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Ariba - They're Back

Stock of B2B e-commerce software provider Ariba Inc. was trending up today after analysts at Goldman Sachs raised both their estimates and their rating (to market outperform) based on earnings expectations.

It's welcome news for the Sunnyvale, Calif.-based company , which has rarely seen its name in print for the past six months without the word "struggling" being used in the same sentence.

Goldman Sachs, in an advisory to clients, said "we would accumulate shares up to the $10 level." The stock in mid-morning trading was going for $7.63 a share, up 46 cents. Shares of Ariba hit a low of $1.42 on Sept. 27.

Analysts said that the reasons for the upgrade are anticipated good results from the December quarter and increased guidance and visibility; a stabilizing balance sheet with strong cash and deferred revenue positions; traction from big-ticket sourcing products and an expanding product suite; and management's focus on top and bottom line growth.

"We believe that Ariba has been able to cross-sell products into its installed base of customers," GS said, adding that it expects December quarter revenues of $49.9 million and a loss per share of 5 cents, which is the consensus loss of most analysts.

But GS said that revenues might be in the mid-$50 million range, with a smaller loss than expected.

And for 2002, analysts said that current estimates are too low as "the demand environment for software has improved since the summer timeframe and the economy has begun to swing towards recovery."

"Our new estimates (for 2002) are $232 million in revenues and a loss per share of 7 cents, compared to our old estimates of $216 million in revenues and a loss of 13 cents a share," GS said. "More importantly we have moved up break even to the September quarter from the December quarter."

Ariba seemed to be in trouble last July, when it reported a wider loss for the third quarter and the no-explanations departure of its CEO, who had held the post for only one quarter. The company installed its CFO, Robert Calderoni, as president and chief executive officer last October.