The news for the pure-play B2B companies has been pretty bleak for a while now. On Friday, it got a little worse. Oh, and guess what? Within the next month, it'll likely get bleaker still.
B2B names were down across the board, with
leading the way, selling off 14.5%, or $1.18, to hover around $6.97. Its compatriot,
, was off 6%.
were both off around 5%.
The bad news? Jim Moore, an analyst at
Deutsch Banc Alex Brown
, issued a note saying research firm
will put out a highly negative report on the B2B e-procurement sector within the next month.
While Moore did not immediately return a call for this story, a Gartner spokeswoman confirmed the research firm is working on a report on the subject, and said it was still a "few weeks" from publication.
In his note, Moore wrote that Gartner is likely to conclude that by 2004, stand-alone e-procurement companies will not exist. Now, for people who follow B2B software closely, Gartner's hardly going out on a limb by subscribing to that line of thinking. In fact, Ariba was trying to expand beyond its core e-procurement business -- basically, software that lets companies buy supplies over the Internet -- when it
failed to acquire
After that deal collapsed, the company said it would go back to its roots in e-procurement; analysts said Ariba likely wouldn't be around as a standalone company if it didn't expand its product offering.
An Ariba spokeswoman didn't immediately return a telephone call for comment for this story.
The news was hammering on the stocks Friday, and Gartner's report isn't even out. Whether a similar effect will be seen when it does come out is anybody's guess.
For Ariba and others like it -- think Commerce One, for instance -- the future can be cast in terms of the past. One need only consider the multitude of word processing and spreadsheet application companies that sprouted up in the 1980s. While both types of software programs are still with us, no company bases its business on selling just that.
basically took the market on those kinds of products by bundling together a bunch of different programs. Of course, using the dominance of its Windows operating system to make sure we all had to buy it didn't hurt, either.
But analysts do see some parallels between the consolidation of different software programs then, and the potential bundling of different business applications now.
"Listen, indirect procurement has always only been one piece of the puzzle. Companies want to surround that with collaborative design, customer relationship management and supply chain management" says Brent Thill, an analyst at
Credit Suisse First Boston
who rates Ariba a buy. "I don't think anything has changed there in terms of our thesis. And I don't think that any of the stand-alone procurement companies are that stupid to say we're just going to live in this world. At least, if any company does think that, they're going to be out of business." (His firm hasn't done underwriting for Ariba.)
Patrick Walravens, an analyst at
, said there was another story within the push for consolidated software offerings: having one guy you can call to yell at when they don't work.
"Companies are realizing that maintaining separate systems from separate vendors is just too much of a hassle," says Walravens. "Companies are accepting less functionality and perhaps a like user interface so that they can have one contact to call up and fix the problems."
CS First Boston's Thill noted that because Ariba has the most challenges of expanding its product line, it was feeling the most pressure Friday. Commerce One, for instance, has its partnership with
to lean on. PurchasePro, while facing its own
problems internally, has a partnership with
AOL Time Warner
that it can cling to.
, on the other hand, a supply chain software company at its core, is acquiring e-procurement company
to round out its own offerings.
Which still leaves the question of Ariba's fate. Now, as then, analysts just don't see the company as anything but an acquisition target.
"They become part of a larger organization," says Brad Reback, an analyst with
CIBC World Markets
, who rates the stock a buy. "This is a challenging environment for all companies that have based their strategy on e-procurement, and we expect it to continue to be challenging." (His firm hasn't done underwriting for the company.)
Especially when Gartner's report hits the streets.