SAN FRANCISCO -- In a sign that the business-to-business software game is tough even when you're on top,
has been running into problems this summer, both at home and abroad.
Ariba told analysts and investors at a private breakout session here Tuesday at the
Robertson Stephens Internet Conference
that its business in Europe this summer has been "soft," according to Eric Upin, an analyst at the firm. And at home, analysts are starting to talk about problems the company has had integrating its
software into its own and customers' systems.
An Ariba spokeswoman didn't immediately return a call seeking a comment.
The challenges Ariba is facing illustrate how difficult it can be to stay ahead of the game in an emerging industry, even for one of its most aggressive leaders. And they come at a time when its main competitor,
, is gaining momentum in key markets -- including Europe -- through its partnership with German software maker
Upin, who rates Ariba a buy and lists the company as one of his top B2B picks, says the new concerns have to be taken in context. (His firm hasn't performed underwriting for the company.)
"Ariba's just getting ramped up in Europe, and Europe's slow during the summer. It's a tiny part of their business," Upin said. "But there was concern because Ariba was saying that business was soft
in Europe in August."
That concern has been reflected in Ariba's stock, which is trading just under $162, off from its Sept. 1 close of $166.25. It fell 6.1% Wednesday after the breakout session, though it's up about 3% Thursday. With the stock trading at more than 70 times next year's projected sales, it's priced to perfection.
Ariba's softness in Europe comes at a time when Commerce One has been making strides there. Its partnership with SAP
has resulted in six new customers so far. Commerce One also announced a joint marketing and sales alliance with
, another German software maker, on Thursday.
At home, Ariba has been encountering problems in integrating its Tradex software, which enables users to participate in auctions over the Internet, into its customers' systems, as well as into its own software platform.
Ian Toll, an analyst at
Credit Suisse First Boston
, says those problems shouldn't be viewed as too much of an impediment for Ariba. But they do illustrate the complexities of building software that is designed to do everything from manage back-office accounting systems to trade real-time with outside partners.
"Implementation has certainly been a concern with Tradex," Toll said. "Certain Tradex customers have highlighted what appear to be longer time lines than they had hoped for. But I think that's true across competing vendors as well." (Toll rates Ariba a buy, and his firm hasn't done underwriting for the company.)
While Ariba issued a news release Thursday crowing about how drugstore operator
recently went live on its
software in just 60 days, observers say that getting Tradex installed and working is taking closer to six months. In the hard-charging world of B2B, that's an eternity.
Ariba completed its acquisition of Tradex in March. Ariba has hailed the acquisition as one that gives it best-of-breed auction capability, which it would integrate into its own suite of software products. But competitors, most notably
, pooh-poohed the deal, saying that stringing together complex technologies through acquisitions is easier said than done.
And in its most recent quarterly results release, when it reported record revenue of $80.7 million that was backed up by $153 million in deferred revenue, the company cautioned that integration of Tradex could be a stumbling point.
In the release's boilerplate section that noted that actual results could differ from projections, Ariba said those differences could result from, among other things, "difficulties in assimilating companies recently acquired, including Tradex."
Despite the problems, though, analysts are still positive on the company.
"Ariba could be the next Oracle," Robbie Stephens' Upin said. "And there were quarters when Oracle promised and didn't deliver or it missed altogether. But even for an Ariba, there will be those bumps along the road."
But as competition increases in the B2B sector, those bumps are getting more pronounced.