B2B Software Firms Slump

By Mel Duvall  |  Posted 2001-04-09 Print this article Print

The economic downturn is taking no prisoners, hammering away at the very companies that thought they could coast through a recession.

The economic downturn is taking no prisoners, hammering away at the very companies that thought they could coast through a recession.

It wasnt long ago that business-to-business (B2B) software companies, such as Ariba, Commerce One and i2 Technologies, boasted that they would be able to ride out a downturn because their software did what companies needed most to do — cut costs.

But the stars of B2B arent crowing anymore. One by one, they have been forced to issue earnings warnings and pare staff in response to sputtering sales.

Supply-chain software maker i2 said earnings for the current quarter will be 2 cents per share on sales of $355 million, compared with previous estimates of a 5-cent-per-share profit on sales of $349 million. It will cut about 10 percent of its work force, or 600 employees.

Ariba said it would report a loss of 20 cents per share for the quarter ended March 31, a dramatic turnaround from the 5-cent-per-share profit analysts had expected. As a result, Ariba said it plans to lay off about 700 employees, or one-third of its work force. It has also called off a planned acquisition of Agile Software, which had been promoted as a way for Ariba to compete more effectively against i2.

Commerce One chimed in a day later, saying it expects to post a loss of 11 cents per share for the quarter on revenue of $170 million, compared with previous expectations of a loss of 6 cents per share on revenue of $198 million.

"In general, customers have become increasingly cautious," Commerce One CEO Mark Hoffman said in response to the shortfall. "In some cases, customers are making smaller initial investments in technology projects, and extending those projects over a longer period of time."

Patrick Walravens, an analyst at Lehman Brothers Holdings, said B2B firms may have a good argument with their offer to cut costs, but when information technology budgets are being slashed, companies tend to focus more on mission-critical applications. In that respect, he said, i2 may come out of this cycle with the strongest footing.

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Thanks for your registration, follow us on our social networks to keep up-to-date
Rocket Fuel