Reviews mixed on Ariba's buy
Debate has already started about the first big business-to-business merger of 2001, the $2.5 million combination of Ariba and Agile Software.
UBS Warburg downgraded Ariba for giving up 23 percent of its own slumping stock in exchange for Agile. The investment house worries that the e-procurement software vendor paid a high price and may stumble while trying to integrate Agiles software with its own.
Lehman Brothers Holdings and Dresdner Kleinwort Wasserstein upgraded the stock, saying the acquisition moves Ariba into markets it needed to enter, particularly for "direct materials" used in any manufacturing process.
Ariba clearly has bigger things in mind. The company wants Agiles software in order to enter the "collaboration" market, said to be the next big thing in business-to-business commerce.
"Theyre not blowing smoke," said Richard Davis, an analyst at Needham & Co. "Its using the primary strength of the Internet real-time communications between trading partners" to solve problems and lay plans in engineering, contracting, logistics, production, marketing and more, he said.
Ariba officials played up the collaboration angle, saying it expands Aribas "addressable market by two to three times."
"The market is looking for a leader. Our merger with Agile, the uncontested leader in collaboration, gives us a decisive claim," said Larry Mueller, Aribas president and chief operating officer.
Despite the bold claim, the space is already contested, analysts said. "Commerce One and SAP are working together. Oracle just announced a suite of collaboration software. I2 [Technologies] would say theyre the leader, but each has a different approach," said Jeanette Sing, vice president at Dresdner Kleinwort Wasserstein.
Agile, which makes software that lets manufacturers share documents and data for designing products, dominates in electronics manufacturing, but the collaboration market is bigger than that, she said.
The deal also expands the competition by opening another crack in Aribas "alliance" with i2, a supply chain software vendor that has been encroaching on the e-procurement market. While Ariba officials stressed that Agiles software doesnt compete with i2s, it was clear that Ariba is heading into markets where it will likely meet its erstwhile ally on far less friendly terms. "This is just another shot across the bow," said Friedman Billings Ramsey analyst David Hilal. "As each expanded its own portfolio, they move farther apart."
Analysts also expect Ariba to pursue other acquisitions this year, possibly including supply chain vendors SynQuest or Adexa.
Ariba wants to close at least one gap its stock value, which fell 30 percent in January to about $38.50 per share.