has its job cut out for it when it reports earnings after the market's close on Wednesday.
The business-to-business software maker has the tough luck of competing against heavyweights
, both of which have big head starts. For instance, in the second quarter, Ariba had $80 million in revenue and Commerce One had $62 million. Clarus is expected to report just $7 million to $8 million.
And investors are holding all B2B companies to the standards set by Ariba, whose second-quarter revenue soared 101% from the first quarter, crushing analysts' estimates. Even after
reporting a respectable 79% jump in second-quarter revenue from the previous period, Commerce One saw its stock fall because it didn't measure up to Ariba.
So what does this mean for Clarus?
"I do think they'll meet expectations, but I don't think they'll do significantly better than that," says Scott Alaniz, an analyst with
, which rates Clarus a buy. (His firm helped underwrite a secondary offering for the company.) "Given the stage that's been set, I'm a little concerned that investors may not react positively."
Clarus' stock has risen sharply recently, climbing nearly 19% in the past two weeks, which could mean it might suffer if the company fails to meet investors' high expectations. Clarus, which makes software that lets companies purchase everyday supplies like pencils, janitorial supplies and office equipment over the Internet, is expected to report a loss of 43 cents per share, according to seven analysts polled by
First Call/Thomson Financial
Clarus will have another factor to face when it reports its earnings. In the first quarter, the company had a high number for its days sales outstanding, or the number of days between when it sells its software and when it gets paid. That figure stood at 125 days. For the same period, Ariba's number was 22 and Commerce One's was 68. Analysts say Clarus, being a smaller company, has had to offer its customers more attractive payment terms to win business.
"Clarus has recognized that, and they know they need to address it," says Alaniz. "That said, it's something that's difficult to show dramatic improvement in from one quarter to the next. My expectation is that it comes down over the next four or five quarters."
The second-quarter reporting period has already shaped up to be a season of differentiation in the B2B, with companies like Ariba being crowned supreme leaders, and others, such as
, being tossed aside by investors. Its shares suffered after it handed in a weak revenue number last week. (
wrote about Ventro's disappointment.)
also reports after the close Wednesday, and it's projected to beat expectations, possibly by a large enough margin to satisfy investors.
Whereas Clarus is often seen competing with Ariba and Commerce One, webMethods is often cast as having business complementary to them. Five analysts surveyed by First Call/Thomson Financial expect a loss of 19 cents per share from the company.
webMethods specializes in XML software, a type of computer language that lets computers understand the information they process. For example, it allows a program or machine to know whether a number is a price or a quantity. That ability, in turn, allows different systems to more easily talk with each other. That's an area where webMethods, which went public in February, has quickly made a name for itself.
"When people like Ariba and Commerce One need to connect different trading partners, they often bring in webMethods to build that technology," said David Hilal, an analyst with
Friedman Billings Ramsey
. "The Street doesn't view them as a competitor, but instead as complementary." (Hilal rates webMethods a buy, and his firm was a co-manager on the company's IPO.)
Hilal expects webMethods revenue to come in at about $11.3 million. Of course, the company will have to beat that by a considerable margin to rally after earnings. Its stock, which has been particularly volatile among B2B companies, is down 17% since Ariba announced earnings July 12. Hilal says there's a "decent" chance the company will come in above revenue estimates.
This earnings season, that's certainly been the name of the game.