plenty of opposing views on Wall Street.
analyst Kaushik Shridharani put out a note Monday calling Ariba, Commerce One and the beleaguered
"realistically" priced. (He rates all three strong buy, and his firm hasn't done underwriting for them.) And Chris Vroom, an analyst at
Credit Suisse First Boston
, wrote Monday that the current "edginess" in B2B stocks is a buying opportunity.
But neither of those notes, or a
new customer that Commerce One announced Monday, helped the stocks.