Ariba (ARBA) 8-K Ariba Reports Third Quarter Results

Exhibit 99.1

Ariba Reports Third Quarter Results

Sunnyvale, CA, July 21, 2005 – Ariba^®, Inc. (Nasdaq: ARBA), the leading spend management solutions provider, today announced financial results for the third quarter of fiscal year 2005 ended June 30, 2005.

Total revenues for the quarter were $77.7 million, as compared to $53.0 million for the third quarter of fiscal year 2004, an increase of 47 percent. License revenues for the quarter were $10.1 million, compared with $15.5 million for the third quarter of fiscal year 2004. Subscription and maintenance revenues were $30.2 million, compared with $21.0 million for the third quarter of fiscal year 2004. Services and other revenues for the quarter were $37.4 million, compared with $16.5 million for the third quarter of fiscal year 2004.

Net loss for the quarter was $288.7 million, or a loss of $4.52 per share, compared with a net loss for the third quarter of 2004 of $7.6 million, or $0.17 per share. The net loss for the quarter includes charges of approximately $5.1 million for amortization of intangible assets, $3.4 million for stock-based compensation, $247.8 million for goodwill impairment, and $34.6 million for restructuring and integration costs. Excluding these items, non-GAAP net income was $2.2 million, or $0.03 per share.

The results for the third quarter include the results from FreeMarkets, Inc., with which Ariba merged on July 1, 2004.

“I am pleased that we exceeded our previous guidance for both revenue and non-GAAP earnings per share,” said Bob Calderoni, CEO, Ariba. “We also continued to build positive momentum with our customers, including a couple of key deals that help validate our new strategic initiatives.”

New and Existing Customers Add Spend Management Solutions

As companies seek to generate cost savings, increase margins and accelerate positive bottom-line results, they continue to invest in Ariba Spend Management solutions. During the third quarter, Ariba added 21 new customers and extended agreements with more than 150 existing customers in Europe, Asia, and North America, including General Dynamics Corp., Goodyear Tire & Rubber Co., Royal Caribbean Cruises Ltd., Bell Canada, Giant Eagle, Inc., AXA, West Penn Allegheny Health System, Equity Office Properties Trust, O2 GmbH & Co OHG, and Capital One.

Conference Call Information

Ariba will host a conference call today, Thursday, July 21, 2005, at 2:00 p.m. PDT/5:00 p.m. EDT to discuss the results for the third quarter of fiscal year 2005. To join the call, please dial (800) 322-0079 in the United States and Canada, or (973) 409-9258 for other international locations. There will also be a live web broadcast available on the investor relations section of the company’s website at www.ariba.com or at www.vcall.com. A replay of this call will be available through Thursday, July 28, 2005 by dialing (877) 519-4471 in the United States and Canada, or (973) 341-3080 for other international location and entering ID # 6253037.

About Ariba, Inc.

Ariba, Inc. is the leading provider of Spend Management solutions to help companies realize rapid and sustainable bottom line results. Successful companies around the world in every industry use Ariba Spend Management software and services. Ariba can be contacted in the U.S. at 1.650.390.1000 or atwww.ariba.com.

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Copyright © 1996 – 2005 Ariba, Inc.

Ariba and the Ariba logo are registered trademarks of Ariba, Inc. Ariba Spend Management, Ariba Spend Management. Find it. Get it. Keep it., Ariba. This is Spend Management, Ariba Solutions Delivery, Ariba Analysis, Ariba Buyer, Ariba Category Management, Ariba Category Procurement, Ariba Contract Compliance, Ariba Contracts, Ariba Contract Management, Ariba Contract Workbench, Ariba Data Enrichment, Ariba eForms, Ariba Sourcing, Ariba Invoice, Ariba Travel & Expense, Ariba Workforce, Ariba Supplier Network, Ariba Supplier Performance Management, Ariba PunchOut, Ariba QuickSource, PO-Flip, Ariba Settlement and Ariba Spend Management Knowledge Base are trademarks or service marks of Ariba, Inc. Ariba Proprietary and Confidential. All rights reserved. Patents pending. All other trademarks are property of their respective owners.

Ariba Safe Harbor

Safe Harbor Statement under the Private Securities Litigation Reform Act 1995: Information and announcements in this release involve Ariba’s expectations, beliefs, hopes, plans, intentions or strategies regarding the future and are forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to Ariba as of the date of the release, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to Ariba’s operating and financial results to differ materially from its current expectations include, but are not limited to: delays in development or shipment of new versions of Ariba’s products and services; lack of market acceptance of Ariba’s existing or future products or services; inability to continue to develop competitive new products and services on a timely basis; introduction of new products or services by major competitors; the ability to attract and retain qualified employees; difficulties in assimilating acquired companies; long and unpredictable sales cycles and the deferrals of anticipated orders; declining economic conditions; inability to control costs; changes in the company’s pricing or compensation policies; significant fluctuations in our stock price; the outcome of and costs associated with pending or potential future regulatory or legal proceedings; the impact of our acquisitions, including the disruption or loss of customer, business partner, supplier or employee relationships; and the level of costs and expenses incurred by Ariba as a result of such transactions. For example, Ariba recently settled patent infringement filed against it by ePlus, Inc. for $37.0 million and incurred significant related legal expenses. Factors and risks associated with its business, including a number of the factors and risks described above, are discussed in Ariba’s Form 10-K filed December 14, 2004, in its Form 10-Q filed February 9, 2005, and in its Form 10-Q filed May 10, 2005.

Investor Contact:

John Ederer

Ariba, Inc.

(650) 390-1000

Media Contact:

Donna Maurillo

Ariba, Inc.

(650) 390-1773

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Ariba, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited; in thousands)

	June 30, 2005			September 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	67,171		$	74,031
Short-term investments		30,217			37,227
Restricted cash		1,345			45,623
Accounts receivable, net		45,089			48,071
Prepaid expenses and other current assets		12,600			10,795
Total current assets		156,422			215,747
Property and equipment, net		19,810			21,909
Long-term investments		18,373			29,676
Restricted cash, less current portion		31,580			26,862
Goodwill		328,692			574,679
Other intangible assets, net		46,375			62,249
Other assets		2,984			2,767
Total assets	$	604,236		$	933,889
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,495		$	15,433
Accrued compensation and related liabilities		28,057			31,171
Accrued liabilities		24,322			69,570
Restructuring obligations		19,228			16,825
Deferred revenue		45,342			49,664
Deferred income - Softbank		13,388			—
Total current liabilities		144,832			182,663
Deferred rent obligations		22,237			21,406
Restructuring obligations, less current portion		69,653			41,042
Deferred revenue, less current portion		21,251			22,858
Deferred income - Softbank, less current portion		17,292			—
Total liabilities		275,265			267,969
Minority interests		141			19,547
Stockholders’ equity:
Common stock		132			125
Additional paid-in capital		4,993,352			4,963,002
Deferred stock-based compensation		(15,212	)		(5,959	)
Accumulated other comprehensive income		5,345			1,634
Accumulated deficit		(4,654,787	)		(4,312,429	)
Total stockholders’ equity		328,830			646,373
Total liabilities and stockholders’ equity	$	604,236		$	933,889

Ariba, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited; in thousands, except per share data)

	Three Months Ended June 30,					Nine Months Ended June 30,
	2005			2004		2005			2004
Revenues:
License	$	10,070		$	15,475	$	39,807		$	50,091
Subscription and maintenance		30,213			20,988		92,865			64,584
Services and other		37,432			16,520		113,240			47,047
Total revenues		77,715			52,983		245,912			161,722
Cost of revenues: (1)											��
License		998			528		2,746			2,112
Subscription and maintenance		7,039			5,226		21,391			16,007
Services and other		30,483			15,128		91,868			40,921
Amortization of acquired technology and customer intangible assets		4,907			340		14,888			340
Total cost of revenues		43,427			21,222		130,893			59,380
Gross profit		34,288			31,761		115,019			102,342
Operating expenses:
Sales and marketing (1)		21,540			17,036		65,562			50,943
Research and development (1)		11,772			13,811		36,434			38,872
General and administrative		6,330			6,650		22,862			16,114
Other income - Softbank		(3,350	)		—		(6,145	)		—
Amortization of other intangible assets		200			149		598			225
Stock-based compensation		3,422			771		12,078			1,639
Restructuring and integration costs		34,570			1,820		38,669			(97	)
Goodwill impairment		247,830			—		247,830			—
Litigation provision		—			—		37,000			—
Total operating expenses		322,314			40,237		454,888			107,696

Loss from operations		(288,026	)		(8,476	)		(339,869	)		(5,354	)
Interest and other income, net		349			723			3,604			2,494
Loss before income taxes and minority interests		(287,677	)		(7,753	)		(336,265	)		(2,860	)
Provision (benefit) for income taxes		1,039			174			6,076			(353	)
Minority interests in net (loss) income of consolidated subsidiaries		(1	)		(296	)		17			(136	)
Net loss	$	(288,715	)	$	(7,631	)	$	(342,358	)	$	(2,371	)
Net loss per share - basic and diluted (2)	$	(4.52	)	$	(0.17	)	$	(5.40	)	$	(0.05	)
Weighted average shares - basic and diluted (2)		63,839			45,454			63,355			45,256

(1) Certain reclassifications, none of which affected net loss or net loss per share, have been made to prior period amounts to conform to the current period presentation. Specifically, the company reclassified certain operating expenses to cost of revenues totaling $5.6 million and $14.6 million in the three and nine months ended June 30, 2004, respectively, and $0.6 million in the three months ended December 31, 2004.

(2) Reflects the one-for-six reverse split of the company’s outstanding common stock effected July 1, 2004.

Ariba, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Operating Results

(Unaudited; in thousands, except per share data)

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP operating results for the period indicated below:

	Three Months Ended June 30, 2005
Expense reconciliation:
GAAP revenue	$	77,715
GAAP net loss		288,715
Total GAAP expenses		366,430
Amortization of intangible assets		(5,107	)
Stock-based compensation		(3,422	)
Goodwill impairment		(247,830	)
Restructuring and integration costs		(34,570	)
Total non-GAAP operating expenses	$	75,501
	Three Months Ended June 30, 2005
Net income (loss) reconciliation:
GAAP net loss	$	(288,715	)
Amortization of intangible assets		5,107
Stock-based compensation		3,422
Goodwill impairment		247,830
Restructuring and integration costs		34,570
Non-GAAP net income	$	2,214
	Three Months Ended June 30, 2005
Net income (loss) per share reconciliation:
GAAP net loss per share - basic	$	(4.52	)
Amortization of intangible assets		0.08
Stock-based compensation		0.05
Goodwill impairment		3.88
Restructuring and integration costs		0.54
Non-GAAP net income per share - basic	$	0.03
Non-GAAP net income per share - diluted	$	0.03
Weighted average shares - basic		63,839
Weighted average shares - diluted		66,190

Ariba provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). In addition, this press release contains non-GAAP financial information. This non-GAAP financial information excludes the following types of costs and expenses that are included in GAAP: i) amortization of intangible assets, ii) stock-based compensation, iii) goodwill impairment, and iv) restructuring and integration costs. Management reviews this non-GAAP financial information in evaluating Ariba’s historical and projected financial performance, and believes that it may assist investors in assessing its ongoing operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We have provided a reconciliation of the non-GAAP financial information provided in this press release with the comparable financial information reported in accordance with GAAP for the given period.