10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                  to                 

Commission File Number 000-26299

ARIBA, INC.

(Exact name of registrant as specified in its charter)

Delaware	77-0439730
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

807 11th Avenue

Sunnyvale, California 94089

(Address of principal executive offices)

(650) 390-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer  x            Accelerated filer  ¨            Non-accelerated filer  ¨

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s common stock as of July 31, 2007 was 78,872,885.

ARIBA, INC.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2007 (unaudited) and September 30, 2006	3
	Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2007 and 2006 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2007 and 2006 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	34
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Submission of Matters to a Vote of Security Holders	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
	Signatures	46

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

ARIBA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2007			September 30, 2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	23,266		$	51,997
Marketable securities		121,697			86,769
Restricted cash		1,100			1,550
Accounts receivable, net of allowance for doubtful accounts of $2,567 and $3,011 as of June 30, 2007 and September 30, 2006, respectively		34,509			31,664
Prepaid expenses and other current assets		10,233			11,157
Total current assets		190,805			183,137
Property and equipment, net		19,797			19,830
Long-term investments		3,001			—
Restricted cash, less current portion		28,920			30,300
Goodwill		326,101			326,101
Other intangible assets, net		13,849			25,060
Other assets		3,196			2,516
Total assets	$	585,669		$	586,944
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,040		$	9,863
Accrued compensation and related liabilities		20,075			24,694
Accrued liabilities		19,214			21,589
Restructuring obligations		19,926			14,888
Deferred revenue		57,849			40,035
Deferred income—Softbank		3,950			13,572
Total current liabilities		131,054			124,641
Deferred rent obligations		22,621			22,668
Restructuring obligations, less current portion		57,000			80,406
Deferred revenue, less current portion		26,960			25,641
Deferred income—Softbank, less current portion		—			565
Total liabilities		237,635			253,921
Commitments and contingencies (Note 3)
Stockholders’ equity:
Common stock		157			151
Additional paid-in capital		5,060,844			5,032,538
Accumulated other comprehensive income		1,367			3,475
Accumulated deficit		(4,714,334	)		(4,703,141	)
Total stockholders’ equity		348,034			333,023
Total liabilities and stockholders’ equity	$	585,669		$	586,944

See accompanying Notes to Condensed Consolidated Financial Statements.

3

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,
	2007			2006 (1)			2007			2006 (1)
Revenues:
Subscription and maintenance		36,613			32,270			104,851			96,703
Services and other		38,951			41,363			121,299			126,903
Total revenues		75,564			73,633			226,150			223,606
Cost of revenues:
Subscription and maintenance		8,490			6,894			24,534			20,359
Services and other		28,490			33,341			88,016			98,703
Amortization of acquired technology and customer intangible assets		3,356			3,696			10,786			12,005
Total cost of revenues		40,336			43,931			123,336			131,067
Gross profit		35,228			29,702			102,814			92,539
Operating expenses:
Sales and marketing		23,389			23,518			69,461			58,601
Research and development		13,254			12,333			38,845			37,080
General and administrative		10,822			6,973			29,108			24,138
Other income—Softbank		(3,390	)		(3,396	)		(10,173	)		(10,190	)
Amortization of other intangible assets		101			200			425			600
Restructuring		(3,805	)		24,376			(3,805	)		25,379
Total operating expenses		40,371			64,004			123,861			135,608
Loss from operations		(5,143	)		(34,302	)		(21,047	)		(43,069	)
Interest and other income, net		3,456			3,138			11,462			5,974
Net loss before income taxes		(1,687	)		(31,164	)		(9,585	)		(37,095	)
Provision for income taxes		347			318			1,608			643
Net loss	$	(2,034	)	$	(31,482	)	$	(11,193	)	$	(37,738	)
Net loss per share—basic and diluted	$	(0.03	)	$	(0.48	)	$	(0.16	)	$	(0.58	)
Weighted average shares—basic and diluted		70,340			65,817			69,589			65,493

(1) The Company has made certain reclassifications to prior year amounts to conform to the current year presentation, none of which affected net loss or net loss per share. See Note 1 of Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

4

ARIBA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

	Nine Months Ended June 30,
	2007			2006
Operating activities:
Net loss	$	(11,193	)	$	(37,738	)
Adjustments to reconcile net loss to net cash provided by operating activities:
(Recovery of) provision for doubtful accounts		(285	)		(158	)
Depreciation		5,186			5,926
Amortization of intangible assets		11,211			12,605
Stock-based compensation		26,259			29,910
Restructuring		(3,805	)		25,379
Realized gains—currency translation adjustment (Note 4)		(2,625	)		—
Changes in operating assets and liabilities:
Accounts receivable		(2,560	)		7,033
Prepaid expenses and other assets		244			(2,594	)
Accounts payable		177			1,876
Accrued compensation and related liabilities		(4,619	)		(7,865	)
Accrued liabilities		(3,323	)		(4,200	)
Deferred revenue		19,133			11,806
Deferred income—Softbank		(10,173	)		(10,190	)
Restructuring obligations		(13,662	)		(13,108	)
Net cash provided by operating activities		9,965			18,682
Investing activities:
Purchases of property and equipment		(5,153	)		(4,239	)
Purchases of marketable securities, net of sales		(37,929	)		(7,549	)
Allocation from restricted cash, net		1,830			1,425
Net cash used in investing activities		(41,252	)		(10,363	)
Financing activities:
Proceeds from issuance of common stock, net		4,309			5,059
Repurchase of common stock		(2,256	)		(2,025	)
Net cash provided by financing activities		2,053			3,034
Effect of foreign exchange rate changes on cash and cash equivalents		503			143
Net change in cash and cash equivalents		(28,731	)		11,496
Cash and cash equivalents at beginning of period		51,997			60,909
Cash and cash equivalents at end of period	$	23,266		$	72,405

See accompanying Notes to Condensed Consolidated Financial Statements.

5

ARIBA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—Description of Business and Summary of Significant Accounting Policies

Description of Business

Ariba, Inc., along with its subsidiaries (collectively referred to herein as the “Company”), provides spend management solutions that allow enterprises to efficiently manage the purchasing of non-payroll goods and services required to run their business. The Company refers to these non-payroll expenses as “spend.” The Company’s solutions include software, network access, professional services and expertise. They are designed to provide enterprises with technology and business process improvements to better manage their spend and, in turn, save money. The Company’s software and services streamline and improve the business processes related to the identification of suppliers of goods and services, the negotiation of the terms of purchases, and ultimately the management of ongoing purchasing and settlement activities.

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending September 30, 2007. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted under the Securities and Exchange Commission’s (“SEC”) rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, presented in the Company’s Annual Report on Form 10-K for the year ended September 30, 2006 filed on December 1, 2006 with the SEC.

Reclassifications

The Company has made certain reclassifications to prior year amounts to conform to the current year presentation, none of which affected net loss or net loss per share. Specifically, given the Company’s shift to an on-demand model and the declining amount of perpetual software revenues, the Company reclassified $651,000 and $5.4 million of license revenues in the three months ended June 30, 2006 to subscription and maintenance revenues (term component) and services and other revenues (perpetual component), respectively, and $2.7 million and $16.1 million in the nine months ended June 30, 2006, respectively. The Company reclassified $306,000 and $1.4 million of cost of revenues—license in the three and nine months ended June 30, 2006 to cost of revenues—services and other, respectively. The Company also reclassified $1.2 million and $3.1 million of compensation and benefits associated with certain employees from cost of revenues—subscription and maintenance in the three and nine months ended June 30, 2006 to sales and marketing, respectively. The following table reflects the effect of all of these reclassifications for the three and nine months ended June 30, 2006 (in thousands):

	Three Months Ended June 30, 2006				Nine Months Ended June 30, 2006
	As Previously Reported		As Reclassified		As Previously Reported		As Reclassified
Revenues—license	$	6,075	$	—	$	18,832	$	—
Revenues—subscription and maintenance	$	31,619	$	32,270	$	94,008	$	96,703
Revenues—services and other	$	35,939	$	41,363	$	110,766	$	126,903
Cost of revenues—license	$	306	$	—	$	1,373	$	—
Cost of revenues—subscription and maintenance	$	8,082	$	6,894	$	23,491	$	20,359
Cost of revenues—services and other	$	33,035	$	33,341	$	97,330	$	98,703
Sales and marketing	$	22,330	$	23,518	$	55,469	$	58,601

6

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported results of operations during the reporting period. Actual results could differ from those estimates. The items that are significantly impacted by estimates include revenue recognition, the assessment of recoverability of goodwill and other intangible assets, restructuring obligations related to abandoned operating leases and contingencies related to the collectibility of accounts receivable and pending litigation.

Fair Value of Financial Instruments and Concentration of Credit Risk

The carrying value of the Company’s financial instruments, including cash and cash equivalents, investments, accounts receivable and accounts payable approximates fair value. Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments and trade accounts receivable. The Company maintains its cash, cash equivalents and investments with high quality financial institutions and limits its investment in individual securities based on the type and credit quality of each such security. The Company’s customer base consists of international businesses, and the Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Company maintains allowances for potential credit losses.

No customer accounted for more than 10% of total revenues for the three and nine months ended June 30, 2007 and 2006. In addition, no customer accounted for more than 10% of net accounts receivable as of June 30, 2007. One customer accounted for more than 10% of net accounts receivable as of September 30, 2006, the Company’s most recent fiscal year end.

Adoption of Accounting Standards

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The provisions of FIN 48 are effective for the first quarter of fiscal year 2008 and the Company is currently evaluating the impact of this guidance on its financial position, results of operation and cash flows.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for the fiscal year beginning October 1, 2008. The Company is evaluating the impact of the provisions of SFAS No. 157 on its financial condition, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early application is allowed under certain circumstances. The Company has not yet determined the impact this interpretation will have on its financial position, results of operation and cash flows.

7

Revenue Recognition

Substantially all of the Company’s revenues are derived from two sources: (i) providing software solutions on either a standalone or on-demand hosted basis and associated technical support and product updates, otherwise known as subscription and maintenance; and (ii) providing services, including implementation services, consulting services, managed services, training, education, premium support and other miscellaneous services. The significant majority of the Company’s standard end user license agreements provide for use of the Company’s software under a time-based license based on the number of users or other usage criteria. The Company licenses its software in multiple element arrangements in which the customer typically purchases a combination of some or all of the following: (i) software solutions, either on a standalone or on-demand hosted basis; (ii) a maintenance arrangement, which is generally priced as a percentage of the software license fees and provides for hosting, technical support and unspecified product updates typically over a period of one year or over the term of the license; and (iii) a services arrangement, on either a fixed fee for access to specific services over time or a time and materials basis.

The Company licenses its products through its direct sales force and indirectly through resellers. Sales made through resellers are recognized at the time that the Company has received persuasive evidence of an end user customer. The license agreements for the Company’s products generally do not provide for a right of return, and historically product returns have not been significant. The Company does not recognize revenue for refundable fees or agreements with cancellation rights until such rights to refund or cancel have expired. Direct sales force commissions are accounted for as sales and marketing expense at the time of sale, when the liability is incurred and is reasonably estimable.

The Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition, Emerging Issues Task Force (“EITF”) 00-21, Revenue Arrangements with Multiple Deliverables, and Emerging Issues Task Force (“EITF”) 00-3, Application of AICPA Statement of Position (“SOP”) 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware, and SOP 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery of the product or service has occurred; the fee is fixed or determinable; and collectibility is probable. If fees are not “fixed or determinable”, revenue is recognized when fees are due and payable. If collectibility is not considered probable at the inception of the arrangement, the Company does not recognize revenue until the fee is collected.

The Company allocates revenue to each element in a multiple element arrangement based on its respective fair value. The Company’s determination of the fair value of each element in a multiple element arrangement accounted for under SOP 97-2 is based on vendor-specific objective evidence of fair value (VSOE), which is limited to the price when sold separately. VSOE or other methods of determining fair value that are allowable under EITF 00-21 are utilized for multiple element arrangements that are not subject to SOP 97-2.

Revenue from software solutions, hosting and sourcing solutions services is primarily recognized ratably over the term of the arrangement, commencing with the initial customer access date. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year). Revenue allocated to software solutions implementation, process improvement, training and other services is recognized as the services are performed or as milestones are achieved or if bundled with a subscription or time-based arrangement or in circumstances where fair value cannot be established for undelivered service elements, is recognized, ratably over the term of the access agreement.

Certain of the Company’s contracts include performance incentive payments based on market volume and/or savings generated, as defined in the respective contracts. Revenue from such arrangements is recognized when those thresholds are achieved.

8

When revenue associated with multiple element arrangements is recognized and more than one element in an arrangement does not have fair value, the Company first allocates revenue on the statement of operations to those elements for which evidence of fair value is available.

In circumstances where the Company provides consulting services that are considered essential to the functionality of the software solutions, both the software solution revenue and service revenue are recognized under contract accounting in accordance with the provisions of SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Revenues from these arrangements are recognized under the lesser of percentage of completion method based on the ratio of direct labor hours incurred to date to total projected labor hours or ratable over the term of the license.

Deferred revenue includes amounts received from customers for which revenue has not been recognized, and generally results from deferred subscription, maintenance and support, hosting, consulting or training services not yet rendered and license revenue deferred until all requirements under EITF 00-21 or SOP 97-2 are met. Deferred revenue is recognized as revenue upon delivery of the Company’s product, as services are rendered, or as other requirements under SAB 104, EITF 00-21 or SOP 97-2 are satisfied. Deferred revenue excludes contract amounts for which payment has yet to be collected. Likewise, accounts receivable excludes amounts due from customers for which revenue has been deferred.

Stock-Based Compensation and Deferred Stock-Based Compensation

The Company maintains stock-based compensation plans which allow for the issuance of stock options and restricted common stock to executives and certain employees. The Company also maintains an employee stock purchase plan (“ESPP”) that provides for the issuance of shares to all eligible employees of the Company at a discounted price.

Effective October 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123R. This statement applies to all awards granted after the effective date and to modifications, repurchases or cancellations of existing awards. Additionally, under the modified prospective transition method of adoption, the Company recognizes compensation expense for the portion of outstanding awards on the adoption date for which the requisite service period has not yet been rendered based on the grant-date fair value of those awards calculated under SFAS No. 123 and SFAS No. 148. The Company amortizes the fair value of awards granted both before and after October 1, 2005 on an accelerated basis.

SFAS No. 123R requires that forfeitures be estimated over the vesting period of an award, rather than being recognized as a reduction of compensation expense when the forfeiture actually occurs.

Determining Fair Value

Valuation and amortization method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model and a multiple option award approach. All options are amortized over the requisite service periods of the awards, which are generally the vesting periods, and are amortized using the accelerated method.

Expected term. The expected term of options granted represents the period of time that they are expected to be outstanding. The Company estimates the expected term of options granted based on historical exercise patterns, which the Company believes are representative of future behavior.

Expected volatility. The Company estimates the volatility of its common stock in the Black-Scholes option valuation at the date of grant based on historical volatility rates over the expected term, consistent with SFAS No. 123R and SAB 107.

9

Risk-free interest rate. The Company bases the risk-free interest rate in the Black-Scholes option valuation model on the implied yield in effect at the time of option grant on U.S. Treasury zero-coupon issues with equivalent remaining terms.

Dividends. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model.

Forfeitures. SFAS No. 123R requires the Company to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records share-based compensation expense only for those awards that are expected to vest.

The Company granted 8,600 options in the nine months ended June 30, 2006. The fair value of options granted were estimated at the date of grant using the Black-Scholes option pricing model and the following assumptions: expected life of 2.8 years, risk-free interest rate of 4.25%, volatility of 83% and dividend yield of 0%.

The Company modified the terms of its employee stock purchase plan in August 2006 to eliminate the option component associated with the plan. The fair value of the option component of the employee purchase plan shares purchased prior to August 2006 was estimated at the date of grant using a Black-Scholes option-pricing model. The following weighted-average assumptions were used in each quarter of fiscal 2006: expected life of 1.25 years, risk-free interest rate of 4.34%, volatility of 51% and dividend yield of 0%.

During the nine months ended June 30, 2007, the Company accelerated approximately 259,000 unvested stock options, which resulted in approximately $1.0 million of compensation cost. During the three months ended June 30, 2007 and 2006, the Company recorded $170,000 and $2.6 million, respectively, of stock-based compensation expense associated with employee and director stock options and employee stock purchase plan programs. During the nine months ended June 30, 2007 and 2006, the Company recorded $2.3 million and $7.1 million, respectively, of stock-based compensation expense associated with employee and director stock options and employee stock purchase plan programs.

During the three months ended June 30, 2007 and 2006, the Company granted 175,000 shares and 333,000 shares, respectively, of restricted common stock to certain employees with a fair value of $1.7 million and $2.9 million, respectively. During the nine months ended June 30, 2007 and 2006, the Company granted 1.8 million and 3.0 million shares, respectively, of restricted common stock to certain employees with a fair value of $16.0 million and $27.1 million, respectively. These amounts will be amortized in accordance with FASB Interpretation No. 28 (“FIN 28”), Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans, over the vesting period of the individual restricted common stock grants, which are three years. During the nine months ended June 30, 2007, the Company also granted 980,000 shares of restricted common stock to executive officers and certain key employees with a fair value of $7.5 million whose vesting is contingent upon meeting a performance milestone related to subscription software revenues and is being amortized over the performance period. The fair value of each restricted share granted was calculated based on the closing stock price on the date of grant and assumes that the performance objective milestone will be achieved. If the performance objective is not achieved, any previously recognized compensation cost will be reversed. During the three months ended June 30, 2007 and 2006, the Company recorded $7.4 million and $8.7 million, respectively, of stock-based compensation expense associated with restricted stock grants. During the nine months ended June 30, 2007 and 2006, the Company recorded $22.0 million and $22.8 million, respectively, of stock-based compensation expense associated with restricted stock grants. As of June 30, 2007, there was $28.4 million of unrecognized compensation cost related to non-vested restricted share-based compensation arrangements which is expected to be recognized over a weighted-average period of 0.8 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

10

The Company also made a contribution to the Ariba, Inc. Employees 401(k) Savings Plan in the form of common stock with a value of $663,000 and $2.0 million in the three and nine months ended June 30, 2007, respectively.

Total stock-based compensation expense of $8.2 million and $11.4 million was recorded in the three months ended June 30, 2007 and 2006, respectively, and $26.3 million and $29.9 million was recorded in the nine months ended June 30, 2007 and 2006, respectively, to various operating expense categories as follows (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2007		2006		2007		2006
Cost of revenues—subscription and maintenance	$	531	$	662	$	1,578	$	1,661
Cost of revenues—services and other		1,775		2,642		5,722		6,754
Sales and marketing		2,550		3,950		8,657		10,013
Research and development		1,365		1,750		4,066		4,925
General and administrative		1,991		2,427		6,236		6,557
Total	$	8,212	$	11,431	$	26,259	$	29,910

Note 2—Other Intangible Assets

The table below reflects balances related to other intangible assets as of June 30, 2007 and September 30, 2006 (in thousands):

	Useful Life	June 30, 2007							September 30, 2006
		Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Other Intangible Assets
Existing software technology	18 to 36 months	$	10,400	$	(10,400	)	$	—	$	10,400	$	(9,515	)	$	885
Order backlog	6 months		100		(100	)		—		100		(100	)		—
Trade name/trademark	60 months		1,800		(1,120	)		680		1,800		(847	)		953
Excess fair value of Visteon in-place contract over current fair value	10 months		1,894		(1,894	)		—		1,894		(1,894	)		—
Visteon contract and related customer relationship	48 months		3,206		(2,405	)		801		3,206		(1,803	)		1,403
Other contracts and related customer relationships	48 months		51,081		(38,713	)		12,368		51,081		(29,262	)		21,819
Total		$	68,481	$	(54,632	)	$	13,849	$	68,481	$	(43,421	)	$	25,060

Amortization of other intangible assets for the three and nine months ended June 30, 2007 totaled $3.5 million and $11.2 million, respectively. Of these amounts, amortization of $3.4 million and $10.8 million was recorded as cost of revenues in the three and nine months ended June 30, 2007, respectively, related to the Visteon contract and related customer relationship, other contracts and related customer relationships and existing software technology. Amortization of $101,000 and $425,000 was recorded as operating expense in the

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three and nine months ended June 30, 2007, respectively, related to trade name/trademark and other contracts and related customer relationships.

Amortization of other intangible assets for the three and nine months ended June 30, 2006 totaled $3.9 million and $12.6 million, respectively. Of these amounts, amortization of $3.7 million and $12.0 million was recorded as cost of revenues in the three and nine months ended June 30, 2006, respectively, related to the Visteon contract and related customer relationship, other contracts and related customer relationships and existing software technology Amortization of $200,000 and $600,000 was recorded as operating expense in the three and nine months ended June 30, 2006, respectively, related to trade name/trademark and other contracts and related customer relationships.

Note 3—Commitments and Contingencies

Leases

In March 2000, the Company entered into a facility lease agreement for approximately 716,000 square feet in four office buildings and an amenities building in Sunnyvale, California for its headquarters. The operating lease term commenced in January 2001 through April 2001 and ends in January 2013. The Company occupies approximately 191,000 square feet in this facility. As of June 30, 2007, the Company had subleases for two and one-half buildings, totaling approximately 442,600 square feet, to third parties. These subleases expire in July 2007, August 2008 and January 2013. After giving effect to the expiration of the sublease agreement in July 2007 and the amendment of another sublease agreement executed in June 2007 (see discussion under “lease abandonment and leasehold impairment costs” below), the Company has subleases for two buildings, totaling approximately 356,000 square feet to third parties. The remaining 169,000 square feet is available for sublease. Minimum monthly lease payments are approximately $3.1 million and escalate annually, with the total future minimum lease payments amounting to $226.2 million over the remaining lease term. As part of this lease agreement, the Company is required to issue standby letters of credit backed by cash equivalents, totaling $29.3 million as of June 30, 2007, as a form of security through fiscal year 2013. Also, the Company is required by other agreements to hold an additional $680,000 of standby letters of credit, which are cash collateralized. These instruments are issued by the Company’s banks in lieu of a cash security deposit required by landlords for domestic and international real estate leases. The total cash collateral of $30.0 million is classified as restricted cash on the Company’s consolidated balance sheet as of June 30, 2007.

In February 2007, the Company entered into the sixth amendment to its lease in Pittsburgh, Pennsylvania, effective January 1, 2007. This location consists principally of the Company’s services organization and administrative activities. The amendment extends the lease term for approximately 91,000 square feet of office space that the Company occupies through December 2017. Effective January 1, 2007, the Company also surrendered the abandoned space it leased and made a payment of approximately $5.4 million to the landlord concurrent with the landlord’s signing of the sixth amendment in February 2007. The difference between the Company’s lease abandonment reserve associated with this abandoned space and the payment of $5.4 million was approximately $901,000 and is being recognized as contra rent expense over the remaining term of the lease through December 2017.

The Company leases certain equipment, software and its facilities under various noncancelable operating leases with various expiration dates through 2013. Rental expense was $8.1 million and $8.2 million for the three months ended June 30, 2007 and 2006, respectively, and $24.4 million and $25.2 million for the nine months ended June 30, 2007 and 2006, respectively. This expense was reduced by sublease income of $4.1 million and $4.3 million for the three months ended June 30, 2007 and 2006, respectively, and $12.1 million and $12.9 million for the nine months ended June 30, 2007 and 2006, respectively.

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The following table summarizes future minimum lease payments and sublease income under noncancelable operating leases as of June 30, 2007 (in thousands):

Year Ending September 30,	Lease Payments		Contractual Sublease Income
2007	$	10,885	$	2,309
2008		43,526		7,950
2009		43,717		7,227
2010		44,578		7,591
2011		45,307		7,957
Thereafter		74,852		11,050
Total	$	262,865	$	44,084

Of the total operating lease commitments noted above, $104.2 million is for occupied properties and $158.7 million is for abandoned properties, which are a component of the restructuring obligation.

Restructuring obligations

The following table details accrued restructuring obligations and related activity through June 30, 2007 (in thousands):

	Severance and benefits			Lease abandonment costs			Total restructuring costs
Accrued restructuring obligations as of October 1, 2005	$	1,684		$	84,816		$	86,500
Cash paid		(1,915	)		(15,140	)		(17,055	)
Total charge to operating expense		273			26,048			26,321
Purchase accounting adjustment		—			(472	)		(472	)
Accrued restructuring obligations as of September 30, 2006		42			95,252			95,294
Cash paid		(42	)		(13,620	)		(13,662	)
Total benefit to operating expense		—			(3,805	)		(3,805	)
Reclassification to deferred rent obligations		—			(901	)		(901	)
Accrued restructuring obligations as of June 30, 2007	$	—		$	76,926			76,926
Less: current portion								19,926
Accrued restructuring obligations, less current portion							$	57,000

Severance and benefits costs

Severance and benefits costs primarily include involuntary termination and health benefits, outplacement costs and payroll taxes for terminated personnel. During the nine months ended June 30, 2006, $273,000 of severance and benefits was recorded due to the continued reduction of the Company’s workforce, primarily to better align its expenses with its revenue levels and to enable the Company to invest in certain growth initiatives.

Lease abandonment and leasehold impairment costs

Lease abandonment costs incurred to date relate primarily to the abandonment of leased facilities in Sunnyvale, California and Pittsburgh, Pennsylvania.

In June 2007, the Company entered into an amendment with Juniper Networks, Inc. (“Juniper”), the successor in interest to NetScreen Technologies, Inc. (“NetScreen”) to the sublease dated as of October 18, 2002

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between the Company and NetScreen. Pursuant to the amendment, Juniper agreed to renew its sublease of approximately 177,000 square feet of space at the Company’s Sunnyvale, California headquarters through January 2013. In addition, Juniper agreed, effective no later than December 1, 2007, to lease approximately 89,000 square feet of additional space at the Company’s Sunnyvale, California headquarters through January 2013. The Company’s Chief Executive Officer, Robert Calderoni, is also on the Board of Directors of Juniper and he abstained from voting on Ariba’s Board of Directors approval of the lease agreement. Also in June 2007, the Company revised its estimates for rental rate projections and sub-lease commencement dates to reflect current market conditions primarily in the Northern California real estate market. The impact of the execution of the amendment to the sublease agreement with Juniper was a benefit to operations of approximately $7.0 million and the impact of the revised estimated rental rate projections and sub-lease commencement dates was a charge to operations of $3.2 million, resulting in a net benefit to operations of $3.8 million in the three months ended June 30, 2007.

In February 2007, the Company entered into the sixth amendment to its lease in Pittsburgh, Pennsylvania, effective January 1, 2007. The amendment extends the lease term for approximately 91,000 square feet of office space that the Company occupies through December 2017. Effective January 1, 2007, the Company also surrendered approximately 91,000 square feet of abandoned space it leased and made a payment of approximately $5.4 million to the landlord concurrent with the landlord’s signing of the sixth amendment in February 2007. The difference between the Company’s lease abandonment reserve associated with this abandoned space and the payment of $5.4 million is approximately $901,000 and is being recognized as contra rent expense over the remaining term of the lease through December 2017.

In the three months ended June 30, 2006, the Company revised its estimates for sublease rental rate projections to reflect continued soft market conditions in the Northern California real estate market and sublease commencement dates, resulting in a charge of $24.4 million. The remaining charge of $730,000 in the nine months ended June 30, 2006 was for an adjustment to the Company’s restructuring obligation related to a prior period. The cumulative understatement of expenses for periods prior to the three months ended June 30, 2006 was approximately $730,000. The Company concluded that the effect of the adjustment was not material to the current or any relevant prior period. During the nine months ended June 30, 2006, the Company also recorded a $472,000 decrease to the restructuring obligation due to the assignment of a lease of an excess legacy FreeMarkets facility. The reversal of the remaining obligation related to this facility has been recorded as a decrease to goodwill.

Total lease abandonment costs include lease liabilities offset by estimated sublease income, and were based on market trend information analyses. As of June 30, 2007, $76.9 million of lease abandonment costs remain accrued and are expected to be paid by fiscal year 2013. The Company’s lease abandonment accrual is net of $73.3 million of estimated sublease income. Actual sublease payments due under noncancelable subleases of excess facilities totaled $44.1 million as of June 30, 2007, and the remainder of anticipated sublease income represents management’s best estimates of amounts to be received under future subleases. Actual future cash requirements and lease abandonment costs may differ materially from the accrual at June 30, 2007, particularly if actual sublease income is significantly different from current estimates. These differences could have a material adverse effect on the Company’s operating results and cash position. For example, a reduction in assumed market lease rates of $0.25 per square foot per month for the remaining term of the lease, with all other assumptions remaining the same, would increase the estimated lease abandonment loss on the Company’s Sunnyvale, California headquarters by approximately $3.1 million as of June 30, 2007.

Other arrangements

Other than the obligations identified above, the Company does not have commercial commitments under standby repurchase obligations or other such debt arrangements. The Company has no other off-balance sheet arrangements or transactions with unconsolidated limited purpose entities, nor does it have any undisclosed material transactions or commitments involving related persons or entities. The Company does not have any material noncancelable purchase commitments as of June 30, 2007.

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Litigation

IPO Class Action Litigation

In 2001, a number of purported shareholder class action complaints related to the Company’s and FreeMarkets’ initial public offerings (the “IPOs”) were filed in the United States District Court for the Southern District of New York against the Company and FreeMarkets, Inc. (“FreeMarkets”), and against certain of the two companies’ former officers and directors. These complaints were later consolidated into single class action proceedings related to each IPO. In June 2003, a proposed settlement was reached between plaintiffs and the Company and FreeMarkets (the individual defendants having been previously dismissed). The Company merged with FreeMarkets in July 2004. In June 2005, the underwriters filed an appeal of the District Court’s order granting class certification in the consolidated action. On December 5, 2006, the Court of Appeals issued an opinion, reversing the District Court’s order granting class certification and finding that plaintiffs cannot satisfy certain elements required for class actions. In light of the Court of Appeals’ decision, the District Court has held several conferences with the parties to discuss how the litigation will proceed. During a conference on May 30, 2007, plaintiffs orally moved for class certification based on two new proposed classes. Plaintiffs’ deadline to file their opening brief on the motion to certify the classes is September 27, 2007. On June 25, 2007, the District Court entered an order terminating the proposed settlement based on a stipulation among the parties to the settlement. The plaintiffs have indicated that they will seek to amend their allegations and file amended complaints. The parties are currently discussing further discovery that the plaintiffs seek from the underwriters and the issuers. As of June 30, 2007, no amount is accrued as a loss is not considered probable or estimable.

Litigation Relating to Alleged Patent Infringement Disclosures Involving the Company’s Chairman and Chief Executive Officer and Former President and Director

On October 31, 2005, a purported class action, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, was filed in the United States District Court for the Eastern District of Virginia against the Company’s Chairman and Chief Executive Officer and a former president and director of the Company. That case was transferred to the United States District Court for the Northern District of California and an Amended Complaint was filed on November 30, 2006, adding the Company as a defendant. The action is brought on behalf of stockholders who purchased the Company’s stock from June 10, 2003 to February 7, 2005. A second amended complaint was filed on May 18, 2007. It alleges that the defendants artificially inflated the Company’s stock price between those dates by failing to disclose, in public statements that the Company made about its products, market position and performance, that some of those products allegedly infringed patents belonging to a third party. The defendants filed a motion to dismiss plaintiff’s second amended complaint on July 20, 2007. As of June 30, 2007, no amount is accrued as a loss is not considered probable or estimable.

Patent Litigation

In October 2006, after an unsuccessful attempt to resolve the matter by negotiation, the Company was sued by Sky Technologies, Inc (“Sky”) for patent infringement in the United States District Court for the District of Massachusetts. The Complaint (which has been amended twice to add additional patents) does not specify which products are accused or what damages are claimed. Sky has served subsequent pleadings in the case contending that the Ariba Dynamic Trade and Ariba Sourcing software products (whether hosted by Ariba for specific customers or distributed to customers for installation at their sites), as well as certain other Ariba software products when used together with Ariba Sourcing software, infringe certain claims of two of the U.S. patents owned by Sky. Sky seeks economic relief in the form of a royalty on Ariba's sale of the accused products, other Ariba software products, and sourcing services, enhancement of damages, an attorneys fee award and an injunction against further infringement. The total amount of the royalty now claimed by Sky before interest, enhancement or attorneys fees is approximately $30.8 million. The current action has been set for trial commencing on December 3, 2007. Sky previously sought to add additional claims under a certificate of correction for the third patent in suit, but on June 7, 2007 the court denied its request to amend its pleading. Sky

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might seek to add those claims or other claims under other patents against Ariba in a different proceeding in the future. As of June 30, 2007, no amount is accrued as a loss is not considered probable or estimable.

General

Defending against these actions and various other claims and legal actions arising in the ordinary course of business may require significant management time and, regardless of the outcome, result in significant legal expenses. If the Company’s defenses are unsuccessful or if it is unable to settle on favorable terms, the Company could be liable for a large damages award and, in the case of patent litigation, subject to an injunction that could seriously harm its business and results of operations.

Indemnification

The Company sells software licenses, access to its on-demand offerings and/or services to its customers under contracts that the Company refers to as Terms of Purchase or Software License and Service Agreements (collectively, “SLSA”). Each SLSA contains the relevant terms of the contractual arrangement with the customer, and generally includes certain provisions for indemnifying the customer against losses, expenses and liabilities from damages that may be incurred by or awarded against the customer in the event the Company’s software or services are found to infringe upon a patent, copyright, trade secret, trademark or other proprietary right of a third party. The SLSA generally limits the scope of remedies for such indemnification obligations in a variety of industry-standard respects, including but not limited to certain product usage limitations and geography-based scope limitations, and a right to replace an infringing product or service or modify them to make them non-infringing. If the Company cannot address the infringement by replacing the product or service, or modifying the product or service, the Company is allowed to cancel the license or service and return certain of the fees paid by the customer.

To date, the Company has not had to reimburse any of its customers for any losses related to these indemnification provisions and no material customer claims for such indemnification are outstanding as of June 30, 2007.

Note 4—Stockholders’ Equity

Stock-Based Compensation Plans

A summary of the activity related to the Company’s restricted common stock is presented below for the nine months ended June 30, 2007:

	Nine Months Ended June 30, 2007
	Number of Shares		Weighted- Average Fair Value
Nonvested at beginning of period	7,543,632		$	7.98
Granted	2,757,929		$	8.53
Vested	(1,805,429	)	$	9.71
Forfeited	(431,622	)	$	6.86
Nonvested at end of period	8,064,510		$	7.85

The fair value of stock awards vested was $1.8 million and $1.0 million for the three months ended June 30, 2007 and 2006, respectively and $16.0 million and $6.2 million for the nine months ended June 30, 2007 and 2006, respectively.

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A summary of the activity related to the Company’s stock options is presented below:

	Nine Months Ended June 30, 2007
	Number of Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at beginning of period	1,946,852		$	11.95
Granted	—		$	—
Exercised	(453,140	)	$	5.27
Forfeited	(154,221	)	$	26.05
Outstanding at end of period	1,339,491		$	12.58	$	3,274,000
Exercisable at end of period	1,339,491		$	12.58	$	3,274,000

The weighted-average grant date fair value of options granted during the nine months ended June 30, 2006 was $4.30. The total intrinsic value of options exercised during the three months ended June 30, 2007 and 2006 was $149,000 and $17,000, respectively, and $1.7 million and $520,000 during the nine months ended June 30, 2007 and 2006, respectively. The aggregate intrinsic value represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of fiscal 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2007. This amount changes based on the fair market value of the Company’s stock.

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, establishes standards of reporting and display of comprehensive income and its components of net income and other comprehensive income. Other comprehensive income refers to revenues, expenses, gains and losses that are not included in net income but rather are recorded directly in stockholders’ equity. The components of comprehensive loss for the three and nine months ended June 30, 2007 and 2006 are as follows (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Net loss	$	(2,034	)	$	(31,482	)	$	(11,193	)	$	(37,738	)
Unrealized gain on securities		—			308			—			435
Foreign currency translation adjustments		187			314			517			163
Cash flow hedge gains (losses)		—			27			—			(14	)
Comprehensive loss	$	(1,847	)	$	(30,833	)	$	(10,676	)	$	(37,154	)

The income tax effects related to unrealized gains and losses on securities and foreign currency translation adjustments are not material.

The components of accumulated other comprehensive income as of June 30, 2007 and September 30, 2006 are as follows (in thousands):

	June 30, 2007		September 30, 2006
Foreign currency translation adjustments	$	1,367	$	3,738
Cash flow hedge loss		—		(263	)
Accumulated other comprehensive income	$	1,367	$	3,475

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In January 2005, the Company hedged anticipated cash flows from Ariba Korea. Ltd. (“Ariba Korea”) using foreign currency forward contracts (Korean Won) to offset the translation and economic exposures related to those cash flows. The Korean Won hedge minimized currency risk arising from cash held in Korean Won as a result of the Softbank Corp. settlement in October 2004. The change in fair value of the Korean Won forward contract attributable to the changes in forward exchange rates (the effective portion) was reported in stockholders’ equity prior to the three months ended March 31, 2007. In the nine months June 30, 2007, the Company recorded a net realized gain of $2.2 million associated with the repatriation of cash from Ariba Korea and liquidation of the Ariba Korea entity, which is comprised of a $2.5 million gain from foreign currency translation adjustments and a $285,000 realized loss on the Korean Won cash flow hedge.

In the three months ended June 30, 2007, the Company substantially liquidated FreeMarkets s.a./n.v., a former Belgium FreeMarkets entity, resulting in a $425,000 realized gain from currency translation adjustments.

Note 5—Net Loss Per Share

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Net loss	$	(2,034	)	$	(31,482	)	$	(11,193	)	$	(37,738	)
Weighted-average common shares outstanding		78,456			74,561			77,326			73,306
Less: Weighted-average common shares subject to repurchase		(8,116	)		(8,744	)		(7,737	)		(7,813	)
Weighted-average common shares—basic and diluted		70,340			65,817			69,589			65,493
Net loss per common share—basic and diluted	$	(0.03	)	$	(0.48	)	$	(0.16	)	$	(0.58	)

For the three months ended June 30, 2007 and 2006, 586,000 and 1.1 million weighted-average potential common shares, respectively, consisting almost entirely of outstanding options, are excluded from the determination of diluted net loss per share, as the effect of such shares is anti-dilutive. For the nine months ended June 30, 2007 and 2006, 681,000 and 1.2 million weighted-average potential common shares, respectively, consisting almost entirely of outstanding options, are excluded from the determination of diluted net loss per share, as the effect of such shares is anti-dilutive.

Note 6—Segment Information

The Company follows SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company has three geographic operating segments: North America, Europe Middle-East and Africa (“EMEA”) and Asia-Pacific (“APAC”). The segments are determined in accordance with how the chief decision maker views and evaluates the Company’s business and based on the aggregation criteria as outlined in SFAS No. 131. Future changes to this organizational structure or the business may result in changes to the reportable segments disclosed. The Company markets its products in the United States and in foreign countries through its direct sales force and indirect sales channels.

The results of the reportable segments are derived directly from the Company’s management reporting system. The results are based on the Company’s method of internal reporting and are not necessarily in

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conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution margin. Asset data is not reviewed by management at the segment level.

Segment contribution margin includes all geographic segment revenues less the related cost of sales, direct sales and marketing expenses and regional general and administrative expenses. A significant portion of each segment’s expenses arise from shared services and infrastructure that the Company has historically allocated to the segments. These expenses include information technology services, facilities and other infrastructure costs and are generally allocated based upon headcount.

Financial information for each reportable segment was as follows for the three and nine months ended June 30, 2007 and 2006 (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2007		2006		2007		2006
Revenue
—North America	$	46,065	$	45,188	$	139,302	$	134,580
—EMEA		15,790		15,781		48,559		50,907
—APAC		5,937		5,573		16,778		17,622
—Corporate revenue		7,772		7,091		21,511		20,497
Total revenue	$	75,564	$	73,633	$	226,150	$	223,606

Revenues are attributed to countries based on the location of the Company’s customers, with some internal reallocation for multi-national customers. Certain revenue items are not allocated to segments because they are separately managed at the corporate level. These items include Ariba Managed Procurement Services, expense reimbursement and other miscellaneous items.

	Three Months Ended June 30,					Nine Months Ended June 30,
	2007		2006			2007		2006
Contribution margin
—North America	$	18,498	$	16,860		$	56,322	$	51,735
—EMEA		3,700		4,005			13,077		14,924
—APAC		1,073		(6	)		1,603		1,451
Total segment contribution margin	$	23,271	$	20,859		$	71,002	$	68,110

Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include marketing costs other than direct sales and marketing, research and development costs, corporate general and administrative costs, such as legal and accounting, amortization of purchased intangibles, other income—Softbank, restructuring costs, interest and other income, net and provision for income taxes.

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The reconciliation of segment information to the Company’s net loss before income taxes was as follows for the three and nine months ended June 30, 2007 and 2006 (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Segment contribution margin	$	23,271		$	20,859		$	71,002		$	68,110
Corporate revenue		7,772			7,091			21,511			20,497
Corporate costs, such as research and development, corporate general and administrative and other		(39,924	)		(37,376	)		(116,327	)		(103,882	)
Amortization of acquired technology and customer intangible assets		(3,356	)		(3,696	)		(10,786	)		(12,005	)
Other income—Softbank		3,390			3,396			10,173			10,190
Amortization of other intangibles		(101	)		(200	)		(425	)		(600	)
Restructuring		3,805			(24,376	)		3,805			(25,379	)
Interest and other income, net		3,456			3,138			11,462			5,974
Loss before income taxes	$	(1,687	)	$	(31,164	)	$	(9,585	)	$	(37,095	)

Subscription revenues consist mainly of fees for software access subscription and hosted software services. Maintenance revenues consist primarily of Ariba Buyer and Ariba Sourcing product maintenance fees. Services and other revenues consist of fees for implementation services, consulting services, managed services, training, education, premium support, fees charged for the use of the Company’s software under perpetual agreements and other miscellaneous items. Revenues by similar product and service groups are as follows (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2007		2006		2007		2006
Subscription revenues	$	18,020	$	13,978	$	48,851	$	40,479
Maintenance revenues		18,593		18,292		56,000		56,224
Services and other revenues		38,951		41,363		121,299		126,903
Total	$	75,564	$	73,633	$	226,150	$	223,606

Information regarding long-lived assets in geographic areas are as follows (in thousands):

	June 30, 2007		September 30, 2006
Long-Lived Assets:
United States	$	17,708	$	17,901
International		2,089		1,929
Total	$	19,797	$	19,830

Note 7—Other Income—Softbank

In June 2003, the Company commenced an arbitration proceeding against Softbank for failing to meet its contractual revenue commitments. In October 2004, the Company entered into a definitive agreement with Softbank settling their dispute. A total of $37.0 million was recorded as “Deferred income—Softbank” in connection with the settlement. As the Company was unable to determine the respective fair value of the amounts that related to Softbank’s software license, related maintenance and the Company’s prior agreements with Softbank, the $37.0 million will be recognized ratably as “Other income—Softbank” over the three-year software license term ending in October 2007. The Company also made a provision for taxes of $4.8 million in the three months ended December 31, 2004 as a result of the settlement. The Company recorded $3.4 million in income related to the Softbank agreement in each of the three months ended June 30, 2007 and 2006 and $10.2 million in each of the nine months ended June 30, 2007 and 2006. As of June 30, 2007 and September 30, 2006, deferred income related to the Softbank settlement was $4.0 million and $14.1 million, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, words such as “may”, “will”, “should”, “estimates”, “predicts”, “potential”, “continue”, “strategy”, “believes”, “anticipates”, “plans”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in any forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those discussed under the heading “Risk Factors” in Part II of this Form 10-Q and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings.

Overview of Our Business

We provide spend management solutions that allow enterprises to efficiently manage the purchasing of non-payroll goods and services required to run their business. We refer to these non-payroll expenses as “spend.” Our solutions include software, network access, professional services and expertise. They are designed to provide enterprises with technology and business process improvements to better manage their spend and, in turn, save money. Our software and services streamline and improve the business processes related to the identification of suppliers of goods and services, the negotiation of the terms of purchases, and ultimately the management of ongoing purchasing and settlement activities.

Our software is built to leverage the Internet and provide enterprises with real-time access to their business data and their business partners. Our software is designed to integrate with all major platforms and can be accessed via a web browser. Our software can be deployed as an installed application or provided as a service in an on-demand model. In addition to application software, Ariba Spend Management solutions include implementation and strategic consulting services, education and training, commodity expertise and decision support services, benchmarking services, low-cost country sourcing services and procurement outsourcing services. Ariba Spend Management solutions also integrate with and leverage the Ariba Supplier Network. The Ariba Supplier Network is a scalable Internet infrastructure that connects our buying organizations with their suppliers to exchange product and service information as well as a broad range of business documents, such as purchase orders and invoices. Over 155,000 registered suppliers, offering a wide array of goods and services, are connected to the Ariba Supplier Network.

Ariba Spend Management solutions are organized around six key functions: (1) spend visibility; (2) sourcing; (3) contract management; (4) procurement and expense; (5) invoice and payment; and (6) supplier management. Through our solution offerings, we help customers develop a strategy for spend management and enable a step-by-step approach with technology and services that work together.

Business Model

Ariba Spend Management solutions are delivered in a flexible manner, depending upon the needs and preferences of the customer. For customers seeking self sufficiency, we offer flexible, highly configurable and easy-to-use technology and related services that can be deployed behind the firewall or delivered as an on-demand service. For customers seeking expert assistance, we offer sourcing process and commodity expertise in over 400 categories of spend. Finally, for those customers seeking managed services, we offer tailored solutions to outsource processes, spend categories, or entire procurement operations.

We have aligned our business model with the way we believe customers want to purchase and deploy spend management solutions. Customers may generally subscribe to our software products and services for a specified term, purchase a perpetual software license and/or pay for services on a time-and-materials basis, depending upon their business requirements. Our revenue is comprised of subscription and maintenance fees and services

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and other fees. Subscription and maintenance revenue consists of fees charged for hosted on-demand software solutions, fees for product updates and support, fees paid by suppliers for access to the Ariba Supplier Network, as well as fees charged for the use of our software products under term agreements. Services and other revenue consists of fees for implementation services, consulting services, managed services, training, education, premium support, license fees charged for the use of our software products under perpetual agreements and other miscellaneous items.

Due to the different treatment of our revenue streams under applicable accounting guidance, each type of revenue has a different impact on our consolidated financial statements. Subscription fees for hosted on-demand software solutions are generally fixed for a specific period of time, and revenue is recognized ratably over the term. Therefore, a subscription license will result in significantly lower current-period revenue than an equal-sized perpetual license, but with revenue recognized in future periods. Similarly, maintenance fees are generally fixed for a specific period of time, and revenue is recognized ratably over the maintenance term. Maintenance contracts are typically entered into when new software licenses are purchased, at a percentage of the software license fee. In addition, most of our customers renew their maintenance contracts annually to continue receiving product updates and product support. Given the ratable revenue recognition and historically high renewal rates of our subscription and maintenance agreements, this revenue stream has generally been more stable over time. Finally, services revenues are driven by a contract, project or statement of work, in which the fees may be fixed for specific services to be provided over time or billed on a time and materials basis. Like subscription and maintenance fees, services fees have generally been more stable over time as revenue has been recognized over the course of the fixed time or project period. The majority of our license fees are from perpetual software license sales, which is included in services and other revenues. Revenue from these license sales is often recognized in the quarter that the software is delivered. Individual software license sales can be significant (greater than $1.0 million) and sales cycles are often lengthy and difficult to predict. As such, the timing of a few large software license transactions or the recognition of license revenue from these transactions can substantially affect our quarterly operating results.

These different revenue streams also carry different gross margins. Revenue from subscription and maintenance fees tends to be higher-margin revenue with gross margins typically around 75%. Subscription and maintenance fees are generally based on software products developed by us, which carry minimal marginal cost to reproduce and sell. Revenue from labor-intensive services and other fees tends to be lower-margin revenue, with gross margins typically in the 20% to 30% range. Our overall gross margins could fluctuate from period to period depending upon the mix of revenue.

Overview of Quarter Ended June 30, 2007

Overall, our revenues increased from $73.6 million in the three months ended June 30, 2006 to $75.6 million in the three months ended June 30, 2007, primarily due to an increase in subscription revenues of $4.0 million or 29%. Subscription revenues were $18.0 million in the three months ended June 30, 2007, as compared to $14.0 million in the three months ended June 30, 2006. This is primarily due to an overall shift over time from predominantly perpetual licenses, with upfront revenue recognition, to more subscription licenses, with revenue recognition spread out over time. This increase in subscription revenues was partially offset by a decline in services revenues of $2.4 million or 6% primarily due to reduced perpetual license revenues in the three months ended June 30, 2007. Finally, maintenance revenues of $18.6 million were relatively consistent with the three months ended June 30, 2006.

Operating expenses decreased to $40.4 million in the three months ended June 30, 2007 compared to $64.0 million in the three months ended June 30, 2006. The decrease in operating expenses is primarily attributable to a decrease in net restructuring costs of $28.2 million from the $24.4 million charge in the three months ended June 30, 2006 to the $3.8 million benefit recorded in the three months ended June 30, 2006 resulting from our execution of a sublease agreement in June 2007 and revisions of our estimates in the Northern California real estate market in fiscal years 2007 and 2006. The decrease in operating expenses in the three months ended

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June 30, 2007 was partially offset by an increase in legal expenses of $2.6 million associated with litigation costs. In sum, our total net expenses, including cost of revenues and other items, decreased to $77.6 million compared to $105.1 million in the three months ended June 30, 2006, which caused a net loss for the three months ended June 30, 2007 of $2.0 million compared to $31.5 million in the three months ended June 30, 2006.

Outlook for Fiscal Year 2007

We anticipate that the shift in our software business from a perpetual model to a subscription-based model will continue during the remainder of fiscal year 2007. More specifically, we expect growth in subscription revenue in fiscal year 2007 as compared to fiscal year 2006.

We believe that our success for the remainder of fiscal year 2007 will depend largely on our ability to: (1) manage the continuing shift to an on-demand delivery model from both a product and a financial standpoint; (2) sell bundled solution offerings that include both technology and expert services; (3) renew our subscription or time-based revenues, including on-demand software fees, maintenance fees, and fees for certain services; and (4) capitalize on new revenue opportunities, such as access fees for the Ariba Supplier Network and selling on-demand spend management solutions to smaller and mid-market customers.

We believe that key risks to our revenues in fiscal year 2007 include: our ability to manage the shift from selling perpetual license software to on-demand subscription solutions; our ability to introduce additional on-demand versions of our products in fiscal year 2007; our ability to renew ratable revenue streams without substantial declines from prior arrangements, including subscription software, software maintenance, subscription services; the impact of transitioning managed procurement customers to subscription software customers; our ability to generate organic growth; our deferral of services revenues as a result of including software implementation and other services as part of a sale with our subscription software solutions; the market acceptance of spend management solutions as a standalone market category; the overall level of information technology spending; and potential declines in average selling prices. We believe that key risks to our future operating profitability include: our ability to maintain or grow our revenues; our ability to maintain adequate utilization of our services organization; and the potential adverse impacts resulting from legal proceedings. Our prospects must be considered in light of the risks encountered by companies at a relatively early stage of development, particularly given that we operate in new and rapidly evolving markets and face an uncertain economic environment. We may not be successful in addressing such risks and difficulties. See “Risk Factors” for additional information.

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Results of Operations

The following table sets forth statements of operations data for the periods indicated (in thousands, except per share data). The data has been derived from the unaudited Condensed Consolidated Financial Statements contained in this Form 10-Q which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the interim periods presented. The operating results for any period should not be considered indicative of results for any future period. This information should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Form 10-K for the fiscal year ended September 30, 2006 filed with the SEC on December 1, 2006.

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Revenues:
Subscription and maintenance	$	36,613		$	32,270		$	104,851		$	96,703
Services and other		38,951			41,363			121,299			126,903
Total revenues		75,564			73,633			226,150			223,606
Cost of revenues:
Subscription and maintenance		8,490			6,894			24,534			20,359
Services and other		28,490			33,341			88,016			98,703
Amortization of acquired technology and customer intangible assets		3,356			3,696			10,786			12,005
Total cost of revenues		40,336			43,931			123,336			131,067
Gross profit		35,228			29,702			102,814			92,539
Operating expenses:
Sales and marketing		23,389			23,518			69,461			58,601
Research and development		13,254			12,333			38,845			37,080
General and administrative		10,822			6,973			29,108			24,138
Other income—Softbank		(3,390	)		(3,396	)		(10,173	)		(10,190	)
Amortization of other intangible assets		101			200			425			600
Restructuring		(3,805	)		24,376			(3,805	)		25,379
Total operating expenses		40,371			64,004			123,861			135,608
Loss from operations		(5,143	)		(34,302	)		(21,047	)		(43,069	)
Interest and other income, net		3,456			3,138			11,462			5,974
Net loss before income taxes		(1,687	)		(31,164	)		(9,585	)		(37,095	)
Provision for income taxes		347			318			1,608			643
Net loss	$	(2,034	)	$	(31,482	)	$	(11,193	)	$	(37,738	)

Comparison of the Three and Nine Months Ended June 30, 2007 and 2006

Revenues

Please refer to Note 1 of Notes to Condensed Consolidated Financial Statements for a description of our accounting policy related to revenue recognition.

Subscription and maintenance

Subscription and maintenance revenues for the three months ended June 30, 2007 were $36.6 million, a 13% increase from the $32.3 million recorded in the three months ended June 30, 2006. Subscription revenues for the three months ended June 30, 2007 were $18.0 million, a 29% increase from the $14.0 million recorded in the three months ended June 30, 2006. The increase of $4.0 million in subscription revenues was primarily due to

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growth in our on-demand software applications and the continued growth of Ariba Supplier Network revenues. Maintenance revenues for the three months ended June 30, 2007 were $18.6 million, a slight increase from the $18.3 million recorded in the three months ended June 30, 2006.

Subscription and maintenance revenues for the nine months ended June 30, 2007 were $104.9 million, an 8% increase from the $96.7 million recorded in the nine months ended June 30, 2006. Subscription revenues for the nine months ended June 30, 2007 were $48.9 million, a 21% increase from the $40.5 million recorded in the nine months ended June 30, 2006. The increase of $8.4 million in subscription revenues was primarily due to growth in our on-demand software applications the continued growth of Ariba Supplier Network revenues. Maintenance revenues for the nine months ended June 30, 2007 were $56.0 million, a slight decrease from the $56.2 million recorded in the nine months ended June 30, 2006. We anticipate that subscription revenues will increase in fiscal year 2007 compared to fiscal year 2006, partially offset by modest declines of maintenance revenues in fiscal year 2007.

Services and other

Services and other revenues for the three months ended June 30, 2007 were $39.0 million, a 6% decrease from the $41.4 million recorded in the three months ended June 30, 2006. The decrease of $2.4 million in services and other revenues is primarily attributed to a decrease in perpetual license revenues of $2.7 million in the three months ended June 30, 2007 primarily due to a shift from perpetual license sales to more subscription and hosted term license software sales.

Services and other revenues for the nine months ended June 30, 2007 were $121.3 million, a 4% decrease from the $126.9 million recorded in the nine months ended June 30, 2006. The decrease of $5.6 million in services and other revenues is primarily attributed to a decrease in perpetual license revenues of $4.5 million in the nine months ended June 30, 2007 primarily due to a shift from perpetual license sales to more subscription and hosted term license software sales and to an increase of $1.1 million in the deferral of consulting services revenues in the nine months ended June 30, 2007 due to such services being bundled with other products or services without evidence of fair value. We anticipate that services and other revenues will decrease in fiscal year 2007 compared to fiscal year 2006 due to a decrease in perpetual license revenues partially offset by an increase in managed procurement services which we anticipate will decline the three months ended September 30, 2007 due to the transition of managed procurement customers to subscription software customers.

Cost of Revenues

Subscription and maintenance

Cost of subscription and maintenance revenues consists of labor costs for hosting services and technical support, including stock compensation costs and facilities and equipment costs. Cost of subscription and maintenance revenues for the three months ended June 30, 2007 was $8.5 million, a 23% increase over the $6.9 million recorded in the three months ended June 30, 2006. This increase is primarily the result of an increase in hosted support costs associated with the overall 29% increase in subscription revenues in the three months ended June 30, 2007.

Cost of subscription and maintenance revenues for the nine months ended June 30, 2007 was $24.5 million, a 21% increase over the $20.4 million recorded in the nine months ended June 30, 2006. This increase is primarily the result of an increase in hosted support costs associated with the overall 21% increase in subscription revenues in the nine months ended June 30, 2007.

Services and other

Cost of services and other revenues consists of labor costs for consulting services, including stock compensation costs, training personnel, facilities and equipment costs. Cost of services and other revenues for the

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three months ended June 30, 2007 was $28.5 million, a 15% decrease from the $33.3 million recorded in the three months ended June 30, 2006. This decrease is primarily due to the following: (1) decreased compensation and benefits expense and travel expense of $1.4 million and $751,000, respectively, due to a slight decrease in average headcount due to our re-allocation of services personnel to sales efforts in fiscal year 2007 in managing our transition to an on-demand model; (2) decreased overhead costs of $1.2 million associated with the slight decrease in average headcount, a decrease in depreciation expense as assets reach the end of their estimated useful lives and a slight decrease in rent expense; and (3) decreased stock-based compensation of $867,000 primarily due to a change in the terms of the employee stock purchase plan in August 2006 whereby the option component of the plan was eliminated (See Note 1) and a decrease in stock-based compensation expense related to restricted stock grants.

Cost of services and other revenues for the nine months ended June 30, 2007 was $88.0 million, an 11% decrease from the $98.7 million recorded in the nine months ended June 30, 2006. This decrease is primarily due to the following; (1) decreased compensation and benefits expense and travel expense of $1.8 million and $1.7 million, respectively, due to a decrease in average headcount resulting from our re-allocation of services personnel to sales efforts in fiscal year 2007 in managing our transition to an on-demand model; (2) decreased overhead costs of $4.1 million associated with the decrease in average headcount, a decrease in depreciation expense as assets reach the end of their estimated useful lives and a slight decrease in rent expense; (3) decreased temporary and contract labor costs primarily due to cost cutting efforts initiated in the current year; and (4) decreased stock-based compensation of $1.0 million primarily due to a change in the terms of the employee stock purchase plan in August 2006 whereby the option component of the plan was eliminated (See Note 1) and a decrease in stock-based compensation expense related to restricted stock grants.

Amortization of acquired technology and customer intangible assets

Amortization of acquired technology and customer intangible assets represents the amortization of the costs allocated to technology and customer relationships in our fiscal year 2004 business combinations with Alliente, Softface and FreeMarkets. This expense amounted to $3.4 million and $3.7 million in the three months ended June 30, 2007 and 2006, respectively, and $10.8 million and $12.0 in the nine months ended June 30, 2007 and 2006, respectively. The decrease in the three and nine months ended June 30, 2007 is primarily attributable to assets reaching the end of their estimated useful lives.

Gross profit

Our gross profit as a percentage of revenues for the three months ended June 30, 2007 was 47% compared to 40% for the three months ended June 30, 2006 and was 45% in the nine months ended June 30, 2007 compared to 41% for the nine months ended June 30, 2006. The increase in gross profit as a percentage of revenues was primarily due to an increase in services and other gross profit as a percentage of services and other revenues due to operational improvement in consulting and managed services. Our gross profit of services and other as a percentage of services and other revenues for the three months ended June 30, 2007 was 27% compared to 19% for the three months ended June 30, 2006 and for the nine months ended June 30, 2007 was 27% compared to 22% for the nine months ended June 30, 2006.

Operating Expenses

Sales and marketing

Sales and marketing includes costs associated with our sales, marketing and product marketing personnel, and consists primarily of compensation and benefits, commissions and bonuses, stock compensation, promotional and advertising and travel and entertainment expenses related to these personnel, as well as the provision for doubtful accounts. Sales and marketing expenses for the three months ended June 30, 2007 were $23.4 million, relatively consistent with the $23.5 million recorded in the three months ended June 30, 2006, reflecting the following: (1) increased sales commissions of $1.0 million primarily associated with sales

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commission reversals of $713,000 in the three months ended June 30, 2006; and (2) increased compensation and benefits expense of $1.6 million associated with a 19% increase in average sales and marketing headcount in supporting our transition to an on-demand model. These increases were offset by a decrease in stock-based compensation expense of $1.4 million primarily due to a change in the terms of the employee stock purchase plan in August 2006 whereby the option component of the plan was eliminated (See Note 1) and a decrease in stock-based compensation expense related to restricted stock grants. The increases were also offset by a decrease in marketing expense of $1.3 million due to reduced expenses associated with our annual 2007 Ariba Live marketing event as compared to our 2006 Ariba Live marketing event.

Sales and marketing expenses for the nine months ended June 30, 2007 were $69.5 million, a 19% increase from the $58.6 million recorded in the nine months ended June 30, 2006. This increase is primarily due to the following: (1) a $4.9 million insurance reimbursement in the nine months ended June 30, 2006 related to litigation expenses which had previously been charged to sales and marketing; (2) increased sales commissions of $4.6 million primarily associated with sales commission reversals of $4.3 million in the nine months ended June 30, 2006; and (3) increased compensation and benefits expense of $4.7 million associated with a 17% increase in average sales and marketing headcount in supporting our transition to an on-demand model. These increases were partially offset by a decrease in stock-based compensation expense of $1.4 million primarily due to a change in the terms of the employee stock purchase plan in August 2006 whereby the option component of the plan was eliminated (See Note 1) and a decrease in stock-based compensation expense related to restricted stock grants. We anticipate that sales and marketing expenses will increase as a percentage of revenues in the year ending September 30, 2007 compared to the year ended September 30, 2006 as we increase personnel to support our transition to an on-demand model and as a result of non-recurring contra expense items recorded in the year ended September 30, 2006, as noted above.

Research and development

Research and development includes costs associated with the development of new products, enhancements of existing products for which technological feasibility has not been achieved, and quality assurance activities, and primarily includes employee compensation and benefits, stock compensation, consulting costs and the cost of software development tools and equipment. Research and development expenses for the three months ended June 30, 2007 were $13.3 million, a 7% increase from the $12.3 million recorded in the three months ended June 30, 2006. This increase is primarily attributable to an increase in compensation and benefits expense of $601,000 due to an 18% increase in average headcount and a $496,000 increase in consulting expense related to the continued development of our on-demand solutions in fiscal year 2007.

Research and development expenses for the nine months ended June 30, 2007 were $38.8 million, a 5% increase from the $37.1 million recorded in the nine months ended June 30, 2006. This increase is primarily attributable to an increase in compensation and benefits expense of $1.0 million or 5% due to a 15% increase in average headcount and a $587,000 in consulting expense related to the continued development of our on-demand solutions in fiscal year 2007.

General and administrative

General and administrative includes costs for executive, finance, human resources, information technology, legal and administrative support functions. General and administrative expenses for the three months ended June 30, 2007 were $10.8 million, a 55% increase from the $7.0 million recorded in the three months ended June 30, 2006. This increase is primarily due to an increase in intellectual property related legal expenses of $2.6 million associated with the patent infringement matter disclosed in Note 3 to Notes to Condensed Consolidated Financial Statements.

General and administrative expenses for the nine months ended June 30, 2007 were $29.1 million, a 21% increase from the $24.1 million recorded in the nine months ended June 30, 2006. This increase is primarily due

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to an increase in intellectual property related legal expenses of $3.6 million primarily associated with the patent infringement matter disclosed in Note 3 to Notes to Condensed Consolidated Financial Statements. We anticipate that general and administrative expenses will increase in the year ending September 30, 2007 compared to the year ended September 30, 2006 due to an increase in legal expenses in fiscal year 2007.

Other income—Softbank

During each of the three months ended June 30, 2007 and 2006, we recorded $3.4 million of income from the settlement with Softbank entered into in October 2004. During each of the nine months ended June 30, 2007 and 2006, we recorded $10.2 million of income from the settlement with Softbank. The $37.0 million of deferred income recorded upon the settlement with Softbank is being recognized into income, starting in January 2005, over the remaining term of the three-year license ending in October 2007. For further discussion, see Note 7 to the Condensed Consolidated Financial Statements.

Amortization of other intangible assets

Amortization of other intangible assets was $101,000 and $200,000 for the three months ended June 30, 2007 and 2006, respectively, and $425,000 and $600,000 for the nine months ended June 30, 2007 and 2006, respectively, which consisted of amortization of trademark intangible assets acquired from our merger with FreeMarkets and our acquisitions of Softface and Alliente. We anticipate amortization of other intangible assets will remain relatively consistent in the near term.

Restructuring

We recorded a net (benefit) charge to operations of $(3.8) million and $24.4 million during the three months ended June 30, 2007 and 2006, respectively, and $(3.8) million and $25.4 million during the nine months ended June 30, 2007 and 2006, respectively. In June 2007, we entered into an amendment with Juniper Networks, Inc. (“Juniper”), the successor in interest to NetScreen Technologies, Inc. (“NetScreen”) to the sublease dated as of October 18, 2002 between Ariba and NetScreen. Pursuant to the amendment, Juniper agreed to renew its sublease of approximately 177,000 square feet of space at our Sunnyvale, California headquarters through January 2013. In addition, Juniper agreed, effective no later than December 1, 2007, to lease approximately 89,000 square feet of additional space at our Sunnyvale, California headquarters through January 2013. Also in June 2007, we revised our estimates for rental rate projections and sub-lease commencement dates to reflect current market conditions primarily in the Northern California real estate market. The impact of the execution of the sublease agreement with Juniper was a benefit to operations of approximately $7.0 million and the impact of the revised estimated rental rate projections and sub-lease commencement dates was a charge to operations of $3.2 million, resulting in a net benefit to operations of $3.8 million in the three months ended June 30, 2007.

In June 2006, we revised our estimates for rental rate projections to reflect current market conditions primarily in the Northern California real estate market and sublease commencement dates, resulting in a charge of $24.4 million. The remaining charge in the nine months ended June 30, 2006 was for severance and related benefits of $273,000 resulting from our goal to better align expenses with our revenue levels and to enable us to invest in certain strategic growth initiatives and an adjustment to our restructuring obligation of $730,000 related to a prior period. We assessed our findings using the guidance of SEC Staff Accounting Bulletin (“SAB”) No. 99, and concluded that the amount of the error was immaterial to the prior period.

Interest and other income, net

Interest and other income, net for the three months ended June 30, 2007 was $3.5 million, compared to $3.1 million recorded in the three months ended June 30, 2006. The increase is primarily attributable to a net realized gain associated with currency translation adjustments of $425,000 due to the substantial liquidation of FreeMarkets s.a./n.v., the former FreeMarkets entity in Belgium, in the three months ended June 30, 2007.

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Interest and other income, net for the nine months ended June 30, 2007 was $11.5 million, compared to $6.0 million recorded in the nine months ended June 30, 2006. The increase is primarily attributable to the following: (1) a net realized gain of $2.2 million associated with the repatriation of cash from Ariba Korea and the substantial liquidation of the entity in the nine months ended June 30, 2007; (2) an increase in interest income of $2.2 million due to an overall increase in the rate of return on marketable investments; and (3) a net realized gain associated with currency translation adjustments of $425,000 due to the substantial liquidation of FreeMarkets s.a./n.v., the former FreeMarkets entity in Belgium, in the three months ended June 30, 2007.

Provision for income taxes

Provision for income taxes for the three months ended June 30, 2007 was $347,000, compared to $318,000 in the three months ended June 30, 2006. Provision for income taxes for the nine months ended June 30, 2006 was $1.6 million, compared to $643,000 in the nine months ended June 30, 2006. The increase in the nine months ended June 30, 2007 is primarily attributable to an increase in foreign income taxes in the three and nine months ended June 30, 2007 related to a foreign subsidiary and an increase in withholding taxes associated with the repatriation of cash from Ariba Korea in the nine months ended June 30, 2007.

Liquidity and Capital Resources

As of June 30, 2007, we had $148.0 million in cash, cash equivalents, marketable securities and long-term investments and $30.0 million in restricted cash, for total cash, cash equivalents, marketable securities, long-term investments and restricted cash of $178.0 million. Our working capital on June 30, 2007 was $59.8 million. All significant cash, cash equivalents, marketable securities and long-term investments are held in accounts in the United States. As of September 30, 2006, we had $138.8 million in cash, cash equivalents and marketable securities and $31.8 million in restricted cash, for total cash, cash equivalents, marketable securities and restricted cash of $170.6 million. Our working capital on September 30, 2006 was $58.5 million.

The increase in total cash, cash equivalents, marketable securities, long-term investments and restricted cash of $7.4 million in the nine months ended June 30, 2007 is primarily attributable to our results of operations, excluding non-cash charges for stock compensation of $26.3 million and amortization of intangible assets of $11.2 million and non-cash income of $10.2 million from the Softbank transaction and $3.8 million benefit from restructuring. The increase in cash, cash equivalents, marketable securities, long-term investments and restricted cash in the nine months ended June 30, 2007 is also attributable to improved cash collections on outstanding accounts receivable. These increases in cash, cash equivalents, marketable securities, long-term investments and restricted cash were partially offset by a payment of $5.4 million associated with surrendering the abandoned space in Pittsburgh, Pennsylvania.

Net cash provided by operating activities was $10.0 million for the nine months ended June 30, 2007, compared to net cash provided by operating activities of $18.7 million for the nine months ended June 30, 2006. Cash flows from operating activities decreased $8.7 million primarily due to higher net loss excluding non-cash charges and a slight decline in collections on outstanding accounts receivable in the current year as compared to the prior year.

Net cash used in investing activities was $41.3 million for the nine months ended June 30, 2007, compared to net cash used in investing activities of $10.4 million for the nine months ended June 30, 2006. The decrease is primarily attributable to the increase in purchases of investments, net of sales of $30.4 million. Capital expenditures were relatively consistent in the nine months ended June 30, 2007 and 2006.

Net cash provided by financing activities was $2.1 million for the nine months ended June 30, 2007, compared to net cash provided by financing activities of $3.0 million for the nine months ended June 30, 2006. The repurchase of common stock in both periods represents shares forfeited to Ariba by employees in satisfaction of statutory tax withholding obligations incurred as a result of the vesting of restricted shares of common stock

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held by those employees. Proceeds from the issuance of common stock in both periods is attributed to stock option exercises and the Employee Stock Purchase Program.

Contractual obligations

Our primary contractual obligations are from operating leases for office space and letters of credit related to those leases. See Note 3 to the Condensed Consolidated Financial Statements for a discussion of our lease commitments and letters of credit.

Other than the lease commitments and letters of credit discussed in Note 3 to the Condensed Consolidated Financial Statements, we do not have commercial commitments under standby repurchase obligations or other such debt arrangements. We do not have any material noncancelable purchase commitments as of June 30, 2007. There have been no material changes in our contractual obligations and commercial commitments during the three months ended June 30, 2007 from those presented in our Annual Report on Form 10-K filed with the SEC on December 1, 2006.

Off-balance sheet arrangements

We have no off-balance sheet arrangements or transactions with unconsolidated limited purpose entities, nor do we have any undisclosed material transactions or commitments involving related persons or entities.

Anticipated cash flows

We expect to incur significant operating costs, particularly related to services delivery costs, sales and marketing, research and development and restructuring costs, for the foreseeable future in order to execute our business plan. We anticipate that such operating costs, as well as planned capital expenditures, will constitute a use of our cash resources. As a result, our net cash flows will depend heavily on the level of future sales, changes in deferred revenues, our ability to manage infrastructure costs, the outcome of our subleasing activities related to abandoned excess leased facilities and ongoing regulatory and legal proceedings.

We believe our existing cash, cash equivalents and investment balances, together with anticipated cash flow from operations, should be sufficient to meet our working capital and operating resource requirements for at least the next twelve months. See “Risk Factors.” Should we find it necessary to obtain additional funds, we may not be able to obtain additional financing on favorable terms or at all.

Application of Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Accounting policies, methods and estimates are an integral part of the preparation of consolidated financial statements in accordance with GAAP and, in part, are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the consolidated financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments. While there are a number of accounting policies, methods and estimates affecting our consolidated financial statements, areas that are particularly significant include:

• Revenue recognition policies

• Allowance for doubtful accounts receivable

• Recoverability of goodwill

• Impairment of long-lived assets

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• Lease abandonment costs

• Legal contingencies

These critical accounting policies and estimates, their related disclosures and other accounting policies, methods and estimates have been reviewed by our senior management and audit committee. These policies and our practices related to the allowance for doubtful accounts receivable, recoverability of goodwill, impairment of long-lived assets, lease abandonment costs and legal contingencies are described in Note 1 to the Condensed Consolidated Financial Statements and in our Annual Report on Form 10-K filed with the SEC on December 1, 2006. The revenue recognition policy and practices related to this policy are described below and in Note 1 of Notes to Condensed Consolidated Financial Statements:

Revenue Recognition

Substantially all of our revenues are derived from two sources: (i) providing software solutions on either a standalone or on-demand hosted basis and associated technical support and product updates, otherwise known as subscription and maintenance; and (ii) providing services, including implementation services, consulting services, managed services, training, education, premium support and other miscellaneous services. The significant majority of our standard end user license agreements provide for use of our software under a time-based license based on the number of users or other usage criteria. We license our software in multiple element arrangements in which the customer typically purchases a combination of some or all of the following: (i) software solutions, either on a standalone or on-demand hosted basis; (ii) a maintenance arrangement, which is generally priced as a percentage of the software license fees and provides for hosting, technical support and unspecified product updates typically over a period of one year or over the term of the license; and (iii) a services arrangement, on either a fixed fee for access to specific services over time or a time and materials basis.

We license our products through our direct sales force and indirectly through resellers. Sales made through resellers are recognized at the time that we have received persuasive evidence of an end user customer. The license agreements for our products generally do not provide for a right of return, and historically product returns have not been significant. We do not recognize revenue for refundable fees or agreements with cancellation rights until such rights to refund or cancel have expired. Direct sales force commissions are included as sales and marketing expense at the time of sale, when the liability is incurred and is reasonably estimable.

We recognize revenue in accordance with Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition, Emerging Issues Task Force (“EITF”) 00-21, Revenue Arrangements with Multiple Deliverables, and Emerging Issues Task Force (“EITF”) 00-3, Application of AICPA Statement of Position (“SOP”) 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware, and SOP 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions. We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery of the product or service has occurred; the fee is fixed or determinable; and collectibility is probable. If collectibility is not considered probable at the inception of the arrangement, we do not recognize revenue until the fee is collected.

We allocate revenue to each element in a multiple element arrangement based on its respective fair value. Our determination of the fair value of each element in a multiple element arrangement accounted for under SOP 97-2 is based on vendor-specific objective evidence of fair value (VSOE), which is limited to the price when sold separately. VSOE or other methods of determining fair value that are allowable under EITF 00-21 are utilized for multiple element arrangements that are not subject to SOP 97-2.

Revenue from software solutions, hosting and sourcing solutions services is primarily recognized ratably over the term of the arrangement, commencing with the initial customer access date. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year). Revenue allocated to software solutions implementation, process improvement, training and other services is recognized as the

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services are performed or as milestones are achieved or if bundled with a subscription or time-based service, or in circumstances where fair value cannot be established for undelivered service elements, is recognized ratably over the term of the access agreement.

Certain of our contracts include performance incentive payments based on market volume and/or savings generated, as defined in the respective contracts. Revenue from such arrangements is recognized when those thresholds are achieved.

When revenue associated with multiple element arrangements is recognized and more than one element in an arrangement does not have fair value, we first allocate revenue on the statement of operations to those elements for which evidence of fair value is available.

In circumstances where we provide consulting services that are considered essential to the functionality of the software solutions, both the software solution revenue and service revenue are recognized under contract accounting in accordance with the provisions of SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Revenues from these arrangements are recognized under the lesser of percentage of completion method based on the ratio of direct labor hours incurred to date to total projected labor hours or ratable over the term of the license.

Deferred revenue includes amounts received from customers for which revenue has not been recognized, and generally results from deferred subscription, maintenance and support, hosting, consulting or training services not yet rendered and license revenue deferred until all requirements under EITF 00-21 or SOP 97-2 are met. Deferred revenue is recognized as revenue upon delivery of the product, as services are rendered, or as other requirements under SAB 104, EITF 00-21 or SOP 97-2 are satisfied. Deferred revenue excludes contract amounts for which payment has yet to be collected. Likewise, accounts receivable excludes amounts due from customers for which revenue has been deferred.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

We develop products primarily in the United States of America and India and market our products in the United States of America, Latin America, Europe, Canada, Australia, Middle East and Asia. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Since the majority of our non-U.S. sales are priced in currencies other than the U.S. dollar, a strengthening of the dollar may reduce the level of reported revenues. If such events were to occur, our net revenues could be seriously impacted, since a significant portion of our net revenues are derived from international operations. For each of the three and nine months ended June 30, 2007, 29% of our total net revenues were derived from customers outside of the United States. As a result, our U.S. dollar earnings and net cash flows from international operations may be adversely affected by changes in foreign currency exchange rates.

We use derivative instruments to manage risks associated with foreign currency transactions in order to minimize the impact of changes in foreign currency exchange rates on earnings. We utilize forward contracts to reduce our net exposures, by currency, related to the monetary assets and liabilities of our foreign operations denominated in local currency. In addition, from time to time, we may enter into forward exchange contracts to establish with certainty the U.S. dollar amount of future firm commitments denominated in a foreign currency. The forward contracts do not qualify for hedge accounting and accordingly, all of these instruments are marked to market at each balance sheet date by a charge to earnings. We believe that these forward contracts do not subject us to undue risk due to foreign exchange movements because gains and losses on these contracts are generally offset by losses and gains on the underlying assets and liabilities. We do not use derivatives for trading or speculative purposes. All contracts have a maturity of less than one year.

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The following table provides information about our foreign exchange forward contracts outstanding as of June 30, 2007 (in thousands):

	Buy/Sell	Contract Value			Unrealized Gain /(Loss) in USD
		Foreign Currency	USD
Foreign Currency
Euro	Sell	4,500	$	6,086	$	(12	)
British Pound	Buy	900		1,818		0
Japanese Yen	Sell	125,000		1,010		0
Switzerland Franc	Buy	1,000		818		2
Czech Koruna	Buy	15,000		733		(13	)
Singapore Dollar	Buy	900		601		(7	)
Total			$	11,066	$	(30	)

The unrealized gain (loss) represents the difference between the contract value and the market value of the contract based on market rates as of June 30, 2007.

Given our foreign exchange position, a ten percent change in foreign exchange rates upon which these forward exchange contracts are based would result in unrealized exchange gains or losses of approximately $1.1 million. In all material aspects, these exchange gains and losses would be fully offset by exchange losses or gains on the underlying net monetary exposures. We do not expect material exchange rate gains and losses from other foreign currency exposures.

Cash Flow Risk

In January 2005, we hedged anticipated cash flows from Ariba Korea, Ltd. (“Ariba Korea”) using foreign currency forward contracts (Korean Won) to offset the translation and economic exposures related to those cash flows. The Korean Won hedge minimized currency risk arising from cash held in Korean Won as a result of the Softbank Corp. settlement in October 2004. The change in fair value of the Korean Won forward contract attributable to the changes in forward exchange rates (the effective portion) was reported in stockholders’ equity. In the nine months ended June 30, 2007, the Company recorded a realized loss of $285,000 associated with the repatriation of cash from Ariba Korea.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We do not use derivative financial instruments in our investment portfolio. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. This is accomplished by investing in widely diversified investments, consisting only of investment grade securities. We hold investments in both fixed rate and floating rate interest earning instruments, and both carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.

Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities which may have declined in market value due to changes in interest rates. Our investments may fall short of expectations due to changes in market conditions and as such we may suffer losses at the time of sale due to the decline in market value. All investments in the table below are carried at market value, which approximates cost.

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The table below represents principal (or notional) amounts and related weighted-average interest rates by year of maturity of our investment portfolio (in thousands, except for interest rates).

	Year Ending June 30, 2008			Year Ending June 30, 2009			Year Ending June 30, 2010			Year Ending June 30, 2011		Year Ending June 30, 2012		Thereafter			Total
Cash equivalents	$	10,097		$	—		$	—		$	—	$	—	$	—		$	10,097
Average interest rate		4.75	%		—			—			—		—		—			4.75	%
Investments	$	121,697		$	—		$	3,001			—		—		—		$	124,698
Average interest rate		5.32	%		—			5.42	%		—		—		—			5.33	%
Restricted cash	$	1,100		$	1,820			—			—		—	$	27,100		$	30,020
Average interest rate		4.74	%		5.04	%		—			—		—		5.02	%		5.01	%
Total investment securities	$	132,894		$	1,820		$	3,001		$	—	$	—	$	27,100		$	164,815

The table above does not include uninvested cash of $13.2 million held as of June 30, 2007. Total cash, cash equivalents, marketable securities and restricted cash as of June 30, 2007 was $178.0 million.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2007, the end of the period covered by this report on Form 10-Q. This evaluation (the “controls evaluation”) was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Rules adopted by the SEC require that we disclose the conclusions of the CEO and the CFO about the effectiveness of our disclosure controls and internal controls based upon the controls evaluation.

Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, such as this report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed such that information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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As of June 30, 2007, management evaluated the effectiveness of our disclosure controls and procedures and concluded those disclosure controls and procedures were not effective because of the material weakness described in Management’s Report on Internal Control over Financial Reporting in Item 9A. Controls and Procedures in our Annual Report on Form 10-K for the year ended September 30, 2006 (“Management’s Report”).

To ensure that our condensed consolidated financial statements for the three months ended June 30, 2007 are fairly presented and were prepared in accordance with U.S. generally accepted accounting principles, management has reviewed in detail all significant balance sheet accounts, as determined appropriate by our Audit Committee with the advice of our management. Consequently, management believes that the financial statements included in this report fairly represent, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Remediation of Material Weaknesses

As discussed above, as of June 30, 2007 and September 30, 2006, the Company identified several significant deficiencies in our internal control over financial reporting that resulted in adjustments and reclassifications to certain financial statement accounts. None of the internal control deficiencies was considered material individually. However, when considered in the aggregate, these control deficiencies indicate a need for more detailed analysis and documentation of balance sheet accounts and together represent a material weakness in internal control over financial reporting. We have taken steps to address this material weakness identified in the Management Report in our Annual Report on Form 10-K for the year ended September 30, 2006 and are currently evaluating whether these steps are sufficient to remediate this material weakness. We expect to have the material weakness remediated by September 30, 2007.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

The litigation discussion set forth in Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

A restated description of the risk factors associated with our business is set forth below. This description includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2006 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

We Compete in New and Rapidly Evolving Markets, and Our Spend Management Solutions Are At a Relatively Early Stage of Development. These Factors Make Evaluation of Our Future Prospects Difficult.

Spend management software applications and services are at a relatively early stage of development. For example, in September 2001, we introduced the majority of our initial Ariba Spend Management solutions and after our merger with FreeMarkets in 2004, we introduced several new products integrating functionality acquired in the merger. We also introduced on-demand versions of a number of our software products throughout fiscal year 2006 and in fiscal year 2007 and we plan to introduce additional on-demand versions of our products in the future. These new and planned products may be more challenging to implement than our more established products, as we have less experience deploying these applications. The markets in which we compete are characterized by rapid technological change, evolving customer needs and frequent introductions of new products and services. As we adjust to evolving customer requirements and competitive pressures, we may be required to further reposition our product and service offerings and introduce new products and services. We may not be successful in developing and marketing such product and service offerings, or we may experience difficulties that could delay or prevent the development and marketing of such product and service offerings, which could have a material adverse effect on our business, financial condition or results of operations.

Economic Conditions and Reduced Information Technology Spending May Adversely Impact Our Business.

Our business depends on the overall demand for enterprise software and services and on the economic health of our current and prospective customers. Weak economic conditions, or a reduction in information technology spending even with healthy economic conditions, could adversely impact our business in a number of ways including longer sales cycles, lower average selling prices and reduced bookings and revenues.

Our Success Depends on Market Acceptance of Standalone Spend Management Solutions.

Our success depends on widespread customer acceptance of standalone spend management solutions from vendors like Ariba, rather than solutions from enterprise resource planning (ERP) software vendors and others that are part of a broader enterprise application solution. For example, ERP vendors, such as Oracle and SAP, could bundle spend management modules with their existing applications and offer these modules at little or no cost. If our products and services do not achieve continued customer acceptance, our business will be seriously harmed.

We Have a History of Losses and May Incur Significant Additional Losses in the Future.

We have a significant accumulated deficit as of June 30, 2007, resulting in large part from cumulative charges for the amortization and impairment of goodwill and other intangible assets. We may incur significant losses in the future for a number of reasons, including those discussed in other risk factors and the following:

• adverse economic conditions;

• the failure of our standalone spend management solutions business to mature as a separate market category;

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• declines in average selling prices of our products and services resulting from competition or the introduction of newer products that generally have lower list prices than our more established products and other factors;

• failure to successfully grow our sales channels;

• increased reliance on on-demand delivery of software services that result in lower near-term revenues from customer deployments;

• failure to maintain control over costs;

• increased restructuring charges resulting from the failure to sublease excess facilities at anticipated levels and rates;

• ongoing charges related to the amortization of intangibles from our merger with FreeMarkets in July 2004; and

• charges incurred in connection with any future restructurings.

Our Quarterly Operating Results Are Volatile, Difficult to Predict and May Be Unreliable as Indicators of Future Performance Trends.

Our quarterly operating results have varied significantly in the past and will likely continue to vary significantly in the future. As a result, period-to-period comparisons of our results may not be meaningful and should not be relied upon as indicators of future performance. In addition, we may fail to achieve forecasts of quarterly and annual revenues and operating results.

Our quarterly operating results have varied or may vary depending on a number of factors, including the following:

Risks Related to Revenues:

• fluctuations in demand, sales cycles and average selling price for our products and services;

• reductions in customers’ budgets for information technology purchases and delays in their purchasing cycles;

• fluctuations in the number of relatively larger orders for our products and services;

• increased dependence on relatively smaller orders from a larger number of customers;

• dependence on generating revenues from new revenue sources;

• delays in recognizing revenue from multiple element arrangements;

• ability to renew ratable revenue streams, including subscription software, software maintenance and subscription services, without substantial declines from prior arrangements,

• changes in the mix of types of customer agreements and related timing of revenue recognition; and

• changes in our product line such as our release of on-demand versions of our software products throughout fiscal year 2006 and fiscal year 2007 and our planned release of additional on-demand versions in the future.

Risks Related to Expenses

• our overall ability to control costs, including managing reductions in expense levels through restructuring and severance payments;

• the level of expenditures relating to ongoing legal proceedings;

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• costs associated with changes in our pricing policies and business model, including the transition to increased reliance on on-demand and managed solutions offerings and the implementation of programs to generate revenue from new sources;

• costs associated with the amortization of stock-based compensation expense; and

• the failure to adjust our workforce to changes in the level of our operations.

Our On-Demand Strategy Carries a Number of Risks Which May Be Harmful to Our Business.

In November 2005, we announced a new strategy to offer on-demand versions of our software products. We believe that in the future customers will increasingly move away from purchasing a perpetual license for our software in favor of purchasing the right to use the software for a specified period of time through a term license or a subscription. If an increasing portion of customers choose term or subscription licenses or application hosting services, we may experience a deferral of revenues and cash payments from customers.

In addition, our on-demand strategy carries a number of additional risks, including the following:

• we may experience a delay in recognizing revenue due to the combination of multiple element arrangements, longer subscription terms and an increase in the time required to implement some on-demand services;

• as a result of increased demands on our engineering organization to develop on-demand versions of our products while supporting and enhancing our existing products, we may not introduce on-demand versions of our products or enhancements to our products on a timely and cost-effective basis or at appropriate quality levels;

• we may fail to achieve our targeted pricing;

• we expect to experience a decrease in the demand for our implementation services to the extent fewer customers license our software products as installed applications;

• we may not successfully achieve market penetration in our newly targeted markets, including target customers we characterize as middle-market companies based on their revenues;

• we may have a short-term and/or long-term decrease in total revenues as a result of the transition; and

• we may incur costs at a higher than forecasted rate as we expand our on-demand operations.

Our Business Could Be Seriously Harmed if We Fail to Retain Our Key Personnel.

Our future performance depends on the continued service of our senior management, product development and sales personnel. The loss of the services of one or more of these personnel could seriously harm our business. Our ability to retain key employees may be harder given that we have substantial operations in several geographic regions, including Sunnyvale, California and Pittsburgh, Pennsylvania. In addition, uncertainty created by turnover of key employees could result in reduced confidence in our financial performance which could cause fluctuations in our stock price and result in further turnover of our employees.

Our Revenues in Any Quarter May Fluctuate Significantly Because Our Sales Cycles Can Be Long and Unpredictable.

Our sales cycles can be long and unpredictable. The purchase of our products is often discretionary and generally involves a significant commitment of capital and other resources by a customer. It frequently takes several months to finalize a sale and requires approval at a number of management levels within the customer organization. The implementation and deployment of our products requires a significant commitment of resources by our customers and third parties and/or professional services organizations. As a result of the length and unpredictability of our sales cycle, our revenues in any quarter may fluctuate significantly.

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Revenues in Any Quarter May Vary to the Extent Recognition of Revenue is Deferred When Contracts Are Signed. As a Result, Revenues in Any Quarter May Be Difficult to Predict and are an Unreliable Indicator of Future Performance Trends.

We frequently enter into contracts where we recognize only a portion of the total revenue under the contract in the quarter in which we enter into the contract. For example, we may recognize revenue on a ratable basis over the life of the contract or enter into contracts where the recognition of revenue is conditioned upon delivery of future product or service elements. The portion of revenues recognized on a deferred basis may vary significantly in any given quarter, and revenues in any given quarter are a function both of contracts signed in such quarter and contracts signed in prior quarters. License revenues in recent and future quarters may be more dependent on revenues from new customer contracts entered into in those quarters rather than from the amortization or recognition of license revenues deferred in prior quarters.

Revenues From Our Ariba Sourcing Solution Could Be Negatively Affected if Customers Elect to Purchase Our Self-Service Products Rather Than Our Technology-Enhanced Services.

Revenue from our full-service sourcing services offering has been declining as existing customers renew contracts for lower dollar volumes and/or purchase our lower-priced self-service technologies (such as Ariba Sourcing). We have several large multi-year contracts for these technology-enhanced services, some of which will come up for renewal during the remainder of fiscal year 2007 and beyond. If these customers do not renew their contracts upon expiration, or if they elect to use one of our lower-cost self-service solutions, our future revenues may decrease.

A Decline in Revenues May Have a Disproportionate Impact on Operating Results and Require Further Reductions in Our Operating Expense Levels.

Because our expense levels are relatively fixed in the near term and are based in part on expectations of our future revenues, any decline in our revenues to a level that is below our expectations would have a disproportionately adverse impact on our operating results for that quarter.

We Are Subject to Evolving and Expensive Corporate Governance Regulations and Requirements. Our Failure to Adequately Adhere to These Requirements or the Failure or Circumvention of Our Controls and Procedures Could Seriously Harm Our Business and Results of Operations.

Because we are a publicly-traded company, we are subject to certain federal, state and other rules and regulations, including those required by the Sarbanes-Oxley Act of 2002. Compliance with these evolving regulations is costly and requires a significant diversion of management time and attention, particularly with regard to our disclosure controls and procedures and our internal control over financial reporting. Although we have reviewed our disclosure and internal controls and procedures in order to determine whether they are effective, our controls and procedures may not be able to prevent fraud or other errors in the future. Faulty judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures may make it impossible for us to ensure that the objectives of the control system are met. A failure of our controls and procedures to detect fraud or other errors could seriously harm our business and results of operations.

We Sometimes Experience Long Implementation Cycles, Which May Increase Our Operating Costs and Delay Recognition of Revenues.

Many of our products are complex applications that are generally deployed with many users. Implementation of these applications by enterprises is complex, time consuming and expensive. Long implementation cycles may delay the recognition of revenue as some of our customers engage us to perform system implementation services, which can defer revenue recognition for the related software license revenue. In addition, when we experience long implementation cycles, we may incur costs at a higher level than anticipated, which may reduce the anticipated profitability of a given implementation.

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If a Sufficient Number of Suppliers Do Not Join and Maintain Their Participation In the Ariba Supplier Network, It May Not Attract a Sufficient Number of Buyers and Other Sellers Required to Make the Network Successful.

In order to provide buyers on the Ariba Supplier Network an organized method for accessing goods and services, we rely on suppliers to maintain web-based product catalogs, indexing services and other content aggregation tools. Any failure of suppliers to join the Ariba Supplier Network in sufficient numbers, or of existing suppliers to maintain their participation in the Ariba Supplier Network, would make the network less attractive to buyers and consequently other suppliers. Our inability to access and index these catalogs and services provided by suppliers would result in our customers having fewer products and services available to them through our solutions, which would adversely affect the perceived usefulness of the Ariba Supplier Network.

We Could Be Subject to Potential Claims Related to the Ariba Supplier Network.

We warrant to our customers that the Ariba Supplier Network will achieve specified performance levels to allow our customers to conduct their transactions. To the extent we fail to meet warranted performance levels, we could be obligated to provide refunds of maintenance fees or credits toward future maintenance fees. Further, to the extent that a customer incurs significant financial hardship due to the failure of the Ariba Supplier Network to perform as warranted, we could be exposed to additional liability claims.

Failure to Establish and Maintain Strategic Relationships with Third Parties Could Seriously Harm Our Business, Results of Operations and Financial Condition.

We have established strategic relationships with a number of other companies. These companies are entitled to resell our products, to host our products for their customers, and/or to implement our products within their customers’ organizations. We cannot be assured that any existing or future resellers or hosting or implementation partners will perform to our expectations. For example, in the past we have not realized the anticipated benefits from strategic relationships with a number of resellers. If our current or future strategic partners do not perform to expectations, or if they experience financial difficulties that impair their operating capabilities, our business, operating results and financial condition could be seriously harmed.

We Face Intense Competition. If We Are Unable to Compete Successfully, Our Business Will Be Seriously Harmed.

The market for our solutions is intensely competitive, evolving and subject to rapid technological change. This competition could result in further price pressure, reduced profit margins and loss of market share, any one of which could seriously harm our business. Competitors vary in size and in the scope and breadth of the products and services they offer. We compete with several major enterprise software companies, including SAP and Oracle. We also compete with several service providers, including McKinsey & Company and A.T. Kearney. In addition, we compete with smaller niche providers of sourcing or procurement products and services, including Emptoris, Ketera Technologies, Perfect Commerce, Procuri and Verticalnet. Because spend management is a relatively new software category, we expect additional competition from other established and emerging companies if this market continues to develop and expand. For example, third parties that currently help implement Ariba Buyer and our other products could begin to market products and services that compete with our products and services. These third parties, which include IBM, Accenture, Capgemini, Deloitte Consulting, BearingPoint and Unisys, are generally not subject to confidentiality or non-compete agreements that restrict such competitive behavior.

Many of our current and potential competitors, such as ERP software vendors including Oracle and SAP, have longer operating histories, significantly greater financial, technical, marketing and other resources, significantly greater name recognition and a larger installed base of customers than us. These vendors could also introduce spend management solutions that are included as part of broader enterprise application solutions at little or no cost. In addition, many of our competitors have well-established relationships with our current and

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potential customers and have extensive knowledge of our industry. In the past, we have lost potential customers to competitors for various reasons, including lower prices and incentives not matched by us. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly increase their market share. We also expect that competition will increase as a result of industry consolidations. As a result, we may not be able to successfully compete against our current and future competitors.

Any Future Acquisitions Will Be Subject to a Number of Risks.

Any future acquisitions will be subject to a number of risks, including:

• the diversion of management time and resources;

• the difficulty of assimilating the operations and personnel of the acquired companies;

• the potential disruption of our ongoing business;

• the difficulty of incorporating acquired technology and rights into our products and services;

• unanticipated expenses related to integration of the acquired companies;

• difficulties in implementing and maintaining uniform standards, controls, procedures and policies;

• the impairment of relationships with employees and customers as a result of any integration of new management personnel;

• potential unknown liabilities associated with acquired businesses; and

• impairment of goodwill and other assets acquired.

If We Fail to Develop Products and Services on a Timely and Cost-Effective Basis, or If Our Products or Services Contain Defects, Our Business Could Be Seriously Harmed.

In developing new products and services, we may:

• fail to develop, introduce and market products in a timely or cost-effective manner;

• find that our products and services are obsolete, noncompetitive or have shorter life cycles than expected;

• fail to develop new products and services that adequately meet customer requirements or achieve market acceptance; or

• develop products that contain undetected errors or failures when first introduced or as new versions are released.

If new releases of our products or potential new products are delayed, we could experience a delay or loss of revenues and customer dissatisfaction.

Pending Litigation Could Seriously Harm Our Business.

There can be no assurance that existing or future litigation will not have a material adverse effect on our business, financial position, results of operations or cash flows, or that the amount of any accrued losses is sufficient for any actual losses that may be incurred. See Note 3 of Notes to Consolidated Financial Statements.

We May Incur Additional Restructuring Charges that Adversely Affect Our Operating Results.

We have recorded significant restructuring charges in the past relating to the abandonment of numerous leased facilities, including most notably portions of our Sunnyvale, California headquarters. Moreover, we have

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from time to time revised our assumptions and expectations regarding lease abandonment costs, resulting in additional charges.

We review these estimates each reporting period, and to the extent that our assumptions change, the ultimate restructuring expenses for these abandoned facilities could vary significantly from current estimates. For example, a reduction in assumed market lease rates of $0.25 per square foot per month for the remaining term of the leases, with all other assumptions remaining the same, would increase the estimated lease abandonment loss on the vacated portions of our Sunnyvale, California headquarters by $3.1 million as of June 30, 2007. Additional lease abandonment costs, resulting from the abandonment of additional facilities or changes in estimates and expectations about facilities already abandoned, could adversely affect our operating results.

We May Incur Additional Goodwill Impairment Charges that Adversely Affect Our Operating Results.

We review goodwill for impairment annually and more frequently if events and circumstances indicate that the asset may be impaired and that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, a significant decline in our stock price for a sustained period, and decreases in our market capitalization below the recorded amount of our net assets for a sustained period. Our stock price is highly volatile and has experienced significant declines in the past. The balance of goodwill is $326.1 million as of June 30, 2007 and, there can be no assurance that future goodwill impairments will not occur.

Our Stock Price Is Highly Volatile.

Our stock price has fluctuated dramatically. There is a significant risk that the market price of our common stock will decrease in the future in response to any of the following factors, some of which are beyond our control:

• variations in our quarterly operating results;

• announcements that our revenues or income are below analysts’ expectations;

• changes in analysts’ estimates of our performance or industry performance;

• general economic slowdowns;

• changes in market valuations of similar companies;

• sales of large blocks of our common stock;

• announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

• the loss of a major customer or our failure to complete significant license transactions;

• additions or departures of key personnel; and

• fluctuations in stock market prices and volumes, which are particularly common among highly volatile securities of software and Internet-related companies.

We Are at Risk of Further Securities Class Action Litigation Due to Our Stock Price Volatility.

In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. We have experienced significant volatility in the price of our stock over the past two years. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management’s attention and resources, which could seriously harm our business.

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If the Protection of Our Intellectual Property Is Inadequate, Our Competitors May Gain Access to Our Technology, and We May Lose Customers.

We depend on our ability to develop and maintain the proprietary rights of our technology. To protect our proprietary technology, we rely primarily on a combination of contractual provisions, including customer licenses that restrict use of our products, confidentiality agreements and procedures, and patent, copyright, trademark and trade secret laws. We have 20 patents issued in the United States, but may not develop other proprietary products that are patentable. Despite our efforts, we may not be able to adequately protect our proprietary rights, and our competitors may independently develop similar technology, duplicate our products or design around any patents issued to us. This is particularly true because some foreign laws do not protect proprietary rights to the same extent as those of the United States and, in the case of our solutions, because the validity, enforceability and type of protection of proprietary rights in these technologies are uncertain and evolving. If we fail to adequately protect our proprietary rights, we may lose customers.

There has been a substantial amount of litigation in the software industry and the Internet industry regarding intellectual property rights. For example, in fiscal year 2005 we paid $37.0 million to ePlus to settle a lawsuit alleging that three of our products, Ariba Buyer, Ariba Marketplace and Ariba Category Procurement, infringed patents held by a third party. In addition, we have recently been sued by Sky Technologies, Inc. for alleged patent infringement. See “Litigation—Patent Litigation” in Note 3 of Notes to Condensed Consolidated Financial Statements. It is possible that in the future other third parties may claim that we or our current or potential future products infringe their intellectual property rights. We expect that software product developers and providers of electronic commerce solutions will increasingly be subject to infringement claims, and third parties may claim that we or our current or potential future products infringe their intellectual property. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business.

We must now, and may in the future have to, license or otherwise obtain access to intellectual property of third parties. For example, we are currently dependent on developers’ licenses from enterprise resource planning, database, human resource and other systems software vendors in order to ensure compliance of our products with their management systems. In addition, we rely on technology that we license from third parties, including software that is integrated with internally developed software and used in our software products to perform key functions. For example, we license integration software from TIBCO for Ariba Buyer. If we are unable to continue to license any of this software on commercially reasonable terms, or at all, we will face delays in releases of our software until equivalent technology can be identified, licensed or developed, and integrated into our current products. These delays, if they occur, could materially adversely affect our business.

Our Business Is Susceptible to Numerous Risks Associated with International Operations.

International operations have represented a significant portion of our revenues over the past three years. We have committed and expect to continue to commit significant resources to our international sales and marketing activities. We are subject to a number of risks associated with these activities. These risks generally include:

• currency exchange rate fluctuations;

• unexpected changes in regulatory requirements;

• tariffs, export controls and other trade barriers;

• longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

• difficulties in managing and staffing international operations;

• potentially adverse foreign tax consequences, including withholding in connection with the repatriation of earnings;

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• the burdens of complying with a wide variety of foreign laws; and

• political instability.

For international sales and expenditures denominated in foreign currencies, we are subject to risks associated with currency fluctuations. We hedge risks associated with foreign currency transactions in order to minimize the impact of changes in foreign currency exchange rates on earnings. We utilize forward contracts to hedge trade and intercompany receivables and payables. There can be no assurance that our hedging strategy will be successful or that currency exchange rate fluctuations will not have a material adverse effect on our operating results.

Anti-takeover Provisions in Our Charter Documents and Delaware Law Could Discourage, Delay or Prevent a Change in Control of Our Company and May Affect the Trading Price of Our Common Stock.

Certain anti-takeover provisions in our certificate of incorporation and bylaws and certain provisions of Delaware law may have the effect of delaying, deferring or preventing a change in control of the Company without further action by our stockholders, may discourage bids for our common stock at a premium over the market price of our common stock and may adversely affect the market price of our common stock and other rights of our stockholders.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We have granted shares of restricted common stock that allow statutory tax withholding obligations incurred upon vesting of those shares to be satisfied by forfeiting a portion of those shares to us. The following table shows the shares acquired by us upon forfeiture of restricted shares during the quarter ended June 30, 2007.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Program
April 1, 2007—April 30, 2007	—	$	—	—	—
May 1, 2007—May 31, 2007	—		—	—	—
June 1, 2007—June 30, 2007	1,687		9.52	—	—
Total	1,687	$	9.52	—	—

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

Exhibit No.	Exhibit Title
10.45	First Amendment to Sublease, dated as of June 15, 2007, by and between Juniper Networks, Inc. and the Registrant.
10.46	Fourth Amendment to Lease, dated as of July 10, 2007, by and between Moffet Park Drive LLC and the Registrant
31.1	Certification of Chief Executive Officer.
31.2	Certification of Chief Financial Officer.
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARIBA, INC.
By:	/s/    JAMES W. FRANKOLA
	James W. Frankola
	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Date: August 8, 2007

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EX-10.45

EXHIBIT 10.45

FIRST AMENDMENT TO SUBLEASE

This First Amendment to Sublease (“First Amendment”) is made as of June 15, 2007 (the “Execution Date”) between ARIBA, INC. a Delaware corporation (“Sublandlord”), and JUNIPER NETWORKS, INC., a Delaware corporation (“Subtenant”).

RECITALS

A. Sublandlord and Moffett Park Drive LLC, a California limited liability company (“Master Landlord”), entered into the Technology Corners Triple Net Multiple Building Lease dated March 15, 2000, which has been amended by a letter agreement dated September 11, 2000, a First Amendment to Lease dated January 12, 2001, a Second Amendment to Lease dated October 31, 2002, and a Third Amendment to Lease dated October 21, 2004 (collectively, “Master Lease”). The Master Lease term expires on January 24, 2013 (“Master Lease Expiration Date”).

B. NetScreen Technologies, Inc. (“Netscreen”), and Sublandlord entered into a Sublease dated October 18, 2002 (“Sublease”), under which Sublandlord is currently subleasing to Subtenant approximately 172,917 rentable square feet of space in Building Three and approximately 4,707 rentable square feet of space in Building Four. Subtenant is the successor in interest to Netscreen under the Sublease. Netscreen, Sublandlord and Master Landlord also entered into that certain Recognition Agreement dated October 31, 2002 (“Recognition Agreement”) and Consent to Sublease dated October 31, 2002 (“Consent”).

C. Sublandlord and Subtenant now desire to amend and modify certain portions of the Sublease to extend the term of the Sublease and expand the Premises, all upon the terms and conditions set forth herein.

AGREEMENT

For and in consideration of the foregoing recitals and the respective undertakings of the parties, and other good and valuable consideration, the receipt and adequacy of which are acknowledged, Sublandlord and Subtenant hereby agree as follows:

1. Capitalized Terms: Each capitalized term used in this First Amendment shall have the meaning ascribed to it in the Sublease, unless such term is otherwise defined in this First Amendment.

2. Definitions: The following definitions are hereby amended or added to the Sublease and this First Amendment:

(a) Premises: Commencing on the Building One Premises Delivery Date, this term shall be amended to mean, collectively, the Building One Premises, the Building Three Premises, and the Building Four Premises.

(b) Building One Premises: The entire third and fourth floors of Building One, which the parties hereby conclusively agree contain a total of 88,742 rentable square feet, as more particularly described on Exhibit A attached to this First Amendment. If Subtenant exercises the Expansion Option, the Building One Premises shall also include the Building One Expansion Space, effective on the Building One Expansion Space Rent Commencement Date.

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(c) Building One Expansion Space: The entire first and second floors of Building One, which the parties hereby conclusively agree contain a total of 86,340 rentable square feet, as more particularly described on Exhibit B attached to this First Amendment.

(d) Rentable Area of Premises: Commencing on the Building One Premises Delivery Date, this term shall be revised to be 266,366 rentable square feet (Building One Premises – 88,742; Building Three Premises – 172,917; and Building Four Premises – 4,707), which the parties conclusively agree to be the rentable square footage of the Premises. If Subtenant exercises the Expansion Option, commencing on the Building One Expansion Space Delivery Date, the Rentable Area of the Premises shall also include the Building One Expansion Space.

(e) Building One Premises Delivery Date: The date that Sublandlord delivers actual possession of the Building One Premises to Subtenant. The Building One Premises Delivery Date is anticipated to be October 1, 2007, provided that if Subtenant notifies Sublandlord in writing that it requires the Building One Premises to be delivered earlier than October 1, 2007, this date shall be such earlier date specified in Subtenant’s notice, but not earlier than August 10, 2007.

(f) Building One Expansion Space Delivery Date: The date that Sublandlord delivers actual possession of the Building One Expansion Space to Subtenant. The Building One Expansion Space Delivery Date is anticipated to be the delivery date specified in Subtenant’s notice of exercise of the Expansion Option, which delivery date may be staggered for Floor One and Floor Two of the Building One Expansion Space but shall not be earlier than August 10, 2007 or later than March 10, 2008.

(g) Sublease Expiration Date: This definition shall be amended to be January 24, 2013, which is coterminous with the Master Lease Expiration Date, and shall apply to the entire Premises, as defined above in Paragraph 2(a), and to the Building One Expansion Space, if applicable.

(h) Building One Premises Rent Commencement Date: Sixty (60) days after the Building One Premises Delivery Date.

(i) Building One Expansion Space Rent Commencement Date: Sixty (60) days after the Building One Expansion Space Delivery Date. If Subtenant elects to stagger delivery of Floor One and Floor Two of the Building One Expansion Space Delivery Date, there shall be a separate “Rent Commencement Date” for each such floor.

(j) Expansion Option: This term shall have the meaning specified in Paragraph 10 hereof.

(k) Extended Term: The period commencing on May 14, 2008 and expiring on January 24, 2013, which Extended Term shall be applicable to the Premises.

(l) Monthly Base Rent: Commencing on the Building One Premises Rent Commencement Date, Monthly Base Rent shall be revised as follows:

(i) From the Building One Premises Rent Commencement Date until and including May 13, 2008, the Monthly Base Rent shall be as follows:

Premises	Time Period	Monthly Base Rent
Building One Premises	Building One Premises Rent
	Commencement Date to 5/13/08	$	158,848.18

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Premises	Time Period	Monthly Base Rent
Building Three and	Building One Premises Rent
Building Four Premises	Commencement Date to 5/13/08	$	262,884.00

(ii) Commencing on the first day of the Extended Term, Monthly Base Rent for the Premises shall be as follows:

Premises	Time Period	Monthly Base Rent
Building One Premises	5/14/08 – 9/30/08	$	158,848.18
	10/1/08 – 9/30/09	$	167,722.38
	10/1/09 – 9/30/10	$	176,596.58
	10/1/10 – 9/30/11	$	185,470.78
	10/1/11 – 9/30/12	$	194,344.98
	10/1/12 – 1/24/13	$	203,219.18
Premises	Time Period	Monthly Base Rent
Building Three and
Building Four Premises	5/14/08 – 9/30/08	$	317,946.96
	10/1/08 – 9/30/09	$	335,709.36
	10/1/09 – 9/30/10	$	353,471.76
	10/1/10 – 9/30/11	$	371,234.16
	10/1/11 – 9/30/12	$	388,996.56
	10/1/12 – 1/24/13	$	406,758.96

(iii) If Subtenant exercises the Expansion Option, commencing on the Building One Expansion Space Rent Commencement Date, Monthly Base Rent for the Building One Expansion Space shall be as follows:

Premises	Time Period	Monthly Base Rent
Building One	Building One Expansion Space Rent
Expansion Space	Commencement Date to 9/30/08	$	154,548.60	*
	10/1/08 – 9/30/09	$	163,182.60
	10/1/09 – 9/30/10	$	171,816.60
	10/1/10 – 9/30/11	$	180,450.60
	10/1/11 – 9/30/12	$	189,084.60
	10/1/12 – 1/24/13	$	197,718.60

* If Subtenant elects to stagger the Delivery Date for the Building One Expansion Space, Monthly Base Rent would be $77,005.80 for the first floor of Building One upon the Rent Commencement Date for such floor, and $77,542.80 for the second floor of Building One upon the Rent Commencement Date of such floor.

(m) Master Landlord Consent: The written consent of Master Landlord to this First Amendment on terms reasonably acceptable to the parties, including consent to Subtenant’s Permitted Use of the Premises. The parties agree that a written consent that is substantially similar to the Consent (as defined in Recital B above), with Paragraphs 19, 21 and 28 revised on commercially reasonable terms, shall be deemed reasonably acceptable to the parties.

(n) Subtenant’s Project Share: Commencing on the Building One Premises Rent Commencement Date, this term shall be revised to be 37.20%. If Subtenant exercises the Expansion Option, commencing on the Building One Expansion Space Rent Commencement Date, Subtenant’s Project Share shall be 49.26%.

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(o) Subtenant’s Building Share: Commencing on the Building One Premises Rent Commencement Date, this term shall be revised as follows:

(i) Building Three Premises – 100%

(ii) Building Four Premises – 0%

(iii) Building One Premises – 50.69%

Notwithstanding the foregoing, if Subtenant exercises the Expansion Option, commencing on the Building One Expansion Space Rent Commencement Date, Subtenant’s Building Share for the Building One Premises shall be 100%.

3. Expansion:

(a) Commencing on the Building One Premises Delivery Date, Sublandlord hereby subleases and demises to Subtenant, and Subtenant hereby subleases and accepts from Sublandlord, on the terms and conditions set forth herein, the Building One Premises.

(b) Sublandlord shall deliver possession of the Building One Premises to Subtenant on the anticipated Building One Premises Delivery Date, provided that Sublandlord shall not be subject to any liability for its failure to deliver possession of the Building One Premises by the anticipated Building One Premises Delivery Date or any other particular date, nor shall such failure effect the validity of this First Amendment or affect the Sublease Expiration Date; provided that the Building One Premises Delivery Date shall be the day that Sublandlord tenders vacant possession of the Building One Premises to Subtenant. Notwithstanding the foregoing, if the Building One Premises Delivery Date does not occur within fifteen (15) calendar days following the anticipated Building One Premises Delivery Date, Base Rent for the Building One Premises shall abate following the actual Building One Rent Commencement Date for like number of days as shall have elapsed between the day following the fifteenth (15^th) day after the anticipated Building One Premises Delivery Date and the actual Building One Premises Delivery Date. If the Building One Premises Delivery Date shall not have occurred within seventy five (75) days following the anticipated Building One Premises Delivery Date (the “Building One Premises Delivery Deadline”), then Subtenant shall have the right, but not the obligation, in its sole and absolute discretion to immediately terminate this First Amendment by providing written notice thereof to the Sublandlord within fifteen (15) days after the Building One Premises Delivery Deadline. If this First Amendment is terminated in accordance with this Section, then Base Rent for the Building One Premises shall be promptly refunded to Subtenant by Sublandlord and Subtenant and Sublandlord shall be fully released from any further obligations and liabilities under this First Amendment.

(c) Prior to the Building One Premises Delivery Date, commencing on the date that the Master Landlord Consent has been received (the “Building One Premises Early Access Date”), Sublandlord agrees where such space is vacant to provide Subtenant, its employees, agents, consultants and contractors with reasonable early access and early entry (“Early Access”) to the Building One Premises, the “Building One MPOE Room”(as shown on Exhibit B), the “Building One MDF Room” (as shown on Exhibit B) and the “Building One Server Room” (as shown on Exhibit B) each of which are located on Floor One of Building One and shown on Exhibit B, at no additional rent to Subtenant, in order that Subtenant may perform due diligence, design and planning; provided, however that: (i) with respect to any Early Access prior to August 1, 2007, Subtenant agrees to provide Sublandlord with at minimum twenty-four (24) hours prior written notice of any Early Access; (ii) with respect to any Early Access after August 1, 2007, Subtenant’s Early Access shall be not require any prior written notice from Subtenant; and (iii) such Early Access shall at all times require an escort designated by Sublandord.

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Subtenant agrees that during such Early Access, other than as described above Subtenant shall not perform any construction, alteration, addition, repair or other work to the Building One Premises, Building One MPOE Room or Building One Server Room.

(d) If Subtenant does not exercise the Expansion Option, Subtenant shall, at its sole expense, subdivide the portion of the Building One Server Room that it requires for its use of the Building One Premises in compliance with the provisions of Section 8.3 of the Sublease (the “Subdivided Server Room Space”) and that upon such subdivision, Subtenant shall pay pro rata Base Rent for the Subdivided Server Room Space (which rentable square feet shall be determined in good faith by Sublandlord and Subtenant).

(e) Sublandlord shall deliver the Building One Premises to subtenant on the Building One Premises Delivery Date in “broom clean” condition with carpets vacuumed, and other floors cleaned. Sublandlord represents to Subtenant that upon such delivery the roof, all structural components, elevator, HVAC, electrical, plumbing, and fire and life safety systems of Building One, as well as the parking lot and site lighting, will be operational and in good working order and condition. Sublandlord further represents to its knowledge that upon such delivery the Premises shall comply with Applicable Requirements and with the Americans with Disability Act (“ADA”). Notwithstanding the foregoing, to the extent that the Initial Subtenant Improvements (as defined in Section 8 hereof), or any other alterations required by Subtenant, trigger a requirement to perform any alterations, improvements, upgrades or other work to Building One or the Building One Premises, then Subtenant shall pay the cost of such work.

4. Extension: The Term is hereby extended for the period of the Extended Term and all references to “Term” in the Sublease shall mean the Term as so extended.

5. Rent:

(a) To reflect the Building One Premises and the Building One Expansion Space (if applicable), the term “Monthly Base Rent” shall be revised as provided in Section 2 hereof, and Subtenant shall pay to Subtenant the Monthly Base Rent as so revised. The term “Base Rent” as used in the Sublease shall mean the Monthly Base Rent as so revised.

(b) Commencing on the Building One Premises Rent Commencement Date, Subtenant’s Project Share and Subtenant’s Building Share shall be revised as provided in Section 2 hereof.

6. Permitted Use: Subtenant may use the Building One Premises for any legally permitted consistent with the character and zoning criteria for the Project and for any uses permitted under the Master Lease, including but not limited to general and administrative office, research and development, laboratory, training and fitness center uses; provided, however, that Subtenant shall not use the Building One Premises for any use that is not permitted under the Master Lease.

7. Security Deposit: Within five (5) business days after receipt of the Master Landlord Consent, Subtenant shall deliver to Sublandlord Six Hundred Thousand Dollars ($600,000) in cash or other immediately available funds, which amount Sublandlord shall hold as a Security Deposit in accordance with Article 4 of the Sublease and Sublandlord shall immediately return to Subtenant the original Letter of Credit previously provided by Subtenant to Sublandlord pursuant to Section 4.06 of the Sublease. From and after the delivery of such Six Hundred Thousand Dollars ($600,000) the term “Security Deposit” as used in the Sublease shall be deemed to refer to such cash sum of Six Hundred Thousand Dollars ($600,000).

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Payment by Regular Mail to:

Ariba, Inc.

c/o PNC Bank

P.O. Box 642962

Pittsburgh, PA 15264-2962

Payment by Wired Funds to:

PNC Bank, N.A.

Routing Number: 043000096

SWIFT: PNCCUS33

Credit: Ariba, Inc.

Account Number: 1008997938

8. Initial Subtenant Improvements: At its sole cost and expense, Subtenant shall construct certain initial leasehold improvements to the Building One Premises (and, if applicable the Building One Expansion Space) in accordance with the Work Letter attached hereto as Exhibit D (the “Initial Subtenant Improvements”); provided that such improvements comply with the provisions of Section 6.03 of the Master Lease (including the requirement to obtain the Master Landlord’s Consent thereto).

9. Restoration: Subtenant shall have no responsibility to perform any restoration obligation that Sublandlord may have to Master Landlord under the Master Lease with respect to any leasehold improvements installed at the Building One Premises or the Building One Expansion Space prior to the applicable delivery date of such premises to Subtenant. If, simultaneously with its written request to Sublandlord for approval of any Subtenant Owned Alterations or Utility Installation (including the Initial Subtenant Improvements), Subtenant requests in writing that Sublandlord notify Master Landlord requesting a written statement from Master Landlord indicating if Master Landlord shall require or shall not require Sublandlord to remove such alterations or installations, then Sublandlord shall promptly request such written statement from Master Landlord. Notwithstanding Article 8.4 of the Sublease to the contrary, Sublandlord shall not require removal of such alterations or installations except to the extent that Master Landlord requires such removal. Subtenant shall have the right to remove all of Subtenant’s trade fixtures and personal property from the Premises at any time during the Term.

10. Option to Expand:

(a) Sublandlord grants to Subtenant the option to expand the Premises to include the Building One Expansion Space (the “Expansion Option”). In order to exercise the Expansion Option, the Subtenant must notify Sublandlord in writing of its irrevocable election to exercise not later than September 1, 2007 (the “Exercise Notice”). If Subtenant does not deliver the Exercise Notice to Sublandlord on or before September 1, 2007, the Expansion Option shall terminate. The Exercise Notice shall specify the Building One Expansion Space Delivery Date, and Sublandlord acknowledges and agrees that Subtenant shall be entitled to stagger delivery of the Building One Expansion Space Delivery Date for Floor One and Floor Two of the Building One Expansion Space. Sublandlord shall deliver possession of the Building One Expansion Space to Subtenant on the anticipated Building One Expansion Space Delivery Date, provided that Sublandlord shall not be subject to any liability for its failure to deliver possession of the Building One Expansion Space by the anticipated Building One Expansion Space Delivery Date or any other particular date, nor shall such failure effect the validity of this First Amendment or affect the Sublease Expiration Date; provided that the Building One Expansion Space Delivery Date shall be the day that Sublandlord tenders possession of the Building One Expansion Space to Subtenant. Notwithstanding the foregoing, if the Building One Expansion Space Delivery Date does

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not occur within fifteen (15) days following the anticipated Building One Expansion Delivery Date, Base Rent for the Building One Expansion Space shall abate following the Building One Rent Commencement Date for like number of days as shall have elapsed between the day following the fifteenth (15^th) day after the anticipated Building One Expansion Delivery Date and the actual Building One Expansion Space Delivery Date; provided further that if the Building One Expansion Space Delivery Date shall not have occurred within seventy five (75) days of the anticipated Building One Expansion Space Delivery Date (the “Building One Expansion Space Delivery Deadline”), then Subtenant shall have the right, but not the obligation, in its sole and absolute discretion to immediately rescind its Exercise Notice and terminate its obligation to accept the Building One Expansion Space by providing written notice thereof to the Sublandlord within fifteen (15) days after the Building One Expansion Space Delivery Deadline. If the Exercise Notice is rescinded in accordance with this Section then Subtenant and Sublandlord shall be fully released from any further obligations and liabilities under such Exercise Notice and the Building One Expansion Space. Commencing on the Building One Expansion Space Rent Commencement Date, the Monthly Base Rent, Subtenant’s Project Share, and Subtenant’s Building Share shall be modified as provided in Section 2 hereof. Upon such exercise, Subtenant shall sublease the Building One Expansion Space for the Term (as modified by this First Amendment).

(b) Prior to the Building One Expansion Space Delivery Date, commencing on the date that the Master Landlord Consent has been received, Sublandlord agrees where such space is vacant to provide Subtenant, its employees, agents, consultants and contractors with reasonable Early Access to the Building One Expansion Space at no additional rent to Subtenant, in order that Subtenant may perform due diligence, design and planning; provided, however that: (i) with respect to any Early Access prior to August 1, 2007, Subtenant agrees to provide Sublandlord will at least twenty-four (24) hours written notice prior to any such Early Access; (ii) with respect to any Early Access after August 1, 2007, Subtenant’s Early Access shall not require any prior written notice from Subtenant; and (iii) such Early Access shall at all times require an escort designated by Sublandlord. Subtenant agrees that except as described herein during any such Early Access, Subtenant shall not perform any construction or other tenant improvement work at the Building One Expansion Space.

11. Right of First Refusal:

(a) Provided Subtenant has validly exercised its Expansion Option, Subtenant shall have a right of first refusal (“ROFR Right”) on any space that becomes available or any space leased by Sublandlord from Master Landlord pursuant to the Master Lease (“ROFR Space”). If at any time after the date Subtenant has exercised its Expansion Option, Sublandlord shall receive a bona fide written offer from a prospective subtenant (any prospective subtenant shall hereinafter be referred to as a “Third Party Subtenant”; provided, however, that no affiliate of Subtenant shall be a Third Party Subtenant), which incorporates substantially all of the basic terms of the transaction which Sublandlord is willing to accept to sublease all or any portion of the ROFR Space or if Sublandlord makes a bona fide written offer to lease all or any portion of the ROFR Space to a Third Party Subtenant, which incorporates substantially all of the “basic material sublease terms” of the transaction which such Third Party Subtenant is willing to accept (the “Offer”), Sublandlord shall submit written notice thereof to Subtenant (together with a copy of such Offer in the form of a list of substantially all of the basic business terms agreed upon by Sublandlord and the Third Party Subtenant). Subtenant shall have seven (7) business days following receipt of such notice to exercise Subtenant’s ROFR Right by providing Sublandlord with written notice of such acceptance (“ROFR Notice”). Should Subtenant fail to give Sublandlord the ROFR Notice within such seven (7) business day period, Subtenant shall be deemed to have waived Subtenant’s right to exercise the ROFR Right for the particular Offer in question only. As used herein, “basic material lease terms” refers to base rent, improvement allowances, and inducements, and security deposit (provided that the security deposit shall be subject to reasonable negotiation taking into consideration Subtenant’s financial condition at the time, as compared (if applicable) to the financial condition of the Third Party Subtenant.

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(b) Should Subtenant not exercise the ROFR Right, Sublandlord may sublease the ROFR Space to such Third Party Subtenant on terms not materially more favorable to the Third Party Subtenant than those presented to Subtenant in the Offer, except that the base monthly rent thereunder may be as low as ninety seven percent (97%) of the base monthly rent set forth in the Offer. If Subtenant desires to sublease the ROFR on terms that are materially more favorable to the Third Party Subtenant or at a base monthly rent that is less than ninety-seven percent (97%) of the base monthly rent set forth in the Offer, Sublandlord shall be required to resubmit the revised Offer to Subtenant (“Revised Offer”). Subtenant shall have five (5) business days following receipt of the Revised Offer to provide Sublandlord with its ROFR Notice with respect to the Revised Offer. Should Subtenant fail to give Sublandlord the ROFR Notice within such five (5) business day period, Subtenant shall be deemed to have waived Subtenant’s right to exercise the ROFR Right for the particular Revised Offer in question only.

(c) Should Subtenant exercise the ROFR Right as and when required hereunder, Sublandlord and Subtenant shall cooperate in good faith to negotiate an amendment to the Sublease to include the ROFR Space. If Sublandlord and Subtenant are unable to agree upon such amendment within forty-five (45) days from the ROFR Notice, then Sublandlord may, at any time within one hundred twenty (120) days thereafter, execute a sublease with any Third Party Subtenant on terms not materially more favorable to the Third Party Subtenant than those presented to the Subtenant in the Offer, except that the base monthly rent thereunder may be as low as ninety seven percent (97%) of the base monthly rent set forth in the Offer.

(d) Subtenant’s ROFR Right shall be subject and subordinate to any existing right of first refusal or other expansion right of any other subtenant of Sublandlord as of the Execution Date.

(e) The term for any ROFR Space shall be coterminous with the Term (as extended by the First Amendment).

(f) The rentable area of the Premises shall be increased by the rentable area of the ROFR Space. The Subtenant’s Building Share and Subtenant’s Project Share shall increase proportionately upon the commencement date of the ROFR Space.

(g) The sublease of the ROFR Space shall be conditioned upon receipt of the Master Landlord’s consent thereto.

12. Furniture:

(a) Subject to the terms and provisions of Paragraph 1.7 of the Sublease, (i) commencing on the Building One Premises Delivery Date, Sublandlord shall lease to Subtenant and Subtenant shall lease from Sublandlord, at no additional rent the furniture and equipment located in the Building One Premises, which Sublandlord has identified on Exhibit C-1 attached hereto (the “Building One Furniture”) and (ii) commencing on the Building One Expansion Space Delivery Date, if applicable, Sublandlord shall lease to Subtenant and Subtenant shall lease from Sublandlord, at no additional rent the furniture and equipment located on the second floor of the Building One Expansion Space, which Sublandlord has identified on Exhibit C-2 attached hereto (the “Building One Expansion Space Furniture”). From and after the Building One Premises Delivery Date, the term “Furniture” as used in the Sublease and this First Amendment shall be deemed also to include the Building One Furniture. From and after the Building One Expansion Space Delivery Date, if applicable, the term “Furniture” as used in the Sublease and this First Amendment shall be deemed also to include the Building One Expansion Space Furniture. Prior to the Building One Premises Delivery Date, Subtenant and Sublandlord shall conduct a walkthrough of the Building One Premises and the Building One Expansion Space and based on such walkthrough the parties shall revise Exhibits C-1 and C-2, accordingly.

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(b) Upon written notice thereof delivered to Sublandlord at least ninety (90) days prior to the Sublease Expiration Date, Subtenant may elect to purchase the Furniture for its “fair market value” payable in cash or other immediately available funds on or before the Sublease Expiration Date. If the parties cannot agree upon the fair market value of the Furniture within thirty (30) days after Subtenant makes such election, either party hereto may submit the issue to arbitration with JAMS, LLC (“JAMS”) in San Jose, California, pursuant to Section 1280, et seq. of the California Code of Civil Procedure. Within ten (10) business days following the appointment of the arbitrator, each party shall state in writing its position concerning the issue supported by the reasons therefor with two copies delivered to the arbitrator. If either party fails timely to submit its position, the position submitted by the other party shall be deemed correct, and the arbitration shall be deemed concluded. The arbitrator shall arrange for a simultaneous exchange of positions and a hearing. After the hearing, the arbitrator shall select which of the two proposed positions most closely approximates his determination of the correct position and shall have no right to propose a middle ground or any modification of either of the two proposed positions. The position he chooses as most closely approximating his determination shall constitute the decision of the arbitrator and be final and binding upon the parties. In the event of a failure, refusal, or inability of the arbitrator to act, his successor shall be appointed by JAMS, or, if JAMS fails to do so within five (5) business days, as provided by the Act. The arbitrator shall attempt to decide the issue within ten (10) business days after the hearing. Both parties shall share the fee and expenses of the arbitrator. The prevailing party shall be entitled to collect its reasonable (as determined by the arbitrator) attorneys’ fees and costs from the unsuccessful party. The arbitrator shall have the right to consult experts and competent authorities with factual information or knowledge concerning the dispute and the fees of such authorities shall be shared equally by the parties.

(c) If Subtenant elects to purchase the Furniture, Sublandlord shall transfer the Furniture to Subtenant pursuant to a bill of sale in its as-is condition and without any representations or warranties. During the Term, Subtenant shall be responsible for, and if necessary shall reimburse Sublandlord with respect to, all costs and expenses related to the Furniture, including all insurance, maintenance, repair, replacement, and personal property tax costs.

(d) Paragraph 1.7(e) of the Sublease shall be deleted.

13. Master Landlord Consent: This Sublease shall become effective following mutual execution of the parties hereto upon the Execution Date; provided, however, that if the Master Landlord Consent and the Amended Recognition Agreement (as defined in Section 18 hereof) is not received within fifteen (15) days of the date hereof, either party hereto may terminate this First Amendment upon written notice to the other party hereto delivered prior to receipt of the Master Landlord Consent and Amended Recognition Agreement. Within two (2) business days following mutual execution of this First Amendment, Sublandlord shall submit this First Amendment to the Master Landlord for its consent and shall request that Master Landlord provide the Amended Recognition Agreement. The parties shall work together diligently and in good faith to obtain the Master Landlord Consent and Amended Recognition Agreement. Subtenant shall provide all reasonable financial and other information reasonably requested by the Master Landlord in connection with such efforts. In the event that either party terminates this First Amendment pursuant to the provisions of this Section 13, this First Amendment shall be of no further force and effect and each party shall be immediately released of any further obligations and liabilities hereunder.

14. Signage: In the event that Subtenant exercises the Expansion Option, Subtenant shall have the right to install one exterior sign on Building One, subject, however to the terms of Paragraph 34 of the Sublease.

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15. Common Areas: Paragraph 1.3 of the Sublease shall be amended to include the following clause thereof:

“(iii) as to Building One, if Subtenant exercises the Expansion Option, there will be no Building Common Area for purposes of this Sublease for Building One.”

16. MPOE Room: The first sentence of Paragraph 1.9 of the Sublease shall be deleted, and in lieu thereof, the following shall be substituted:

“In addition to Sublandlord’s Server Room, Sublandlord shall also have access at all reasonable times to the main point of entry room (“MPOE Room”) located on the first floor of Building Three in the location designated on the Building Three floor plans attached to the Sublease as Exhibit B and, should Subtenant exercise the Expansion Option, to the MPOE Room located on the first floor of Building One in the location designated on the Building One floor plans attached to the First Amendment as Exhibit B. Sublandlord’s access to the MPOE Room where the same is shared with Subtenant shall be subject to 24 hours’ prior written notice to Subtenant at all times (except in the case of emergency) and Subtenant shall have the right to have a representative of Subtenant present at such entry. Subtenant shall also have access at all reasonable times to the MPOE Room in Building Three and Building One upon 24 hours’ prior written notice to Sublandlord (except in the case of emergency) and Sublandlord shall have the right to have a representative of Sublandlord present at such entry. The parties acknowledge and agree that each party shall use commercially reasonable practicable efforts to place the other party on notice and allow for that parties representatives to be present where access to the MPOE Room is required in the case of an emergency. Where a party enters the MPOE Room in the case of an emergency and is unable to place the other party on notice prior to such entry that party shall nevertheless provide to the other party notice in writing of such entry describing the same in reasonable detail with dates and time of entry following the same.”

17. Deleted Provisions: Paragraphs 39 and 40 of the Sublease are hereby deleted and of no further force and effect.

18. Recognition Agreement. Sublandlord and Subtenant acknowledge and agree that this First Amendment shall be subject and subordinate to all of the terms, covenants and conditions of the Recognition Agreement and Consent (as the same are defined in the Recitals above) and the Master Landlord Consent. Following the Execution Date, Sublandlord shall request from Master Landlord an amendment to the Recognition Agreement referred to in Recital B, which amendment shall be in the form attached hereto as Exhibit D (the “Amended Recognition Agreement”).

19. Sublandlord’s Server Room:

(a) Sublandlord and Subtenant acknowledge that the calculation method for Sublandlord’s share of the Server Room Electricity Cost in Paragraph 1.8 of the Sublease is no longer an equitable method to determine Sublandlord’s share of consumption. In the event Sublandlord does not exercise its right to vacate the Sublandlord’s Server Room (as described in Section 19(b) below) prior to December 31, 2007, Sublandlord may, at Sublandlord sole cost, install a separate electricity meter(s) for Sublandlord’s Server Room prior to December 31, 2007. Once the electricity meter(s) for Sublandlord’s

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Server Room is installed and operational, Sublandlord and Subtenant agree that the calculation for Sublandlord’s share of the electricity consumption per Paragraph 1.8 shall no longer have effect and Sublandlord shall pay the electricity costs for Sublandlord’s Server Room as metered based on the rates and taxes assessed by the utility company. Sublandlord agrees to continue to calculate Sublandlord’s share of the consumption per Paragraph 1.8 of the Sublease until the earlier of the date on which Sublandlord vacates the Sublandlord’s Server Room or the date on which the electricity meter for the Sublandlord’s Server Room is installed and operational. If a separate meter is not installed for the HVAC system serving the Server Room, the parties shall allocate the electricity consumption of the HVAC system pro rata in accordance with electricity consumption allocated to the servers and other equipment.

(b) Sublandlord shall have the right at any time during the Term to vacate the Sublandlord’s Server Room upon sixty (60) days written notice to Subtenant (the “Sublandlord’s Server Room Exit Notice”). In the event that Sublandlord exercises its right to vacate the Sublandlord’s Server Room, effective sixty (60) days after Subtenant’s receipt of the Sublandlord’s Server Room Exit Notice, all references to the Sublandlord’s Server Room in the Basic Sublease Information and Paragraph 1.8 of the Sublease shall be deleted in its entirety.

(c) Effective sixty (60) days after Subtenant’s receipt of the Sublandlord’s Server Room Exit Notice (the “Server Premises Commencement Date”), the definition of the Premises and Rentable Area of Premises will be expanded and amended to include the additional 2,165 square feet in the Building Three Premises (the “Server Premises”), and Subtenant shall commence paying Sublandlord Monthly Base Rent on the Server Premises at the same per rentable square foot rate (as adjusted pursuant to Section 2(1) hereof) as Subtenant pays for the other Premises during the same time period.

20. Sublandlord’s Representations and Warranties. As of the Execution Date, Sublandlord represents and warrants to Subtenant that: (i) Sublandlord is not in default or breach of any of the provisions of the Master Lease with respect to the Building One Premises beyond any applicable notice and cure period; and (ii) Sublandlord has not received written notice from Master Landlord or any governmental agencies that the Building One Premises is in violation of any Environmental Laws.

21. Notices. Any notice, claim, certificate, request, demand, consents, approvals, offers, statements and any other instruments or communications required or permitted to be given pursuant to the provisions of this Sublease shall be in writing and shall be deemed to have been given and received for all purposes when delivered in person or by Federal Express or other reliable 24-hour delivery service or five (5) business days after being deposited in the United States mail, by registered or certified mail, return receipt requested, postage prepaid, addressed to the other party at its address provided below with copies of the same as further described below. The parties may change the address or person addressed by written notice.

Sublandlord’s address for notices:	Subtenant’s address for notices:
Ariba, Inc.	Juniper Networks, Inc.
807 Eleventh Avenue	1194 N. Mathilda Ave.
Sunnyvale, California 94089	Sunnyvale, California 94089
Attn: General Counsel	Attn:Vice President of Real Estate
Fax: (650) 390-1377	Fax:(408) 936-3062

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Sublandlord’s address for notices:	Subtenant’s address for notices:
Ariba, Inc.	Juniper Networks, Inc.
807 Eleventh Avenue	1194 N. Mathilda Ave.
Sunnyvale, California 94089	Sunnyvale, California 94089
Attn: General Counsel	Attn: Vice President of Real Estate
Fax: (650) 390-1377	Fax:(408) 936-3062
With a copy to:	With copy of all notices to:
Ariba, Inc.	Juniper Networks, Inc.
210 Sixth Avenue	1194 N. Mathilda Ave.
Pittsburgh, Pennsylvania 15222	Sunnyvale, California 94089
Attn: Real Estate manager	Attn: Legal Department
	Fax:(408) 936-1278
	With copy of all notices to:
	The Staubach Company
	15601 Dallas Parkway, Suite 400,
	Addison, Texas 75001
	Attn: Lease Administration
	With a copy of all default notices only to:
	Reed Smith LLP
	Two Embarcadero Center,
	Suite 2000
	San Francisco, California 94111
	Attn: Simon T. Adams, Esq.
	Fax:(415) 391-8269

22. Brokers.

(a) Each party to this First Amendment represents and warrants to the other party that it has had no dealings with any broker or agent in connection with this First Amendment except for Staubach Bay Area, Inc. (“Staubach”), the exclusive real estate representative of Subtenant, and Newmark Pacific, Inc. (“Newmark”), the exclusive real estate representative of Sublandlord.

(b) Sublandlord will pay a commission to Newmark pursuant to a separate agreement dated August 16, 2006, between Sublandlord and Newmark.

(c) Sublandlord shall pay a commission to Staubach equal to five percent (5%) of the aggregate Monthly Base Rent payable during the Extended Term for the Building Three Premises and the Building Four Premises and five percent (5%) of the aggregate Monthly Base Rent payable for the sublease of Building One Premises. The commission will be due and payable (i) fifty percent (50%) upon receipt of Master Landlord Consent, and (ii) fifty percent (50%) upon the Building One Premises Rent Commencement Date.

(d) In the event that Subtenant exercises the Expansion Option, the commission attributable to the Building One Expansion Space shall be due (i) fifty percent (50%) within ten (10) days of Sublandlord’s receipt of written notice from Subtenant exercising said option, and (ii) fifty percent (50%) upon the Building One Expansion Space Rent Commencement Date.

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(e) No other commissions shall be payable in connection with this transaction. Each party to this First Amendment covenants and agrees to protect, defend, indemnify and hold harmless the other party from and against any and all costs (including reasonable attorneys’ fees), expenses or liability for any compensation, commission and charges claimed by any broker or other agent, other than the brokers named above, with respect to this First Amendment or the negotiation thereof on behalf of such party.

23. Use of Cafeteria and Fitness Center. Sublandlord grants Subtenant the right for Subtenant’s directors and employees to the use and enjoyment of the Cafeteria and Fitness Center, which Subtenant shall use in accordance with Exhibits E and F of the Sublease, respectively, and all reasonable rules and regulations relating to the same.

24. Indemnification. Notwithstanding anything to the contrary in the Sublease, Subtenant will have no obligation to indemnify, defend or hold harmless either Master Landlord or Sublandlord under such terms and conditions in the Master Lease to the extent that any of the claims, demands, liabilities or causes of action at issue are caused by Master Landlord’s, Sublandlord’s or any of their respective agents, contractors or employees, gross negligence or willful misconduct.

25. Sublandlord’s Compliance with Master Lease. Sublandlord covenants to timely and fully observe, perform and discharge all of its obligations under the Master Lease, except where the failure to do so would not have a material adverse effect (as reasonably determined by Subtenant) on Subtenant and except where such obligation is an obligation of Subtenant under the Sublease.

26. Modifications to Provisions of the Sublease. The following provisions of the Sublease are hereby amended:

(a) Utilities: Commencing on the Building One Premises Delivery Date, Paragraph 7.1(a) of the Sublease shall be amended to include Subtenant’s right to access Building One Premises twenty (24) hours per day, seven (7) days per week.

(b) Direct Contracts for Service:

(i) Notwithstanding anything to the contrary in Paragraph 7.1 of the Sublease, upon not less than thirty (30) days’ prior written notice, Subtenant shall have the right to enter into contracts for services with service providers of its choice for the Building Three Premises and, provided that Subtenant leases the entire rentable space in Building One, the Building One Premises. Such service contract specifications shall be subject to the review and approval of Sublandlord, which review and approval shall not be unreasonably withheld, conditioned or delayed. Upon approval by the Sublandlord and at least thirty (30) days’ notice from the Subtenant that such service contract vendors have been retained to perform services the Sublandlord shall immediately terminate any prior service contracts and shall release Subtenant of any further liability or obligation for reimbursement of its share of the same. Commencing on the Building One Premises Delivery Date, Paragraph 7.5 of the Sublease shall be amended to provide that all references therein to “Building Three” and “Building Three Premises” shall be deemed also to include the Building One Premises and, if applicable, the Building One Expansion Space. Paragraph 7.5(a) shall be revised to no longer require Subtenant to use Sublandlord’s designated janitorial service for the Building Three Premises and, provided that Subtenant leases the entire rentable space in Building One, the Building One Premises.

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(ii) Notwithstanding anything to the contrary in Paragraph 7 of the Sublease, upon the Building One Expansion Space Delivery Date, Subtenant shall have the right to separately contract with service providers of its choice for any services identified in Paragraph 7 of the Sublease that are with regard to the Premises (as defined in Section 2(a) hereof) upon the terms and conditions set forth above.

(c) No Right to Holdover. Paragraph 25 of the Sublease shall be deleted in its entirety and replaced with the following:

“25. No Right to Holdover.

(a) Subtenant has no right to retain possession of the Premises or any part thereof beyond the expiration or sooner termination of this Sublease. In the event that Subtenant holds over, then the Base Rent shall be increased to one hundred fifty percent (150%) of the Base Rent applicable immediately preceding the expiration or termination. If the Premises are not surrendered at the end of the Term, Subtenant shall indemnify Sublandlord against any loss or liability resulting from Subtenant in so surrendering the Premises, including without limitation, actual damages for any rent and charges which Sublandlord pays Master Landlord pursuant to the Master Lease.

(b) Upon expiration or sooner termination of this Sublease, Sublandlord may reenter the Premises and remove all persons or property therefrom. If Subtenant shall fail to remove any personal property which it is entitled or obligated to remove from the Premises upon the expiration or sooner termination of this Sublease, for any cause whatsoever, Sublandlord, at its option, may remove the same and store or dispose of them, and Subtenant agrees to pay to Sublandlord on demand any and all expenses incurred in such removal and in making the Premises free from dirt, litter, debris and obstruction, including all storage and insurance charges.”

(d) Cooperation with Subtenant. Commencing on the Building One Premises Delivery Date, Paragraph 30.2 of the Sublease is hereby deleted and replaced with the following:

“Sublandlord agrees to use commercially reasonable efforts to cooperate with Subtenant in (1) obtaining for Subtenant Master Landlord’s consent to any action for which the Master Lease requires Master Landlord’s consent, and (2) delivery any notice to Master Landlord as required by any provision of the Master Lease, including, without limitation, forwarding (within three (3) business days after Sublandlord’s receipt) any request made by Subtenant to Master Landlord for consent or approval, and providing Master Landlord will all the information required (or that Maser Landlord may reasonably request) regarding any such request. The fact that Master Landlord has consented to an action of Subtenant shall not in any way limit or restrict any right of Sublandlord to reasonably withhold Sublandlord’s consent to such action. Sublandlord shall use commercially reasonable efforts to diligently enforce any provision of the Master Lease on Subtenant’s behalf, including, but not limited to any provision that requires Master Landlord to make repairs, or provide maintenance or services to the Building or the Premises. Sublandlord shall not be liable to Subtenant for any liability, loss or damages whatsoever in the event Master Landlord fails to give its consent.”

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27. Miscellaneous:

(a) This First Amendment shall be binding upon and inure to the benefit of the parties hereto, their heirs, estates, personal representatives, successors and assigns.

(b) This First Amendment shall be construed in accordance with and governed by the laws of the State of California.

(c) This First Amendment constitutes the entire understanding and agreement of Sublandlord and Subtenant with respect to the specific subject matter hereof, and shall supersede and replace all prior understandings and verbal representations. The parties confirm and acknowledge that there are no other promises, covenants, understandings, agreements, representations or warranties with respect to the subject matter of this First Amendment except as expressly set forth herein.

(d) This First Amendment may not be modified, amended or terminated except pursuant to a written instrument duly executed by the parties hereto, or their successors-in-interest.

(e) Sublandlord and Subtenant shall each bear their own costs and expenses with respect to the negotiation, preparation and execution of this First Amendment.

(f) All notices, demands or other communications between the parties hereto shall be in writing and shall be given in the manner set forth for the giving of notices in the Sublease and Section 21 of this First Amendment.

(g) Each party acknowledges that it has been represented by counsel with respect to this First Amendment and accordingly, each party represents to the other party that it has read and understood the terms hereof and the consequences of executing this First Amendment. Each party further waives any right it may have to require the provision of this First Amendment to be construed against the other party who drafted the same.

(h) If any term or provision of this First Amendment shall be deemed or held, by any court or authority having property jurisdiction to be invalid, illegal, void or unenforceable, the remaining terms and provisions hereof shall nevertheless remain in full force and effect with the intent that the purpose of this First Amendment will be accomplished.

(i) Each party acknowledges and agrees that except as may be amended by the terms and conditions of this First Amendment, the terms, covenants and conditions of the Sublease, Recognition Agreement and Consent are hereby ratified and confirmed. Upon the consent of the Master Landlord to a fully executed copy of the First Amendment the Sublease and this First Amendment shall collectively be known as the “Sublease”.

28. Exhibits to the First Amendment: The following exhibits are attached hereto and hereby incorporated with this First Amendment.

Exhibit A	Building One Premises
Exhibit B	Building One Expansion Space
Exhibit C-1	Building One Furniture
Exhibit C-2	Building One Expansion Space Furniture
Exhibit D	Work Letter
Exhibit E	First Amendment to Recognition Agreement

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IN WITNESS WHEREOF, Sublandlord and Subtenant have duly executed this First Amendment as of the day and year first above written.

SUBLANDLORD:		SUBTENANT:
ARIBA, INC. a Delaware Corporation		JUNIPER NETWORKS, INC. a Delaware Corporation
By:	/s/ James W. Frankola	By:	/s/ John Lucas
Its:	Executive Vice President and Chief Financial Officer	Its:	Senior Director Corporate Real Estate

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EXHIBIT A

BUILDING ONE PREMISES

[Graphic of Building One Premises Appears Here ]

EXHIBIT B

BUILDING ONE EXPANSION SPACE

[Graphic of Building One Expansion Space Appears Here ]

EXHIBIT C-1

BUILDING ONE FURNITURE

[Inventory of Building One Furniture Appears Here ]

EXHIBIT C-2

BUILDING ONE EXPANSION SPACE FURNITURE

[Inventory of Building One Expansion Space Furniture Appears Here ]

EXHIBIT D

WORK LETTER AGREEMENT

This Work Letter Agreement (this “Agreement”) is made and entered into as of June 15, 2007, by and between ARIBA, INC., a Delaware corporation (“Sublandlord”), and JUNIPER NETWORKS, INC., a Delaware corporation (“Subtenant”). This Agreement is attached to and a substantive part of that certain First Amendment to Sublease (“First Amendment”) of even date herewith for the Building One Premises (which term shall include, if applicable, the Building One Expansion Space), to which this Agreement is attached as Exhibit D.

A. Subtenant, at Subtenant’s sole cost and expense, will be constructing certain initial alterations, additions and improvements (the “Initial Subtenant Improvements”) in the Building One Premises. All future alteration, additions and improvements to the Building One Premises shall be governed by the applicable terms and provisions of the Sublease and the Master Lease (as incorporated into the Sublease).

B. This Agreement describes the terms and conditions applicable to the design and construction of the Initial Subtenant Improvements. Capitalized terms used herein without definition shall have the same meaning as in the Sublease. The term “Sublease” as used herein shall mean the Sublease as modified by the First Amendment. The provisions of this Agreement shall supersede any conflicting provisions of the Sublease and First Amendment.

In consideration of the mutual covenants contained in this Agreement and in the First Amendment, Sublandlord and Subtenant hereby agree as follows:

I. INITIAL SUBTENANT IMPROVEMENTS

1. Generally. At Subtenant’s sole cost and expense, including payment within thirty (30) days of demand of (i) all related out-of-pocket costs incurred by Sublandlord and (ii) all related costs to which Master Landlord is entitled under the Master Lease, Subtenant shall perform the design and construction of Initial Subtenant Improvements in conformance with the Approved Plans (defined below). Sublandlord shall not charge any construction management fee, supervisory fee or plan review fee for time spent by Sublandlord personnel pertaining to the Initial Subtenant Improvements. The Initial Subtenant Improvements and the construction thereof shall comply in all respects with the terms and conditions of the Master Lease and the Sublease, provided that this Agreement shall control in the event of a conflict between this Agreement and the Sublease. Nothing in this Agreement shall be construed to in any way to limit the rights of Master Landlord under the Master Lease and the requirement that the Initial Subtenant Improvements and the construction thereof shall comply in all respects with the terms and conditions of the Master Lease. By way of example only, all approvals of Sublandlord described in or pursuant to this Agreement are expressly conditioned on Master Landlord’s explicit, unconditional, written approval of the matter approved by Sublandlord. Sublandlord shall have no responsibility with regard to Master Landlord’s approval except as expressly provided in this Agreement.

2. Preparation of Conceptual, Preliminary and Final Plans.

(a) Conceptual Plans. Subtenant shall prepare conceptual plans showing the Initial Subtenant Improvements (the “Conceptual Plans”), and shall deliver such Conceptual Plans to Sublandlord for approval. Sublandlord acknowledges and approves Subtenant’s use of Robinson Mills & Williams to prepare the Conceptual Plans, Preliminary Plans (as defined below), and Final Plans (as defined below).

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(b) Preliminary Plans. Based on the Conceptual Plans and in conformance therewith, Subtenant shall prepare preliminary design drawings and specifications for Initial Subtenant Improvements (“Preliminary Plans”), and shall deliver such Preliminary Plans to Sublandlord for approval. All specifications for Initial Subtenant Improvements shall be in accordance with the Interior Specification Standards attached as Schedule 1 to Exhibit C of the Master Lease, except as otherwise approved in writing by Sublandlord and Master Landlord in their sole discretion upon written request by Subtenant.

(c) Revision of Preliminary Plans. Within one (1) business day following receipt of the Preliminary Plans, Sublandlord shall forward the same to Master Landlord for its review and approval. Within five (5) business days after the actual receipt of Master Landlord’s response to such Preliminary Plans, Sublandlord shall provide a copy of Master Landlord’s actual response to Subtenant and either (i) approve, in writing, the Preliminary Plans or (ii) inform Subtenant in writing of Sublandlord’s specific objections to such Preliminary Plans, which objections must be reasonable. If Sublandlord does not provide such written notice within such five (5) business day period, then the Preliminary Plans shall be deemed to be approved by Sublandlord. In the event that Sublandlord has specific objections, the parties shall reach agreement as to what revisions should be made as soon as reasonably practicable.

(d) Final Plans. Once an agreement has been reached regarding revisions to the Preliminary Plans, Subtenant shall prepare final plans and specifications and working drawings (“Final Plans”) for Initial Subtenant Improvements. Within one (1) business day following receipt of the Final Plans, Sublandlord shall forward the same to Master Landlord for its review and approval. Within five (5) business days after the actual receipt of Master Landlord’s response to such Final Plans, Sublandlord shall either (i) approve, in writing, the Final Plans or (ii) inform Subtenant in writing of Sublandlord’s specific objections to such Final Plans, which objections must be reasonable. If Sublandlord does not provide such written notice within such five (5) business day period then the Final Plans shall be deemed to be approved by Sublandlord. In the event that Sublandlord has specific objections, the parties shall reach agreement regarding changes to the Final Plans as soon as is reasonably practicable.

(e) Sublandlord and Master Landlord Approvals. Sublandlord’s approval of the Conceptual Plans, Preliminary Plans and/or the Final Plans shall in no way be deemed (i) a determination that Initial Subtenant Improvements complies with applicable laws, regulations, ordinances or codes, or (ii) an implied warranty of the adequacy or sufficiency of the design or quality of any items shown therein. Sublandlord makes no representation or warranty whatsoever with regard to the probability of approval of the Initial Subtenant Improvements, the Conceptual Plans, Preliminary Plans, or Final Plans by Master Landlord or any governmental authority. Sublandlord shall reasonably cooperate with Subtenant and use commercially reasonable efforts to obtain Master Landlord’s approval and, when requested by Subtenant, shall sign any documents required to enable Subtenant to obtain a building permit and whatever authorizations are reasonably required to proceed with Initial Subtenant Improvements. Sublandlord shall not be deemed to have waived its right to approve or disapprove the Final Plans if Sublandlord has not approved the Final Plans at the time it signs such documents.

(f) Governmental Approvals. Subtenant shall cause the Final Plans to be submitted to the appropriate governmental authorities for approval. If the governmental authorities require any changes, Sublandlord and Subtenant shall reasonably cooperate to incorporate such changes into the Final Plans, and neither party shall unreasonably withhold or delay its approval of such changes. Once all required approvals of the Final Plans have been obtained from Sublandlord, Master Landlord and all appropriate governmental authorities, the Final Plans shall be deemed the “Approved Plans”.

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3. Construction.

(a) Generally. Subject to the approval of the Master Landlord (in accordance with the Master Lease) and Sublandlord (which approval shall not be unreasonably withheld), Subtenant shall retain a California-licensed general contractor, who shall be a union contractor (the “General Contractor”) to construct the Initial Subtenant Improvements using well-trained, adequately supervised workers, in a good and workmanlike manner, free from design, material, and workmanship defects in accordance with the Approved Plans and all Applicable Requirements. Subtenant shall promptly remedy all violations of this obligation at Subtenant’s sole cost and expense. Subtenant shall request and obtain from the General Contractor a written commitment for completing construction of the Initial Subtenant Improvements in accordance with the Approved Plans. All subcontractors, laborers, materialmen, and suppliers shall conduct their activities in and around the Premises, Buildings and Project in a harmonious relationship with all other subcontractors, laborers, materialmen and suppliers at the Premises, Buildings and Project, and, if necessary, union labor shall be employed to achieve such harmonious relations. Subtenant shall obtain Sublandlord’s prior written consent to each such subcontractor, which shall not be unreasonably withheld, conditioned or delayed. Sublandlord will respond in writing to Subtenant’s request for consent within five (5) business days from Sublandlord’s receipt of Subtenant’s written request. Subtenant shall not use any area outside the Building One Premises for construction staging or other construction-related purposes other than the area depicted on Schedule 1 as “staging area,” the use of which shall be limited to construction staging activities and subject to Sublandlord’s reasonable restrictions and rules.

(b) Change Orders. No change or modification to the Approved Plans or Initial Subtenant Improvements pursuant thereto (“Change Order”) may be made by Subtenant without the prior written consent of Sublandlord, which consent shall not be unreasonably withheld or delayed. Sublandlord will respond in writing to Subtenant’s submission of all requests for Sublandlord approval of Change Orders for Sublandlord approval within two (2) business days from Sublandlord’s actual receipt with respect to Change Orders having a cost of Two Thousand Dollars ($2,000) or less and within five (5) business days from Sublandlord’s actual receipt for all other Change Orders. All requests for Change Orders shall be made in writing. Once approved in writing by Sublandlord and all required approvals of Master Landlord and governmental authorities have been obtained, such Change Orders shall become a part of the Approved Plans.

(c) Removal of Initial Subtenant Improvements. The rights and obligations of the parties with respect to the removal of Initial Subtenant Improvements and restoration of the Premises shall be governed by Article 8 of the Sublease as modified by Section 9 of the First Amendment.

(d) Insurance.

i. General Coverages. The General Contractor and each subcontractor of the General Contractor shall carry worker’s compensation insurance covering all of its respective employees, and shall also carry commercial general liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Subtenant as set forth in Paragraph 9 of the Sublease.

ii. Special Coverages. Subtenant shall carry “Builder’s All Risk” insurance in an amount approved by Sublandlord covering the construction of Initial Subtenant Improvements, and such other insurance as Sublandlord may require, it being understood and agreed that Initial Subtenant Improvements shall be insured by Subtenant pursuant to Paragraph 9 of the Sublease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Sublandlord including, but not limited to, the requirement that the General Contractor and/or any or all of its subcontractors shall carry excess liability and Products and Completed Operation Coverage insurance, each in amounts not less than $1,000,000 per incident, $2,000,000 in aggregate, and in form and with companies as are required to be carried by-Subtenant as set forth in Paragraph 9 of the Sublease.

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iii. General Terms. Certificates for all insurance carried pursuant to this Section I.3(d) shall be delivered to Sublandlord before the commencement of construction of the Initial Subtenant Improvements and before any contractor’s equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will give Sublandlord thirty (30) days’ prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Initial Subtenant Improvements are damaged by any cause during the course of the construction thereof, Subtenant shall immediately repair the same at Subtenant’s sole cost and expense. The General Contractor and any of its subcontractors that are not covered under an umbrella policy of the General Contractor, shall each maintain all of the foregoing insurance coverage in force until the Initial Subtenant Improvements is fully completed and accepted by Sublandlord. All policies carried under this Section I.3(d) shall insure Master Landlord, Sublandlord and Subtenant, as their interests may appear, as well as the General Contractor. All insurance, except Workers’ Compensation, maintained by the General Contractor and each of its subcontractors shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance with respect to the Sublandlord and that any other insurance maintained by Sublandlord is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Sublandlord by Subtenant under the Sublease or Section I.3(e) of this Agreement.

(e) Indemnity. Subtenant’s indemnity as set forth in Paragraph 10 of the Sublease (including any limitations or restrictions set forth therein) shall apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Subtenant or Subtenant’s contractors, subcontractors, laborers, materialmen, suppliers and design professionals and other hirees, or anyone directly or indirectly employed by any of them, or in connection with Subtenant’s non-payment of any amount arising out of the Initial Subtenant Improvements and/or Subtenant’s disapproval of all or any portion of any request for payment. Such indemnity by Subtenant, as set forth in Paragraph 10 of the Sublease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Sublandlord’s and Master Landlord’s performance of any ministerial acts reasonably necessary (i) to permit Subtenant to complete the Initial Subtenant Improvements, and (ii) to enable Subtenant to obtain any building permit or certificate of occupancy for the Premises.

(f) Requirements of General Contractor. Subtenant shall cause the General Contractor to provide an express written warranty that the Initial Subtenant Improvements shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof, such that the General Contractor is responsible for the replacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) year after completion of the Initial Subtenant Improvements. Said warranty shall require the General Contractor to pay for all additional expenses and damages incurred in connection with such replacement or repair, including without limitation any damage or disturbance to the Premises, Buildings, or Common Areas caused thereby. Subtenant covenants to enforce any contractor guarantees and warranties for the benefit of Sublandlord where Sublandlord’s interests may appear and, if necessary to give Sublandlord the full benefit of such protection, shall give to Sublandlord any assignment or other assurances which may be necessary to effect a right of direct enforcement.

(g) Assumption of the Risk. Subtenant accepts, assumes and shall be solely responsible for all risks for the construction and installation of the Initial Subtenant Improvements other than for risks resulting from the active negligence or willful misconduct of Sublandlord or Sublandlord’s employees, agents, contractors or subcontractors.

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(h) Mechanics Liens and Releases. Upon final completion of the Initial Subtenant Improvements, Subtenant shall obtain from the General Contractor and each subcontractor, materialman, supplier and design professional an unconditional lien release, signed and notarized by such party, and shall provide copies of each such release to Sublandlord. Subtenant shall not suffer or permit any lien of a contractor, subcontractor, materialman, supplier, design professional, or other to be placed against the Building, the Building One Premises, the Master Lease or the Sublease, or any portion thereof, with respect to work or services performed or claimed to have been performed for Subtenant or materials furnished or claimed to have been furnished to Subtenant or the Building One Premises. Sublandlord has the right at any time to post and keep posted on the Building One Premises any notice that it considers necessary for protection from such liens. At least ten (10) days before beginning construction of any of the Initial Tenant Alterations, Subtenant shall give Sublandlord written notice of the expected commencement date of that construction to permit Sublandlord to post and record a notice of non-responsibility. If any such lien attaches or Subtenant receives notice of any such lien, Subtenant shall cause the lien to be promptly released and removed of record. Despite any other provision of this Agreement, if the lien is not released and removed within twenty (20) days after Sublandlord delivers notice of the lien to Subtenant, Sublandlord may immediately take all action necessary to release and remove the lien, without any duty to investigate the validity of it. All expenses (including reasonable attorneys’ fees and the cost of any bond) incurred by Sublandlord in connection with the lien incurred by Subtenant or its removal shall be considered additional rent under the Sublease and be immediately due and payable by Subtenant.

(i) As Built Plans. Within sixty (60) days following the substantial completion of the Initial Subtenant Improvements, Subtenant shall provide Sublandlord and Master Landlord with a set of “as built” plans, drawings and specifications for the Initial Subtenant Improvements.

II. GENERAL TERMS.

1. No Partnership. Nothing in this Agreement shall cause Sublandlord and Subtenant to be partners or joint venturers.

2. Representatives. Subtenant has designated Troy Ward as its sole representative(s) with respect to the matters set forth in this Agreement, who, until further notice to Sublandlord, shall have full authority and responsibility to act on behalf of Subtenant as required in this Agreement. Sublandlord has designated Mark Pietrone as its sole representative(s) with respect to the matters set forth in this Agreement, who, until further notice to Subtenant, shall have full authority (excepting signature authority) and responsibility to act on behalf of Sublandlord as required in this Agreement.

SUBLANDLORD:		SUBTENANT:
ARIBA, INC., a Delaware Corporation		JUNIPER NETWORKS, INC. a Delaware Corporation
By:	/s/ James W. Frankola	By:	/s/ John Lucas
Title:	Executive Vice President and Chief Financial Officer	Title:	Senior Director Corporate Real Estate
Date:	6/15/107	Date:	6/15/07

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SCHEDULE ONE

Map of Staging Area Appears Here

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EXHIBIT E

FIRST AMENDMENT TO RECOGNITION AGREEMENT

This First Amendment to Recognition Agreement (“First Amendment”) is made and entered into as of June 15, 2007, by and among Moffett Park Drive LLC, a California limited liability company (“Moffett”), Ariba, Inc., a Delaware corporation (“Ariba”), and Juniper Networks, Inc., a Delaware corporation, successor-in-interest to NetScreen Technologies, Inc., a Delaware corporation (“Juniper”).

RECITALS

A. Moffett, as lessor, and Ariba, as lessee, entered into the Technology Corners Triple Net Multiple Building Lease dated March 15, 2000, pursuant to which Moffett leases to Ariba certain premises including the buildings commonly known as Buildings 1, 2, 3 and 4 at 1111 Lockheed Martin Way, Sunnyvale, California, with individual addresses for those buildings on Eleventh Avenue in Sunnyvale, California, and a related amenity building (the “Amenity Building”) (together, the “Premises”). The initial lease has been amended by a letter agreement dated September 11, 2000, a First Amendment to Lease dated January 12, 2001, a Second Amendment to Lease dated of even date herewith (the “Second Amendment”),and a Third Amendment to Lease dated October 21, 2004, which, together with the initial lease and referred to herein as the “Master Lease.” All capitalized terms used in this Sublease Consent and not defined herein have the same meaning as in the Master Lease.

B. Ariba sublet to NetScreen Technologies, Inc., a portion of the Premises (such portion herein called the “Sublease Premises”) pursuant to a Sublease Agreement dated October 18, 2002, a copy of which is attached hereto as Exhibit A (the “Sublease”). The Sublease Premises consist of approximately 177,624 rentable square feet of space consisting of most of the building commonly known as 805 Eleventh Avenue, Sunnyvale, California, and a portion of the first floor of the building commonly known as 809 Eleventh Avenue, Sunnyvale, California, all as more particularly described in the Sublease. Moffett, Ariba and Netscreen Technologies, Inc., entered into a Recognition Agreement dated October 31, 2002 (“Recognition Agreement”) with respect to the Sublease Premises and concurrently Moffett consented to the Sublease pursuant to a written Consent To Sublease (“Sublease Consent”).

C. Moffett, Ariba and Juniper now enter into this First Amendment to facilitate the expansion of the Sublease Premises pursuant to the terms and conditions of the First Amendment to Sublease dated June 15, 2007 (“First Amendment to Sublease”) between Ariba and Juniper and ratify the terms and conditions of the Sublease, Sublease Consent and Recognition Agreement as the same shall apply to the Premises and Building One Expansion Space as the same are defined in the First Amendment to Sublease.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Moffett, Ariba and Juniper agree as follows:

1. Moffett, Ariba and Juniper acknowledge and agree that pursuant to this First Amendment the Recognition Agreement terms, covenants and conditions shall apply to the expanded Sublease Premises and Building One Expansion Space (as such terms are defined in the First Amendment to Sublease).

2. Except to the extent not permitted by the continued possession of Ariba or restricted by court order or other legal constraint, the provisions of this First Amendment shall be self-executing upon the occurrence of a Recognition Event (as such term is defined in the Recognition Agreement); provided, however, either Moffett or Juniper shall execute and deliver at the other’s request an instrument confirming Juniper’s attornment and other obligations pursuant to the Recognition Agreement as the same is amended by this First Amendment and Moffett’s agreement to be bound by the terms of the Sublease as modified pursuant to the Sublease, Sublease Consent, First Amendment to Sublease, Recognition Agreement and this First Amendment.

3. Except as expressly modified by this First Amendment, (i) nothing in this First Amendment shall be deemed to change in any manner the provisions of the Master Lease as between Moffett and Ariba or to waive any right that either Moffett or Ariba may now have or later acquire against the other by reason of the Master Lease, and (ii) nothing in this First Amendment shall be deemed to change in any manner the provisions of the Sublease as amended by the First Amendment to Sublease as between Ariba and Juniper or to waive any right that Ariba or Juniper may now have or later acquire against the other by reason of the First Amendment to Sublease.

4. Upon a Recognition Event, the Sublease as amended by that certain First Amendment to Sublease shall be deemed modified such that all references to “Subtenant” shall be deemed to be “Tenant” (i.e., Juniper) and all references to “Ariba” or “Sublandlord” shall be deemed to be “Landlord” (i.e., Moffett) and certain provisions of the Sublease as amended by that certain First Amendment to Sublease shall either be amended or deleted in their entirety, as more particularly described in the Recognition Agreement.

5. Juniper, Ariba and Moffett each represents and warrants to each other that they have no obligation to any broker or agent other than those listed in the First Amendment to Sublease with respect to this First Amendment and the transaction contemplated hereunder and each shall indemnify, defend, protect and hold the other harmless as to any claim or liability based upon a contrary claim or a claim made by a broker claiming through such party against another party hereto.

6. If any lender of Moffett requires a modification of the Sublease (as the same is modified by the Sublease Consent, the Recognition Agreement, the First Amendment to Sublease and this First Amendment) that will not increase Juniper’s cost of expense or materially and adversely change Juniper’s rights and obligations, the Sublease shall be so modified and Juniper shall execute whatever reasonable documents are reasonably required by such lender and deliver them to Moffett within ten (10) business days after delivery of the same.

7. All notices required or permitted by this First Amendment or applicable law shall be in writing and may be delivered in person (by hand or courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail or other nationally-recognized overnight courier, with postage prepaid and shallb deemed given o the date delivered or, if refused, on the first date delivery was attempted or refused. Any Party may by written notice to the other specify a different address for notice.

Moffett:

Moffett Park Drive LLC

c/o Jay Paul Company

350 California Street, Suite 1905

San Francisco, CA 94111

Attention: Mr. Matt Lituchy

With copy to:

Ariba:

Ariba, Inc.

807 Eleventh Avenue

Sunnyvale, CA 94089

Attn: General Counsel

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With copy to:

Ariba, Inc.

210 Sixth Avenue

Pittsburg, PA 15222

Attn: Real Estate Manager

Juniper:

Juniper Networks, Inc.

1194 N. Mathilda Ave.

Sunnyvale, CA 94089

Attn: Vice President of Real Estate Legal Department

With copy to:

Juniper Networks, Inc.

1194 N. Mathilda Ave.

Sunnyvale, CA 94089

Attn: Legal Department

With copy of all notices to:

The Staubach Company

15601 Dallas Parkway, Suite 400

Addision, Texas 75001

Attn: Lease Administration

With copy of all default notices to:

Reed Smith LLP

Two Embarcadero Center, Suite 2000

San Francisco, CA 94111

Attn: Simon T. Adams, Esq.

8. Miscellaneous Provisions.

(a) This First Amendment, together with the provisions of the Sublease, Sublease Consent, First Amendment to Sublease, Recognition Agreement, Master Lease and consent to First Amendment to Sublease, contains the entire agreement among the parties hereto regarding the matters which are the subject of this First Amendment. The terms, covenants and conditions of this First Amendment shall apply to and bind the permitted heirs, successors, assigns, executors and administrators of all the parties hereto. The parties hereto acknowledge and agree that no rule of construction, to the effect that any ambiguities are to be resolved against the drafting party, shall be employed in the interpretation of this First Amendment. If any provision of this First Amendment is determined to be illegal or unenforceable, such determination shall not affect any other provisions of this First Amendment and all such other provisions shall remain in full force and effect.

(b) Moffett, Ariba and Juniper each for itself certifies that no voluntary or involuntary petition under the Bankruptcy Code (II U.S.C. §§ 101 et seq.) has been filed by or against it and that it is not presently entitled to relief under the Bankruptcy Code.

(c) By signing this First Amendment, each of the persons signing this First Amendment on behalf of the parties certifies that he or she is authorized to execute this First Amendment and to bind his

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or her respective party to the terms of this First Amendment and that all corporate action necessary to authorize the execution of this First Amendment by each respective party has been taken and is presently in force and effect.

(d) This First Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and when taken together they shall constitute one and the same.

(e) Ariba waives any requirement under California unlawful detainer statutes or otherwise that Moffett name or serve Juniper with any default notice given under the Master Lease or to name or make Juniper a party to any eviction proceedings. Moffett may seek and recover possession of the Premises from Ariba pursuant to the terms of the Master Lease (including the Sublease Premises) without recovering possession from Juniper. Conversely, to the extent Moffett deems it necessary or appropriate to name and/or serve Juniper with notice and/or to make Juniper a party to such proceedings, the same shall not be deemed a violation of any duty owed by Moffett to Juniper and upon termination of the Master Lease pursuant to such proceedings, the terms and conditions of the Recognition Agreement as amended by this First Amendment shall apply.

(f) In the event that any legal action or proceeding, including, without limitation, arbitration and declaratory relief, is commenced with respect to any matter arising from or related to the Premises, Building One Expansion Space or this First Amendment or for the purpose of enforcing or seeking a declaration of any rights or remedies pursuant to this First Amendment, the prevailing party or parties shall be entitled to recover from the non-prevailing party or parties reasonable attorneys’ fees, as well as costs of suit, in such action or proceeding, whether or not such action is prosecuted to final judgment.

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IN WITNESS WHEREOF, Moffett, Ariba and NetScreen have executed this Recognition Agreement as of the day and year first hereinabove written.

“MOFFETT”		“JUNIPER”
Moffett Park Drive LLC a California limited liability company		Juniper Networks, Inc., a Delaware corporation
By:	GATEWAY LAND COMPANY, INC., a California corporation, its managing member
By:		By:
	(type or print name)		(type or print name)
Its:		Its:
“ARIBA”
Ariba, Inc., a Delaware corporation
By:
	(type or print name)
Its:

EX-10.46

EXHIBIT 10.46

FOURTH AMENDMENT TO LEASE

THIS FOURTH AMENDMENT TO LEASE (“Amendment”) is made as of July 6, 2007 between MOFFETT PARK DRIVE LLC, a California limited liability company (“Lessor”), and ARIBA, INC., a Delaware corporation (“Lessee”).

THE PARTIES ENTER INTO THIS AMENDMENT based upon the following facts, understandings and intentions:

A. Lessor and Lessee are now parties to that certain Technology Corners Triple Net Multiple Building Lease dated March 15, 2000, as amended by a letter agreement dated September 11, 2000 and by a First Amendment to Lease dated January 12, 2001 and a Second Amendment to Lease dated October 31, 2002 and a Third Amendment to Lease dated October 21, 2004 (as amended, the “Lease”), whereby Lessor leases to Lessee, and Lessee leases from Lessor, certain premises (the “Premises”) located at 1111 Lockheed Martin Way (also known as 801-809 Eleventh Avenue) in Sunnyvale, California, including four (4) free standing, four-story office and research and development buildings and one (1) amenity building.

B. Lessee and Juniper Networks, Inc., a Delaware corporation (a successor in interest to NetScreen Technologies, Inc. “Juniper”) have entered into that certain Sublease dated as of October 18, 2002 (the “Juniper Sublease”) pursuant to which Lessee sublets to Juniper, and Juniper sublets from Lessee, a portion of the Premises comprised of most of Building Three of the Project, consisting of approximately one hundred seventy-two thousand nine hundred seventeen (172,917) rentable square feet of space (the “Building 3 Sublease Premises”) and a portion of the first floor of Building Four of the Project, consisting of approximately four thousand seven hundred and seven (4,707) rentable square feet of space(the “Building 4 Sublease Premises”), subject to certain rights of Juniper to expand its subleased portion of Building Four as more particularly described in the Juniper Sublease. Lessor, Lessee and Juniper have each executed a Consent to Sublease, dated October 31, 2002 (“Consent to Sublease”) and Recognition Agreement, dated October 31, 2002 (“Recognition Agreement”) with respect to the Juniper Sublease.

C. Lessee and Juniper have entered into that certain First Amendment to Sublease dated as of June 15, 2007 (the “Juniper First Amendment”) pursuant to which: (i) Lessee extends the term of the sublease for the Building 3 Sublease Premises and the Building 4 Sublease Premises to January 24, 2013, and (ii) Lessee sublets to Juniper, and Juniper sublets from Lessee, a portion of the Premises comprised of the third and fourth floors of Building One of the Project, consisting of approximately eighty-eight thousand seven hundred forty-two (88,742) rentable square feet of space and subject to certain rights of Juniper to expand its subleased premises to include the first and second floors of Building One, consisting of approximately eighty-six thousand three hundred forty (86,340) rentable square feet of space, as more particularly described in the Juniper First Amendment. Lessor, Lessee and Juniper have each executed a Consent to Sublease Amendment (“Consent to Sublease Amendment”) and First Amendment to Recognition Agreement dated June 15, 2007 (“First Amendment to Recognition Agreement”) with respect to the Juniper First Amendment.

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D. Pursuant to Section 11.01 of the Lease, Lessor’s written consent to the Juniper First Amendment is required. Lessee is required to reimburse Lessor for all of Lessor’s reasonable costs and expenses (including attorneys’ fees, architect fees and engineering fees) involved in reviewing any request for consent to a subletting of the Premises.

E. Pursuant to Section 4.06 of the Lease, Lessee has deposited with Lessor’s lender, inter alia, that certain JP Morgan Chase standby letter of credit No. TPTS-268315 in favor of Borrower and Lender as co-beneficiaries for the account of Tenant in the original stated amount of $5,000,000.00 (together with all and any replacement or renewal letters of credit, the “Second Additional Security Deposit”), subject to certain scheduled reductions described therein (e.g., in accordance with the scheduled reductions on October 29, 2006, the maximum amount available for drawing thereunder is Three Million Dollars ($3,000,000.00).

F. Lessor is willing to consent to the Juniper First Amendment, but only if the Lease is amended as more particularly described below.

G. The parties hereto desire to modify the Lease as hereinafter provided. Capitalized terms used herein shall have the same meaning given them in the Lease.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties, the parties hereto agree as follows:

1. Modification of Second Additional Security Deposit. Within ten (10) business days after the date on which this Amendment is executed by Lessor and Lessee, Lessee shall cause the Second Additional Security Deposit to be modified and reissued such that, notwithstanding anything to the contrary in the Lease, the amount of the Second Additional Security Deposit shall not be reduced below Two Million Five Hundred Thousand Dollars ($2,500,000.00) during the Term of the Lease. The Second Additional Security Deposit, the Additional Security Deposit, and the Security Deposit, together in the current aggregate amount of Twenty-Nine Million Three Hundred Forty Thousand Dollars ($29,340,000), shall be held by Lessor in the manner, and subject to the terms of Section 4.06 of the Lease, except that the last sentence of such Section 4.06 shall not apply to either the Second Additional Security Deposit or the Additional Security Deposit. At Lessor’s request, any future lender to Lessor shall be named as co-beneficiary under each of the Second Additional Security Deposit, the Additional Security Deposit, and the Security Deposit delivered pursuant to Section 4.06 of the Lease, together with any renewals supplements, amendments or substitutions thereof, provided that Lessee’s obligation to name any future lender as co-beneficiary under such letters of credit may be upon such lender and Lessor executing a tri-party agreement substantially in the form attached hereto as Exhibit A. Lessee’s failure to execute and deliver any such tri-party agreement within ten (10) days of Lessor’s request therefor shall be an event of default under Section 12.01(c) of the Lease. The Second Additional Security Deposit, as modified and re-issued hereunder, shall be held by Lessor as security for the faithful performance by Lessee of all of the terms, covenants, and conditions of the Lease applicable to Lessee. Lessor may, in Lessor’s sole discretion, make a draw request against any of the Security Deposit described in Section 4.06 of the Lease and/or the Additional Security Deposit as described in the Second Amendment to the Lease, and/or the Second Additional Security Deposit described hereunder, to the extent such draws are allowed pursuant to the terms of the Lease.

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2. Consent Fees. Notwithstanding anything to the contrary in the Lease, within fifteen (15) days after request therefor, together with copies of invoices supporting such request, Lessee shall pay to Lessor the amount of any and all of Lessor’s costs and expenses (including but not limited to attorneys’ fees, architect fees, engineering fees and fees incurred in the review of the Work Letter attached to the Juniper First Amendment and related plans) incurred in connection with Lessor’s review of the Juniper First Amendment and related documents (including but not limited to this Amendment).

3. Full Force and Effect. Lessee and Lessor acknowledge and ratify that nothing herein has modified the security interest in certain furniture granted by Lessee to Lessor under the Second Amendment. Except as herein amended and supplemented, the Lease Documents shall continue in full force and effect as written.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment with duplicate counterparts as of the day and year first above written.

“Lessor”
MOFFETT PARK DRIVE LLC, a California limited liability company
By: GATEWAY LAND COMPANY, INC., a California corporation
By:	/s/ Jay Paul
Name:	Jay Paul
Title:	President
“Lessee”
ARIBA, INC., a Delaware corporation
By:	/s/ Wayne Kimber
Name:	Wayne Kimber
Title:	VP, Corporate Controller

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EXHIBIT A

TRI-PARTY AGREEMENT

This Tri-Party Agreement is made and entered into as of July     , 2007, by and among MOFFETT PARK DRIVE LLC, a California limited liability company (“Borrower”), ARIBA, INC., a Delaware corporation (“Tenant”) and BANK OF AMERICA, N.A., a national banking association (“Lender”).

RECITALS

A. On or about March 15, 2000, Borrower and Tenant entered into that certain “Technology Corners Triple Net Multiple Building Office Lease”, as amended by a First Amendment to Lease dated January 12, 2001 and a Second Amendment to Lease dated October 31, 2002 (“Second Amendment”), a Third Amendment to Lease dated October 21, 2004 (“Third Amendment”) and a Fourth Amendment to Lease dated July     , 2007 (“Fourth Amendment”) (as the same is or may hereafter be amended from time to time, the “Lease”) whereby Tenant agreed to lease from Borrower, and Borrower agreed to Lease to Tenant, that certain real property located at 1111 Lockheed Martin Way, Sunnyvale, Santa Clara County, California more particularly described on Exhibit A hereto (the “Property”) together with any and all improvements now or hereafter located on the Property (collectively together with the Property, the “Premises”) on and subject to the terms and conditions set forth in the Lease.

B. Pursuant to Section 4.06 of the Lease, Tenant has caused JP Morgan Chase Bank, N.A.to issue its irrevocable standby letter of credit No. [                    ] in favor of Borrower and Lender as co-beneficiaries for the account of Tenant in the stated amount of $25,740,000 (together with all and any replacement or renewal letters of credit, the “Security Deposit Letter of Credit”). Additionally, pursuant to Section 1 of the Second Amendment, Tenant has caused JP Morgan Chase Bank, N.A. to issue an irrevocable standby letter of credit in favor of Borrower and Lender as co-beneficiaries for the account of Tenant in the stated amount of $600,000 (together with all and any replacement or renewal letters of credit, the “Additional Security Deposit Letter of Credit”). Further, pursuant to Section 1 of the Third Amendment, Tenant has caused JP Morgan Chase Bank, N.A. to issue an irrevocable standby letter of credit in favor of Borrower and Lender as co-beneficiaries for the account of Tenant in the original stated amount of $5,000,000.00, subject to certain scheduled reductions described therein, (together with all and any replacement or renewal letters of credit, the “Second Additional Security Deposit Letter of Credit” and, together with the Security Deposit Letter of Credit and the Additional Security Deposit Letter of Credit, the “Letters of Credit”).

C. On or about June     , 2006, Borrower and Lender entered into a Loan Agreement whereby Lender agreed to make a $190,000,000 loan (the “Loan”) to Borrower. The Loan Agreement, together with all other documents and instruments evidencing, securing or relating to the Loan are referred to herein as the “Loan Documents.”

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D. Pursuant to the Loan Agreement, Borrower agreed to cause all of the Letters of Credit to be reissued so as to name both Lender and Borrower as co-beneficiaries or to be transferred into the name of Lender.

E. Tenant is willing to cooperate with Borrower and Lender in the reissuance of the Letters of Credit so as to name both Lender and Borrower as co-beneficiaries so that any letters of credit issued on behalf of Tenant as security under the Lease name both Lender and Borrower as co-beneficiaries so that, subject to Section 4.06 of the Lease, Lender can draw on the Letters of Credit without the signature or action of Borrower, but only if Borrower and Lender enter into this Agreement.

F. Now, therefore, in consideration of the foregoing and the covenants and agreements contained herein, and for other good and valuable consideration, the parties hereto agree as follows:

AGREEMENT

1. Re-Issuance of Letters of Credit. Borrower and Tenant agree to cause the Security Deposit Letter of Credit to be reissued in the form attached hereto as Exhibit B, to cause the Additional Security Deposit Letter of Credit to be reissued in the form attached hereto as Exhibit C, and to cause the Second Additional Security Deposit Letter of Credit to be reissued in the form attached hereto as Exhibit D. [Need attachments.]

2. Agreements of Lender. Lender agrees, for itself and for all of the other lenders who now or hereafter may hold an interest in the Loan, that:

3. As between Lender and Tenant and between Borrower and Tenant, the provisions of Section 4.06 of the Lease shall govern and control (i) any and all drawings under the Security Deposit Letter of Credit, (ii) the use and application of the proceeds of any and all drawings on the Security Deposit Letter of Credit, and (iii), if applicable, the return of the Security Deposit Letter of Credit and/or any proceeds of any and all drawings thereon;

4. Lender shall only be entitled to draw on the Security Deposit Letter of Credit if and to the extent Borrower is entitled to draw on the Security Deposit Letter of Credit pursuant to the provisions of Section 4.06 of the Lease;

5. As between Lender and Tenant and between Borrower and Tenant, the provisions of Section 4.06 of the Lease shall govern and control (i) any and all drawings under the Additional Security Deposit Letter of Credit, (ii) the use and application of the proceeds of any and all drawings on the Additional Security Deposit Letter of Credit, and (iii), if applicable, the return of the Additional Security Deposit Letter of Credit and/or any proceeds of any and all drawings thereon;

6. Lender shall only be entitled to draw on the Additional Security Deposit Letter of Credit if and to the extent Borrower is entitled to draw on the Additional Security Deposit Letter of Credit pursuant to the provisions of Section 4.06 of the Ariba Lease.

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7. As between Lender and Tenant and between Borrower and Tenant, the provisions of Section 4.06 of the Lease shall govern and control (i) any and all drawings under the Second Additional Security Deposit Letter of Credit, (ii) the use and application of the proceeds of any and all drawings on the Second Additional Security Deposit Letter of Credit, and (iii), if applicable, the return of the Second Additional Security Deposit Letter of Credit and/or any proceeds of any and all drawings thereon;

8. Lender shall only be entitled to draw on the Second Additional Security Deposit Letter of Credit if and to the extent Borrower is entitled to draw on the Second Additional Security Deposit Letter of Credit pursuant to the provisions of Section 4.06 of the Ariba Lease.

9. The foregoing notwithstanding, as between Lender and Borrower, the provisions of the Loan Documents shall govern and control which of Borrower or Lender shall have the right to make drawings on the Letters of Credit, whether the proceeds of any drawing under the Letters of Credit shall be paid to Borrower or retained by Lender, the order of application of the proceeds of any drawing under the Letters of Credit against the obligations of Borrower under the Loan Documents and any similar or related matters

10. General Provisions.

11. This Agreement, its construction, interpretation, and enforcement, and the rights of the parties hereto with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the laws of the State of California without giving effect to its conflict of laws principles.

12. This Agreement constitutes the entire understanding among the parties hereto with respect to the matters contemplated herein, and this Agreement cannot be amended, modified or discharged in any way except by written instrument signed by the parties hereto.

13. Any provision of this Agreement which is prohibited, invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, invalidity, illegality or unenforceability without invalidating, affecting or impairing the validity, legality or enforceability of the remaining provisions hereof, and any such prohibition, invalidity, illegality or unenforceability in any such jurisdiction shall not invalidate, affect or impair the validity, legality or enforceability of such provision in any other jurisdiction.

14. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns. Without limiting the generality of the foregoing, any successor to Lender under the Loan Documents or any other person or entity to whom Lender transfers its interest in any of the Letters of Credit (whether through assignment, reissuance of said Letter(s) of Credit or otherwise) who is not the Landlord under the Lease shall acknowledge and agree in writing, for the benefit of Tenant, that it is and shall be bound by the terms and provisions of this Agreement, a copy of which written agreement shall be provided to Tenant.

15. If any party to this Agreement shall bring any action or proceeding for any relief against the other, declaratory or otherwise, arising out of this Agreement, the losing party

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shall pay to the prevailing party reasonable attorney’s fees and costs incurred in bringing or defending such action or proceeding and/or enforcing any judgment granted therein, all of which shall be deemed to have accrued upon the commencement of such action or proceeding and shall be paid whether or not such action or proceeding is prosecuted to final judgment. Any judgment or order entered in such action or proceeding shall contain a specific provision providing for the recovery of attorney’s fees and costs, separate from the judgment, incurred in enforcing such judgment.

16. Neither the Lease nor any of the Loan Documents are modified by this Agreement.

This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and same instrument.

[NO FURTHER TEXT ON THIS PAGE]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

“LENDER”			“TENANT”
BANK OF AMERICA, a national banking association			ARIBA, INC., a Delaware corporation
By:			By:
Its:			Its:
“LANDLORD” MOFFETT PARK DRIVE LLC, a California limited liability company
By:	Gateway Land Company, Inc., a California corporation, Member and Manager
	By:
		Jay Paul Its President
By:
	Jay Paul, Member

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EXHIBIT A

REAL PROPERTY DESCRIPTION

LEGAL DESCRIPTION

Real property in the City of Sunnyvale, County of Santa Clara, State of California, described as follows:

PARCEL A:

PARCEL 1, PARCEL 2, PARCEL 3, PARCEL 4, AND PARCEL 5, SO DESIGNATED AND DELINEATED ON THE PARCEL MAP RECORDED JUNE 1, 2001 IN BOOK 740 OF MAPS, PAGES 7 AND 8, SANTA CLARA COUNTY RECORDS.

PARCEL B:

BEING A PORTION OF PARCEL 5, AS SHOWN ON THAT CERTAIN PARCEL MAP FINED IN THE OFFICE OF THE RECORD OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JUNE 1, 2001 IN BOOK 740 OF MAPS, PAGES 7 AND 8,

EXCEPTING THEREFROM THAT PORTION THEREOF DESIGNATED AS “PROPOSED LANDS OF THE VTA” AND DELINEATED ON SAID PARCEL MAP, MORE PARTICULARLY DESCRIBED IN THE DEED BY MOFFETT PARK DRIVE LLC TO THE SANTA CLARA VALLEY TRANSPORTATION AUTHORITY RECORDED JUNE 1, 2001, DOCUMENT NO. 15705133, OFFICIAL RECORDS AND A PORTION OF LOT 1, AS SHOWN ON THAT CERTAIN MAP ENTITLED “TRACT NO. 9800, MOFFETT PARK SUBDIVISION”, FILED FOR RECORD JUNE 14, 2006 IN BOOK 802 OF MAPS AT PAGES 7- 14, SANTA CLARA COUNTY RECORDS MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 5;

THENCE ALONG THE NORTHERLY PROPERTY LINE OF SAID PARCEL 5 NORTH 75°07’40” WEST A DISTANCE OF 1199.13 FEET TO A POINT ALONG THE PROPERTY LINE OF SAID LOT 1; THENCE ALONG THE PROPERTY LINE OF SAID LOT 1, THE FOLLOWING (2) COURSES:

1. NORTH 15°22’44” EAST, 1.80 FEET;

2. NORTH 75°07’40” WEST, 71.90 FEET;

THENCE LEAVING SAID PROPERTY LINE, THE FOLLOWING SEVEN (7) COURSES:

1. SOUTH 14°52’04” WEST, 269.53 FEET TO THE BEGINNING OF A TANGENT CURVE, CONCAVE TO THE WEST, HAVING A RADIUS OF 837.00 FEET;

2. SOUTHERLY, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 11°53’01” AND AN ARC DISTANCE OF 173.60 FEET TO THE BEGINNING OF A REVERSE CURVE, CONCAVE TO THE EAST, HAVING A RADIUS OF 1163.00 FEET;

3. SOUTHERLY, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 21°31’55” AND AN ARC DISTANCE OF 437.06 FEET;

4. SOUTH 05°13’10” WEST, 17.23 FEET TO THE BEGINNING OF A TANGENT CURVE, CONCAVE TO THE EAST, HAVING A RADIUS OF 50.00 FEET;

5. SOUTHERLY, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 14°25’06” AND AN ARC DISTANCE OF 12.58 FEET;

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6. SOUTH 09°11’56” EAST, 52.20 FEET TO THE BEGINNING OF A TANGENT CURVE, CONCAVE TO THE WEST, HAVING A RADIUS OF 150.00 FEET;

7. SOUTHERLY, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 24°34’32” AND AN ARC LENGTH OF 64.34 FEET TO A POINT ON THE SOUTHERLY PROPERTY LINE OF SAID PARCEL 5;

THENCE ALONG THE PROPERTY LINE OF SAID PARCEL 5, THE FOLLOWING TWO (2) COURSES:

1. NORTH 88°09’33” EAST, 74.20 FEET;

2. SOUTH 05°45’46” WEST, 76.95 FEET TO THE NORTHWESTERLY CORNER OF THE LANDS DESIGNATED AS “PROPOSED LANDS OF VTA” AND DELINEATED ON SAID PARCEL MAP, MORE PARTICULARLY DESCRIBED IN THE DEED BY MOFFETT PARK DRIVE LLC TO THE SANTA CLARA VALLEY TRANSPORTATION AUTHORITY RECORDED JUNE 1, 2001, DOCUMENT NO. 15705133, OFFICIAL RECORDS THENCE ALONG THE PROPERTY LINE OF SAID LANDS, THE FOLLOWING TWO (2) COURSES:

1. NORTH 88°09’36 EAST, 351.28 FEET;

2. SOUTH 01°50’24” EAST, 10.00 FEET TO A POINT ON THE SOUTHERLY PROPERTY LINE OF SAID PARCEL 5;

THENCE ALONG THE PROPERTY LINE OF SAID PARCEL 5, THE FOLLOWING FOUR (4) COURSES:

1. NORTH 88°09’36” EAST, 199.44 FEET TO THE BEGINNING OF A TANGENT CURVE, CONCAVE TO THE NORTH, HAVING A RADIUS OF 3655.90 FEET;

2. EASTERLY, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 01°33’45” AND AN ARC LENGTH OF 99.70 FEET TO THE BEGINNING OF A COMPOUND CURVE, CONCAVE TO THE NORTH, HAVING A RADIUS OF 2739.15 FEET;

3. EASTERLY, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 12°37’47” AND AN ARC LENGTH OF 603.79 FEET;

4. NORTH 14°52’20” EAST, 638.82 FEET TO THE POINT OF BEGINNING OF THIS DESCRIPTION. AND BEING PARCEL A AS SHOWN ON THAT CERTAIN CERTIFICATE OF COMPLIANCE (LOT LINE ADJUSTMENT) RECORDED FEBRUARY 14, 2007 AS INSTRUMENT NO. 19303928, OFFICIAL RECORDS.

TOGETHER WITH AND AS APPURTENANT TO ALL OF SAID LAND, A NON-EXCLUSIVE EASEMENT AND RIGHT OF INGRESS AND EGRESS UPON, OVER, ABOVE AND BENEATH A STRIP OF LAND 90.00 FEET IN WIDTH CONTIGUOUS TO AND EASTERLY OF THE WESTERLY BOUNDARY LINE (BEARING NORTH 15° 22’ 20” EAST, 1441.06 FEET) OF THE PARCEL OF LAND DESCRIBED IN THE DEED FROM LOCKHEED AIRCRAFT CORPORATION TO THE UNITED STATES OF AMERICA RECORDED JUNE 24, 1958 IN BOOK 4105, PAGE 694, OFFICIAL RECORDS, TO INSTALL, OPERATE, USE, AND MAINTAIN A STORM DRAIN, DESCRIBED AS RESERVED (1) (B) IN SAID DEED FROM LOCKHEED AIRCRAFT CORPORATION TO THE UNITED STATES OF AMERICA.

ALSO TOGETHER WITH AND AS APPURTENANT TO ALL OF SAID LAND, NON-EXCLUSIVE EASEMENTS (1) FOR SEWER LINES AND RELATED EQUIPMENT UPON, OVER, ABOVE, AND BENEATH A STRIP OF LAND 60.00 FEET IN WIDTH DESCRIBED AS RESERVED IN THE DEED BY LOCKHEED AIRCRAFT CORPORATION TO THE UNITED STATES OF AMERICA RECORDED DECEMBER 27, 1957 IN BOOK 3970, PAGE 483, OFFICIAL RECORDS; AND (2) FOR SEWER LINES AND RELATED EQUIPMENT UPON, OVER, ABOVE, AND BENEATH STRIPS OF LAND 60.00 FEET AND 30.00 FEET IN WIDTH DESCRIBED AS RESERVED IN THE DEED BY LOCKHEED AIRCRAFT

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CORPORATION TO THE UNITED STATES OF AMERICA RECORDED JUNE 24, 1958 IN BOOK 4105, PAGE 694, OFFICIAL RECORDS; AND (3) FOR A SANITARY SEWER PIPELINE THROUGH AND UNDER A STRIP OF LAND 30.00 FEET IN WIDTH DESCRIBED IN THE GRANT OF EASEMENT BY THE UNITED STATES OF AMERICA RECORDED JULY 12, 1962 IN BOOK 5644, PAGE 233, OFFICIAL RECORDS. SAID EASEMENTS WERE ASSIGNED BY LOCKHEED MARTIN CORPORATION AND TRANSFERRED TO MOFFETT PARK DRIVE LLC BY INSTRUMENT RECORDED FEBRUARY 7, 2001, DOCUMENT NO. 15552922, OFFICIAL RECORDS.

ALSO TOGETHER WITH AND AS APPURTENANT TO ALL OF SAID LAND NON-EXCLUSIVE EASEMENTS FOR THE PURPOSES OF INGRESS AND EGRESS AND UTILITIES, AND FOR OPERATION AND MAINTENANCE OF STORM DRAINS WITH THE RIGHT OF ENCROACHMENT AND ACCESS, DESCRIBED AS RESERVED FROM “PARCEL ONE” AND “PARCEL TWO” IN SAID DEED FROM LOCKHEED AIRCRAFT CORPORATION TO THE UNITED STATES OF AMERICA RECORDED SEPTEMBER 18, 1968 IN BOOK 8265, PAGE 381, OFFICIAL RECORDS.

ALSO TOGETHER WITH AND AS APPURTENANT TO ALL OF SAID LAND, A NON-EXCLUSIVE EASEMENT FOR THE PURPOSES OF MAINTENANCE AND OPERATION, REPAIR AND REPLACEMENT OF UNDERGROUND OR ABOVEGROUND STORM WATER DRAINAGE FACILITIES, AND FOR INCIDENTAL PURPOSES, IN, OVER, AND UPON THOSE PORTIONS OF PARCEL FOUR AND PARCEL FIVE, SO DESIGNATED AND DELINEATED AS “75.00 PSDE” ON THE PARCEL MAP OF “LOCKHEED MARTIN PARCEL 18 SUBDIVISION” RECORDED JULY 9, 1999 IN BOOK 717 OF MAPS, PAGES 42-47, SANTA CLARA COUNTY RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND RECIPROCAL EASEMENTS OF BAYVIEW SUBDIVISION BY LOCKHEED MARTIN CORPORATION, RECORDED JULY 22, 1999, DOCUMENT NO. 14907622, OFFICIAL RECORDS.

ALSO TOGETHER WITH EASEMENTS APPURTENANT TO THE “BAYSHORE PARCEL, JAGELS PARCEL, AND MANILA PARCEL” DESCRIBED IN AND ACCORDING TO THE TERMS AND PROVISIONS SET FORTH IN THE DECLARATION OF COVENANTS, CONDITIONS, AND RESTRICTIONS, AND RECIPROCAL EASEMENTS (BAYSHORE/JAGELS/MANILA PARCELS) BY LOCKHEED MARTIN CORPORATION RECORDED NOVEMBER 9, 1999, DOCUMENT NO. 15053464, OFFICIAL RECORDS, VIZ:

2.1(A)(III) ACCESS EASEMENTS - NONEXCLUSIVE EASEMENTS ON, OVER, AND ACROSS (CERTAIN OF THE) PRIVATE ROADWAY EASEMENT AREAS FOR THE PURPOSE(S) OF VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS;

2.1(B) SIGNAGE AND LIGHTING EASEMENTS - NONEXCLUSIVE EASEMENTS IN THE PRIVATE ROADWAY EASEMENT AREAS FOR THE PURPOSE(S) OF INSTALLATION, MAINTENANCE AND REPLACEMENT OF TRAFFIC, DIRECTIONAL AND INFORMATIONAL SIGNS AND STREET LIGHTING;

2.1(C)(II) LANDSCAPING EASEMENTS - NONEXCLUSIVE EASEMENTS IN, ON, OVER AND ACROSS (CERTAIN OF THE) LANDSCAPING EASEMENT AREAS FOR THE PURPOSE(S) OF THE INSTALLATION, MAINTENANCE AND REPLACEMENT OF LANDSCAPING AND LANDSCAPING FACILITIES;

2.1(D)(II) PUBLIC UTILITY EASEMENTS - NONEXCLUSIVE EASEMENTS IN, ON, OVER, UNDER AND ACROSS (CERTAIN OF THE) PUBLIC UTILITY EASEMENT AREAS FOR THE PURPOSE(S) OF INSTALLATION, OPERATION, MAINTENANCE, INSPECTION, REMOVAL, REPLACEMENT, AND REPAIR OF GAS, WATER, ELECTRIC, TELECOMMUNICATIONS, RECLAIMED WATER, AND SANITARY SEWER LINES AND FACILITIES, AND ALL NECESSARY AND PROPER CONDUITS,

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LINES, VALVES, FITTINGS, PUMPS, MEASURING AND PROTECTIVE DEVICES, AND OTHER APPARATUS AND EQUIPMENT BY PUBLIC UTILITY PROVIDERS;

ONE OF SAID EASEMENTS (EXHIBIT D-5 LMMS E STREET PUBLIC UTILITY EASEMENT) HAS BEEN EXTINGUISHED, ACCORDING TO THE QUITCLAIM DEED AND TERMINATION AGREEMENT DATED JULY 13, 2000, BY AND BETWEEN MOFFETT PARK DRIVE LLC AND LOCKHEED MARTIN CORPORATION RECORDED JULY 14, 2000, DOCUMENT NO. 15309829, OFFICIAL RECORDS; THE DESCRIPTION OF ONE OF SAID EASEMENTS WAS CORRECTED ACCORDING TO CORRECTIVE DECLARATION RECORDED JULY 14, 2000, DOCUMENT NO. 15309830.

2.1(E) UTILITY FACILITIES EASEMENTS - NONEXCLUSIVE EASEMENTS IN AND THROUGH THOSE CERTAIN UTILITY FACILITIES DESIGNATED FOR SUCH USE OF THE BAYSHORE PARCEL IN THE FINAL PLANS FOR THE PURPOSE(S) OF INSTALLATION, REPLACEMENT, MAINTENANCE, INSPECTION, REMOVAL AND REPAIR FROM TIME TO TIME OF ELECTRIC, TELECOMMUNICATIONS, AND GAS UTILITIES SERVING THE BAYSHORE PARCEL, JAGELS PARCEL, AND MANILA PARCEL;

2.1(G)(I)(B) STORM DRAINAGE EASEMENT - A NONEXCLUSIVE EASEMENT IN, ON, OVER AND ACROSS (A CERTAIN) STORM DRAINAGE EASEMENT AREA FOR THE PURPOSE OF CONVEYING DRAINAGE TO THE STORM DRAINAGE FACILITIES AND 2.1(G)(II) ON, OVER, AND ACROSS EXISTING PAVED OR UNPAVED SURFACES AT LOCATIONS WHERE STORMWATER CROSSES, FOR THE PURPOSES OF CONVEYING SUCH DRAINAGE TO THE STORM DRAINAGE FACILITIES. ALSO TOGETHER WITH NON-EXCLUSIVE EASEMENTS GRANTED ACCORDING TO THE EASEMENT AGREEMENT (SEWER AND STORM DRAINAGE) BY LOCKHEED MARTIN CORPORATION TO MOFFETT PARK DRIVE LLC RECORDED JULY 14, 2000, DOCUMENT NO. 15309828, OFFICIAL RECORDS, VIZ:

1.(A) FOR THE PURPOSE OF INSTALLATION, OPERATION, MAINTENANCE, INSPECTION, REMOVAL, REPLACEMENT, AND REPAIR OF SANITARY SEWER LINES AND FACILITIES; AND 2.(B) TO DRAIN, GATHER, CONVEY, STORE, RETAIN, AND PUMP STORMWATER.

ALSO TOGETHER WITH A NON-EXCLUSIVE PRIVATE UTILITY EASEMENT FOR UNDERGROUND TELECOMMUNICATIONS LINES AND FACILITIES, GRANTED ACCORDING TO THE EASEMENT AGREEMENT (TELECOMMUNICATIONS) BY LOCKHEED MARTIN CORPORATION TO MOFFETT PARK DRIVE LLC RECORDED NOVEMBER 20, 2001, DOCUMENT NO. 15969745, OFFICIAL RECORDS.

APN: 110-45-001 (Parcel 1), 110-45-002 (Parcel 2), 110-45-003 (Parcel 3), 110-45-004 (Parcel 4)

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Robert M. Calderoni, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ariba, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007

/s/    ROBERT M. CALDERONI        

Robert M. Calderoni

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, James W. Frankola, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ariba, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007

/s/    JAMES W. FRANKOLA        

James W. Frankola

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ariba, Inc. (the “Company”) on Form 10-Q for the three months ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert M. Calderoni, as Chief Executive Officer of the Company, and James W. Frankola, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/    ROBERT M. CALDERONI        

Robert M. Calderoni

Chief Executive Officer

August 8, 2007

/s/    JAMES W. FRANKOLA        

James W. Frankola

Executive Vice President and

Chief Financial Officer

August 8, 2007