Ariba loses money, CEO

Ariba Inc. on Thursday announced a quarterly net loss of US$273.5 million and the departure of president and chief executive officer Larry Mueller, who will be temporarily replaced by company chairman Keith Krach.

The e-commerce software maker reported revenue for its third fiscal quarter ending June 30 of US$85.3 million, an increase of six per cent over the same quarter last year, according to company officials. For last year’s third quarter, the company’s net loss was US$317.1 million. While the company managed to reduce overall costs during the past quarter through layoffs and other expense reductions, Ariba’s chief financial officer Bob Calderoni said more layoffs could come in the near future.

“We will intensify our efforts to further reduce our breakeven point. We’ll do it through discretionary expense control,” Calderoni said during a conference call Thursday morning. “Throughout the organization, we certainly will look for all opportunities to further reduce cost. We expect further headcount reductions, but I don’t have a particular target for that.”

Mueller, who was appointed CEO of Ariba in May, announced Wednesday to the company’s board that he is leaving to pursue other interests, according to Krach, who also spoke during the conference call. The company will move quickly yet cautiously to find a replacement, Krach said.

“I have every confidence in our management team to lead Ariba as we search for the next CEO,” he said. “You can expect me to help the board find the right leader, support the management team that’s in place, and ensure that we deliver value to our customers.”

Ariba’s CFO attributed the quarterly loss to poor market conditions in the software industry, a refrain that is becoming popular among technology vendors as they report largely disappointing earnings for the quarter ending June 30.

“What’s clear to me is that market conditions are probably going to last longer than most of the industry hoped,” Calderoni said. “The overall market environment remained challenging in the third quarter; customers continued to delay business decisions as they look for signs of recovery in their own businesses. It’s clear to me that … more often than not, bigger deals are getting delayed.”

Yet, the company added 49 new customers during its third quarter.

“Even in this challenging market environment we are winning against the biggest ERP vendors, even in their own accounts,” Calderoni said, referring to customers who may use enterprise resource planning or database software from competitors, but who turn to Ariba for their e-commerce applications.

The company reported a pro forma net loss, excluding special charges, of US$26.1 million for its third quarter this year, compared to US$11.3 million in pro forma losses for the same quarter last year. Special charges taken during the past quarter included a US$13 million charge for head-count reduction and a US$57 million charge for real estate commitments.

But in a somewhat surprising move, Calderoni said the company recently found a tenant to lease its excess office space, and doesn’t expect to incur any additional charges related to real estate.

“It is the only large real estate deal in Silicon Valley this year. That was certainly gratifying, in this challenging environment,” he said, though he declined to name the tenant.

Ariba Inc., based in Sunnyvale, Calif., is at