[BusinessTeam] FT.com News and Analysis World Article.htm

Message-ID: <6B75EF096AE0BE428B8CEDEA89C5F632782394@exchange01.lab49.com> · Wed Apr 04 13:44:53 2001 UTC

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Downgrades hit e-providers
By Tom Foremski in San Francisco
Published: April 2 2001 13:15GMT | Last Updated: April 4 2001 12:33GMT

 i2 technologies
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Wall Street analysts on Tuesday downgraded most leading e-business
software companies, stunned at the size of the revenue declines in a
string of warnings issued late on Monday. 

i2 Technologies, was the first to warn and announce layoffs. By the end of
the day on Monday, it was followed by Ariba, Commerce One, Art Technology,
Broadvision and Inktomi. 

These companies were supposed to be a haven for investors during a time of
slowing IT spending growth because of the significant cost savings
potential from using their software. 

But the latest round of earnings warnings and layoffs by sector leaders
has soundly dispelled this myth despite what initially seemed to be a
sympathetic market. 

When i2 warned early on Monday, paradoxically it rose as much as 17 per
cent before finishing the day up 7 per cent. 

After markets closed, Ariba, Broadvision, Art Technology and Inktomi
weighed in with their warnings and large layoffs. And if they were hoping
for a similar favorable investor reaction to that of i2, they didn't get
it. 

In early trading on Tuesday, they plunged between 23 and 50 per cent, and
even dragged down i2, which fell 14 per cent. Oracle and Siebel Systems
were also caught in the downdraft and fell 12 per cent and 15 per cent
respectively. 

SAP, Europe's largest software company, said it was comfortable with its
current guidance for the first half of this year. Nevertheless, it was
downgraded by Merrill Lynch in the wake of comments by its US counterparts
that the IT slowdown was spreading to Europe. 

E-business software companies had been the darlings of Wall Street for
much of last year. Analysts were encouraged by bullish statements from
chief executives such as Larry Ellison of Oracle that an economic slowdown
would be good for business. 

Mr Ellison argued that customers would rush to install e-business
applications for the large cost savings they promise. After all, as Oracle
likes to brag, it saved $1bn using its own software. 

Butin late February and March, it became apparent that e-business software
sales had slowed dramatically. Jeff Henley, CFO at Oracle, said "We've had
to rethink our story on e-business applications." 

Sifting through Monday's revenue and earnings warnings, analysts were
stunned at the steep rate of revenue decline. 

In the case of Ariba, the leading online procurement company, Merrill
Lynch analysts said they "could not remember when a company with a revenue
base of this scale missed street estimates by more than 50 per cent." 

"Eye-popping" was how Merrill Lynch analyst Henry Blodget described
Inktomi's expected 70 per cent revenue decline. 

Yet virtually all of the e-business software companies repeat a common
mantra: the orders are not lost, just delayed. 

Nervous chief executives are holding off on approving large contracts, say
Oracle and the others. 

IT industry analysts were not convinced. Mark Shainman, senior analyst at
Meta Group, the US IT consultancy, said, "What we are seeing is that
companies are trying to make do with what they have and are not rushing
out to make large IT purchases."

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