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RealTime IT News

Market for B2B Apps Still Soft

Sales of B2B software, the applications needed to establish online marketplaces, bolster supply chains and allow for collaboration among companies, continue to be soft, and Goldman, Sachs analysts are lowering estimates for some of the prime players in the field.

"While we didn't really expect to see much strength (in B2B software sales) given the economy and seasonality, business was somewhat weaker than expected," GS said in an advisory to clients. "Therefore we are once again taking the pre-emptive action of cutting estimates on Ariba, Commerce One and i2 Technologies."

"...we expected results to be flat to slightly down in September with a slight uptick in December (7-10 percent)," GS said. "However, we now believe that September could be down from June by as much as 10-15 percent and in some cases by as much as 30 percent as companies have depleted both backlog and deferred revenues."

GS blamed the B2B softening on the continued economic slowdown, especially in the manufacturing and financial services sectors, coupled by weakness in Europe due to slower spending and the summer holiday season there.

For Ariba , GS reduced September quarter results slightly to a loss of 12 cents a share, from a previous estimated loss of 10 cents a share.

For Commerce One , GS said it believes the company "has strong potential to miss numbers" and lowered estimates to a loss of 24 cents a share from its previous estimated loss of 22 cents.

For i2 , Goldman, Sachs said it now expects a loss of 12 cents a share, compared to a previous estimated loss of 11 cents a share.

On the bright side, analysts said there have been "some pockets of strength in application software" generally coming from the larger ERP companies, such as PeopleSoft and SAP. "Both are gaining mindshare and marketshare with customers and systems integrators as companies look to build out internal applications," GS said.

But that was followed by this statement: "It appears business (in general) has not yet bottomed and Street estimates for software and tech in general are likely still too optimistic."

Goldman, Sachs actually seems more pessimistic than the Federal Reserve. A new report from the Federal Reserve Bank in Dallas said last week that despite the meltdown in the dot com world and the ongoing shakeout involving many e-marketplaces, B2B e-commerce is fundamentally sound and continues to drive so-called new economy.

But clearly when it comes to B2B estimates, mileage varies considerably, as witness this report that says despite anecdotal evidence of increased involvement in e-commerce, nearly half of all businesses use "traditional" methods, including hard copies, floppy disks and faxes, to communicate with customers and suppliers.

That is not what Ariba, Commerce One and i2 want to hear.



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