Updated from 6:12 p.m. EDT

Fighting to live up to Wall Street's lofty hopes,

Ariba

(ARBA)

announced Wednesday that its revenue climbed sharply in the latest quarter, as the maker of software for electronic marketplaces posted a smaller-than-anticipated operating loss.

Ariba, which is based Mountain View, Calif., reported a loss of $1.1 million, breaking even on a per-share basis, before special charges. A year earlier, the company lost $4.6 million, or 3 cents a share. Ariba said revenue rose to $134.9 million, up from $17.1 million in the 1999 period.

Yet including non-operating charges, the company's overall net loss widened to $339.3 million, or $1.50 a share, from $9.9 million, or 7 cents a share, a year earlier. Operating expenses rose to $117.5 million, up from $19.9 million.

Growing Clientele

During the latest quarter, Ariba said it added 114 customers, including

Pfizer

(PFE) - Get Report

and

Bear Stearns

(BSC)

and

Target

(TGT) - Get Report

.

"Profitability is imminent, well above expectations," Keith Krach, Ariba's chairman and chief executive, said in a conference call with analysts.

The results satisfied the consensus estimate of nearly 40 Wall Street analysts, who had predicted a fiscal fourth quarter loss, excluding extraordinary charges, of 5 cents a share, according to earnings tracker

First Call/Thomson Financial

, and revenue of around $100 million.

Still, investors were clearly dissatisfied. Shares of Ariba fell $9.81, or 7.7%, to $117.25 in after-hours trading, according to

Instinet

. The company's results were released after the close of regular trading on the

Nasdaq

stock market, where shares of Ariba rose 6 cents to $127.06.

"It's hard to imagine what investors are disappointed about," said Mark Verbeck, an analyst at

Epoch Partners

, who called the stock movement a "knee-jerk reaction."

Analysts and investors alike, as always, had their eyes on Ariba's deferred revenue, money actually collected before its products are delivered or its work is done. Verbeck said some concerns revolve around that figure, which helps company observers gauge demand.

Ariba told analysts in the conference call that deferred revenue increased by $46 million in the fourth quarter, compared with a roughly $70 million rise in the previous quarter, Verbeck said.

As e-marketplaces, Web sites that link buyers and sellers of goods, proliferate across the New Economy landscape, and clients seek out new opportunities to generate additional revenue and cut costs, Ariba and others hope to capitalize on the trend.

"It has become clear in the last several months that all of the nation's, if not the world's, leading corporations are pursuing an e-commerce strategy with genuine vigor,"

U.S. Bancorp Piper Jaffray

analyst Jon Ekoniak wrote last week in a research note.

Expectations leading up to Wednesday's announcement were certainly high. Back in the second quarter, Ariba had said revenue more than doubled to $80.7 million from $40 million a year earlier, and recorded an operating loss of $11.3 million, about half of what Wall Street had forecast.

Stock Makes Steady Climb

Exerting even more pressure on the software maker to produce, the company's stock price has made a steady upward climb since June, despite a brief sell-off in early October after the company and its partners lost the

Global Health Care Exchange

, a B2B venture involving several large health care companies, as a customer.

The bar was raised even higher on Tuesday, after

i2 Technologies

(ITWO)

, a fellow e-marketplace software provider, announced that its third-quarter profits excluding special charges climbed 188% to $28.8 million, or 12 cents a share, on revenue that more than doubled.

Ariba's business-to-business competitor,

Commerce One

(CMRC)

, has the unenviable task of following on Thursday with its earnings performance. The company is expected to report a net loss of 12 cents a share, according to First Call, and revenue of up to $80 million.

The only problem with posting impressive numbers quarter after quarter is that they're often difficult to sustain. Competition in the sector could slice into Ariba's market share, making it harder to justify the value of the company's stock.

"Investors need to remember the law that as numbers get larger, it's hard to grow by the same rate," said David Hilal, who follows Ariba for

Friedman Billings Ramsey & Co.

"But I don't see any negating factors to inhibit growth for a while."

Buying and Partnering Up

Seeking to broaden its platform of services, Ariba recently completed its acquisition of

SupplierMarket.com

and teamed up with i2 Technologies, which makes software companies use to manage inventories and communicate with suppliers, and

IBM

(IBM) - Get Report

, which offers consulting services for e-marketplaces.

Analysts note that companies in the sector are beginning to form partnerships in bids to widen their appeal as the popularity of e-marketplaces rises. But finding the successful exchanges could by tricky.

"The real question is which of these marketplaces will be the winners," said Hilal of Friedman Billings Ramsey, who rates the stock a buy. His firm has not done any underwriting for Ariba. For Ariba and its rivals, "being diversified is a safer bet."

Ekoniak echoed Hilal's sentiments in his memo, pointing out that Commerce One has joined with

SAP

(SAP) - Get Report

, the German enterprise-software maker.

"Clearly, the e-commerce companies are of the opinion that to be successful in this market, it is crucial to have broad solution, either internally or through partnerships," he wrote, "and to be able to serve more of their clients' needs."