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Ariba climbs on narrower-than-expected loss

Shares of the business e-commerce software maker jump after it reports a narrower-than-expected second-quarter loss, driven by strong software sales.

Shares of Ariba jumped today after the business e-commerce software maker reported a narrower-than-expected second-quarter loss, driven by strong software sales.

Net loss for the period was $11.5 million, or 6 cents per share. That compares with a net loss of $2.8 million, or 7 cents per share, in the same period a year ago. Analysts expected Ariba to post a loss of 8 cents per share, according to a survey by First Call.

Shortly after the opening bell, Ariba jumped more than 9 percent on the news. In afternoon trading, shares were up $3.81 to $75.81. The stock has traded as high as $183.34 and as low as $15.25 in the past 52 weeks.

Merrill Lynch analyst Christopher Shilakes upgraded Ariba from "accumulate" to "buy" today and raised fiscal year revenue estimates from $125 million to $175 million. Other analysts today reiterated "buy" recommendations.

The company, which develops software that lets businesses link partners and suppliers and trade goods and services over the Internet, said revenues for the quarter jumped 322 percent to $40 million, up from $9.5 million in its year-ago period.

While the business-to-business sector has won the attention of investors, analysts and industry players, shares of Ariba and other business e-commerce stocks, including prime rival Commerce One, have taken a recent beating from analysts and the hard hit stock market.

Ariba and Commerce One have lost billions in value since the beginning of March as analysts warn of overcrowding and lack of confidence in unproved business models.

J.P. Morgan analyst Bill Epifanio said he remains bullish on the entire business e-commerce sector despite investor concerns.

"These (trading) exchanges will truly represent the way businesses will interact in the future," said Epifanio. "Ultimately, they will prove to be very good investments. Right now, we're early in the game...business models have to evolve more, but I'm confident that will turn into something very positive and lucrative in the future."

Ariba chief executive Keith Krach said he disagrees with predictions of a business e-commerce slowdown. "We sure don't see it. We've doubled our customer base, (and) we're a leader in this market. There may be a shakeout, but because of our leading position I'm not concerned."

Analysts predict Ariba is on track to turn a profit by the second half of 2001.

Commerce One is expected to report a loss of 23 cents a share in its upcoming first quarter, according to analysts polled by First Call. In its last fiscal quarter, Commerce One reported a loss of 16 cents a share, beating expectations by a penny.

Ariba said revenue growth was partly due to a number of "significant" deals it inked across several industries, including financial services, health care, automotive, oil and computer hardware. Like other software makers jumping into the market, Ariba has been busy partnering with industry giants such as Electronic Data Systems, Dell Computer, Bank of America and Dupont to create online marketplaces. Business-to-business companies are wooing partners from a wide range of industries, promising that Net marketplaces will reduce companies' internal purchasing costs by moving their supply chains online.

Last quarter, Ariba posted a wider loss of $10.3 million, or 13 cents a share, compared with a loss of $2.4 million, or 13 cents, a year earlier. The company said revenues jumped to $23.5 million from $6.9 million.