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February 5, 2001 |
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Ariba Pays A High Price For E-Business Vendor
Goal is to incorporate Agile's manufacturing collaboration capabilities into its apps
By Alorie Gilbert (agilbert@cmp.com)
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riba Inc. last week acquired Agile Software Corp., a move designed to extend its E-procurement capabilities from the world of pens and paper clips into the more lucrative market for manufacturing supplies. Ariba will pay $2.55 billion in stock for Agile, whose clients include large manufacturers such as Compaq, Dell Computer, and GE Medical Systems. The deal, expected to close by May, values Agile's shares at $54, 26% more than their value of $42.81 at market close the day the deal was signed.While paying a premium isn't uncommon in software mergers, analysts were dismayed at the timing: Ariba's share price fell about 30% last month, hitting a 52-week low of $32.12. But Marcus Ryu, VP of corporate strategy for Ariba, says, "we're not in the timing game. At this stage of development in B-to-B, we have to make a strategic move when it makes sense."
In addition to handling so-called direct procurement, Agile's software lets users exchange information with customers and suppliers about component specifications and availability when engineering changes are made to a product. But the tools don't address a critical hole in Ariba's product line--supply-chain management apps that provide demand-forecast and inventory-planning data. Ariba's rivals, including i2 Technologies, Oracle, and SAP, have capabilities in those areas, which can be used to help businesses save money.
Although some analysts are waiting for Ariba to make an acquisition in the supply-chain arena, the vendor says it's not. Taking on i2, its reselling partner in the supply-chain space, would be a major challenge: i2 has a sales force three to five times as large as Ariba's.
The integration of Agile's products with Ariba's is likely to take a while, but when it's complete, customers should be able to bring the procurement process closer to the engineering process. The result: The availability and cost of components can be reflected in a product's design. That's key, says David Wasson, a senior VP at Technology Solutions Co. "When you source materials up front, you close the door on latency in the production process."
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