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ABN Amro Lowers Ariba Rating to Add

Ariba Inc. (ARBA) posted Q1 earnings per share of $0.05 versus a $0.04 loss per share one year earlier. The e-commerce software firm sees Q2 EPS of $0.06. ABN Amro downgraded its rating on the shares to Add from Buy.

Analyst Robert Johnson says that while the company turned in a solid quarter, he is concerned with a perceived slowdown in sequential revenue growth when deferred revenue is taken into account. Johnson believes investors may have this perception as well. He notes that Ariba's transition to term licenses has created ambiguity in its true growth rate. The analyst thinks the transition has the effect of artificially increasing reported revenue growth.

Johnson cut his price target on Ariba to $52, around 90 times his $0.58 calendar 2002 EPS estimate. He believes short term catalysts are limited for the shares.

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