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HP plans e-commerce site with Ariba

Hewlett-Packard plans to launch an Internet site with startup Ariba Technologies to sell everything from desks to paper clips to corporations in a market that could reach $500 billion by 2002.

Hewlett-Packard today announced plans to launch an e-commerce service with Ariba Technologies to sell everything from desks to paper clips to corporations in a business-to-business market that could reach $500 billion by 2002.

HP, the world's second-largest computer maker, said the announcement is linked with its plans to separate into two companies: its well-known computer and printer business and its much smaller medical devices and electronic-testing business.

The 60-year-old company has come under fire in recent quarters for lackluster revenue growth and a lack of focus.

The new service, called Ariba.com Network, will run on HP hardware and HP will provide hosting services, operations infrastructure, deployment support, and marketing assistance.

Analysts said the Ariba is designed to convince customers, competitors, and shareholders that HP is not the stodgy and arrogant company some claim it is.

"You've only seen the tip of the iceberg in terms of what they plan to do in the Internet area," Paul McGuckin, a vice president and analyst with market researcher Gartner Group told Reuters. "They are determined to make a splash and not to do things the way they had in the past."

The new offering marks Ariba's first foray into services. It will let buyers view suppliers' catalogs online, then handle transactions over Ariba's network.

Ariba is "becoming the 800-pound gorilla in their market, which is purchasing," said Nick Earle, head of marketing for enterprise computing at Hewlett-Packard.

Ariba's operating resource management system [ORMS] software is sold primarily to large companies to automate routine purchases of office supplies, travel, computers, and other commonly used items. The new network service will run on Ariba's software. To date, Ariba has concentrated largely on buyers, not suppliers, although in December the company announced its first catalog effort for suppliers.

Ariba's move into services mimics the strategy of competitor Commerce One, run by former Sybase CEO Mark Hoffman. Commerce One sells its software to buyers and sellers, then routes purchases over its network for a fee.

Both Ariba and Commerce One's services will function in part as Internet-based alternatives to electronic data interchange [EDI] conducted over secure private networks called value added networks. VANs are run by companies like GE Information Services, Sterling Commerce, IBM, and Harbinger.

Ariba's older software offering competes with similar packages from Netscape, Trilogy, and other smaller vendors.

Many large companies use EDI, which also can be routed over the Internet, to buy materials used to produce their goods from their suppliers. The two services also can serve as Commerce One and Ariba's service handle primarily with routine purchases, not production materials.

Ariba.com Network plans to deliver business and information services, such as supplier ratings and evaluations, news and forums, vertical industry consortiums, sourcing services, and auctions of surplus materials.

"With buyers and suppliers being able to make virtual markets in real-time through Ariba's ORM system, important new economies of scale will now be achievable in the marketplace," Zona Research said today in a note to clients.

Ariba's offering, which uses a commerce-related version of eXtensible Markup Language called cXML, lets buyers and sellers negotiate prices, Zona said, giving it an advantage over Trilogy's Buying Chain software that uses fixed prices. Zona praised Ariba's offering "a real winner" because of the involvement of XML integrator webMethods, EDI firm Sterling Commerce, and HP.

Ariba's network will support a variety of e-commerce protocols, including EDI, Internet EDI, cXML, Open Buying on the Internet [OBI], Catalog Information Format, and additional standards emerging from RosettaNet, and CommerceNet.

One key issue for online buying networks is keeping up with changes in suppliers' catalogs-pricing, out-of-stock items, etc. Ariba will index the various suppliers, then let them keep their own catalogs current. The company claims its system can access more than 10.1 million items.

Some 39 suppliers and catalog aggregators are participating in the new network, including barnesandnoble.com, software store Beyond.com, Boise Cascade Office Products, Cort Furniture Rental, computer distributor Inacom, Office Depot, and Staples.

Ariba customers include Advanced Micro Devices, Chevron, Cisco Systems, Lucent's Octel division, Visa, Transamerica, and U S West.

Reuters contributed to this report.