8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event Reported): July 21, 2008

ARIBA, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	000-26299	77-0439730
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

807 11th Avenue, Sunnyvale, California	94089
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 390-1000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On July 23, 2008, Ariba, Inc. (“Ariba”) announced its financial results for its third quarter of fiscal year 2008, ended June 30, 2008, as well as certain other information. A copy of the press release is furnished as Exhibit 99.1 to this Current Report and is incorporated herein by reference.

The information set forth herein, including the exhibit attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

About Non-GAAP Financial Measures

Ariba provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (“GAAP”). The attached press release contains non-GAAP financial information. This non-GAAP financial information includes non-GAAP revenues, non-GAAP cost of revenues, gross profit, operating expenses, (loss) income from operations, net (loss) income and net (loss) income per share amounts. Management reviews this non-GAAP financial information in evaluating Ariba’s historical and projected financial performance and believes that it may assist investors in assessing Ariba’s ongoing operations. The presentation of this additional financial information is not meant to be considered in isolation or as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

In the press release attached hereto as Exhibit 99.1, Ariba has provided a reconciliation of the non-GAAP financial information provided in the press release with the comparable financial information reported in accordance with GAAP for the given period.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) On July 23, 2008, Ariba announced that Jim Frankola, Chief Financial Officer and Executive Vice President, resigned from his position with effect from August 10, 2008. Mr. Frankola will remain at Ariba as an Executive Vice President working on strategic initiatives.

(c) On July 23, 2008, Ariba announced that Ahmed Rubaie has become an employee effective as of July 21, 2008 and will assume the role of Executive Vice President and Chief Financial Officer as of August 10, 2008.

Ahmed Rubaie, 41, recently served as the vice president, group finance for the retail information services group of Avery Dennison, a $1.7 billion division of the $6 billion global leader in pressure-sensitive labeling materials, retail tag, ticketing and branding systems, and office products. From December 2000 to July 2008, Mr. Rubaie held various positions at Avery Dennison, including Corporate Vice President, Global Internal Audit, member of RFID steering committee and Corporate Vice President, Global Tax. Prior to Avery Dennison, Mr. Rubaie held various positions at BHP Billiton, a global leader in the resources industry, and spent six years in public accounting with both Coopers & Lybrand and Deloitte & Touche. Mr. Rubaie holds a Bachelor of Arts degree in Economics and Management from Albion College and a J.D. degree from University of Detroit School of Law.

Pursuant to the terms of an employment agreement by and between Ariba and Mr. Rubaie, executed on July 21, 2008, Mr. Rubaie will receive a base salary of not less than $400,000 and a signing bonus of $200,000, the first half of which will be paid within 30 days of the first day of Mr. Rubaie’s employment and the remaining half of which will be paid within six months after the first day of Mr. Rubaie’s employment. Commencing with fiscal year 2009, Mr. Rubaie will be eligible for an annual incentive bonus with a target amount of not less than $200,000, based upon criteria established by Ariba. Solely with respect to fiscal year 2009, Ariba has agreed that Mr. Rubaie’s incentive bonus will not be less

than $150,000, of which $50,000 will be payable in November 2008 and $100,000 will be payable in June 2009. Mr. Rubaie was granted restricted stock units pursuant to Ariba’s 1999 Equity Incentive Plan with a market value equal to $1,400,000, calculated based on the average of the closing prices on the 30 consecutive trading days immediately preceding July 21, 2008, the date of grant, as reported by The Wall Street Journal. The grant vests in three one year installments from the vesting commencement date, provided that the Mr. Rubaie remains in continuous service at Ariba on the applicable vesting date.

If Ariba terminates Mr. Rubaie’s employment for a reason other than cause or disability, then the employment agreement provides for a continuation of his cash compensation (base salary plus target bonus) for 12 months, for 12 months of additional service credit for purposes of determining the vested portion of any options, restricted shares or stock units and for an opportunity to exercise any options during the 12-month period starting on his termination date.

If, within 12 months after Ariba has been subject to a change in control, Ariba terminates Mr. Rubaie’s employment for a reason other than cause or disability or he resigns for good reason (as defined in the employment agreement), then the agreement provides for a lump sum payment equal to 200% of his annual cash compensation (base salary plus target bonus), for full vesting of his equity compensation and for an opportunity to exercise any options during the 24-month period starting on his termination date. The agreement also provides that Ariba will reimburse Mr. Rubaie, on a tax-adjusted basis, for any excise tax on excess parachute payments, provided the parachute payments exceed 330% of his average annual compensation from Ariba for the last five completed calendar years (or for such shorter time as he was employed by Ariba).

The benefits received from a termination for a reason other than cause or disability are contingent on Mr. Rubaie’s executing a general release of claims and complying with restrictive covenants. These covenants apply while Mr. Rubaie is employed by Ariba and while his cash compensation continues following the termination of his employment. One of the covenants prohibits Mr. Rubaie from soliciting Ariba’s employees to work for another employer. Another covenant prohibits him from competing with Ariba and from working for certain specific companies as well as any other company that derives its revenue primarily from e-procurement and/or spend management software or service sales or sales of software or services aiding companies in sourcing and/or spend management activities. Finally, Mr. Rubaie is required to facilitate the transition of his duties to his successor and is precluded from disparaging Ariba or its directors, officers or employees.

Mr. Rubaie and Ariba will also enter into Ariba’s standard form of indemnification agreement for directors and executive officers, as set forth at Exhibit 10.1 to Ariba’s Form 10-K for the fiscal year ended September 30, 2007, pursuant to which Ariba agrees, among other things, to indemnify its officers against certain liabilities that may arise by reason of their status or service as officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
99.1	Press release dated July 23, 2008.

SIGNATURE

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 hereunto duly authorized.

	ARIBA, INC.
DATE: July 23, 2008	By:	/s/ James W. Frankola
		James W. Frankola
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release dated July 23, 2008.

EX-99.1

Exhibit 99.1

Ariba Reports Results for Third Quarter of Fiscal 2008

Company posts 76% year-over-year growth in subscription software revenue and 81%

year-over-year growth in 12 month subscription software backlog

SUNNYVALE, Calif., July 23, 2008 — Ariba, Inc. (Nasdaq: ARBA), the leading spend management solutions provider, today announced results for the third quarter ended June 30, 2008.

Quarterly Financial and Operational Highlights:

• Total Non-GAAP revenues of $86.5 million and EPS of $0.13

• Non-GAAP subscription software revenue of $31.7 million, up 76% year-over-year

• 12-month subscription software backlog of $107 million, up 81%

• Number of on-demand transactions up 48% year-over-year

“Despite a tough global economy, Ariba has posted another strong quarter as evidenced by the continued growth in our subscription software revenue, backlog and operating margin expansion,” said Bob Calderoni, Chairman and CEO, Ariba. “Profitable growth remains our top priority going forward, and Ariba is fortunate to be well-positioned in the spend management market as companies are increasingly looking for innovative ways to save money and run their organizations more efficiently.”

Results for the Third Quarter of Fiscal Year 2008

Revenue:

Total GAAP revenues for the third quarter of fiscal year 2008 were $85.0 million, as compared to $75.6 million for the third quarter of fiscal year 2007. Subscription and maintenance revenues for the quarter were $49.3 million, as compared to $36.6 million for the third quarter of fiscal year 2007. Within subscription and maintenance revenues, subscription software revenue was $30.3 million for the current quarter, as compared to $18.0 million for the third quarter of fiscal year 2007. Services and other revenues for the current quarter were $35.7 million, as compared to $39.0 million for the third quarter of fiscal year 2007. On a Non-GAAP basis, total revenues for the third quarter of fiscal year 2008 were $86.5 million with subscription software revenue at $31.7 million. The difference between GAAP and Non-GAAP is approximately $1.4 million of revenue that was not recognized due to the impact of purchase accounting on contracts acquired through the acquisition of Procuri, Inc.

Earnings Per Share:

Net loss for the third quarter of fiscal year 2008 was $4.3 million, or $0.05 per share, as compared to a net loss for the third quarter of fiscal year 2007 of $2.0 million, or $0.03 per share. In addition to the revenue that was not recognized due to the impact of purchase accounting on contracts acquired through the acquisition of Procuri, Inc., the net loss for the third quarter of fiscal year 2008 included charges of $4.9 million for amortization of intangible assets, $9.6 million for stock-based compensation, a $0.7 million net restructuring benefit primarily related to a sub-lease agreement. Excluding these items, non-GAAP net income was $10.9 million, or $0.13 per diluted share.

Balance Sheet and Cash:

Total cash, cash equivalents, marketable securities, and investments were $129.4 million at June 30, 2008, down $48.6 million from June 30, 2007. The primary reason for the decrease in cash was due to cash payments made for the acquisition of Procuri. Net cash flow from operations for the three months ended June 30, 2008 was $8.7 million, as compared to $2.9 million for the three months ended June 30, 2007. Accounts receivable, on a days-sales-outstanding basis, were 31 days for the third quarter of fiscal 2008, as compared to 40 days for the third quarter of fiscal 2007, and down two days from the previous quarter. Total deferred revenues were $100.3 million at June 30, 2008, up $15.5 million from June 30, 2007.

Customer Acquisition and Transactions for the Quarter:

During the quarter, 247 companies of all sizes across geographies purchased Ariba solutions to drive their spend management strategies, including: H. J. Heinz Company, ABN Amro, The Travelers Company, Sanofi-Aventis, Unilever N.V., Telefonica S.A., Dana Corporation, Enel SpA, and Mobistar. The company also added 34 new customers, and closed 17 transactions over $1 million including 4 software deals over $1 million, and 151 on-demand product deals.

Changes in Executive Leadership

With its transition to an on-demand model complete, Ariba is now focused on the next wave of innovation and growth that will enable the company to extend its market leadership position. To assist in driving value creation, the company today announced that Chief Financial Officer Jim Frankola will transition from his current role to the newly created position of Executive Vice President of Strategy.

“Jim has been my partner as CFO for the past seven years and has been instrumental in our transition to an on demand model,” Calderoni said. “With the transition behind us, now is a good time to bring in a CFO who can lead our finance organization to the next level and allow Jim to focus his energy on helping me drive strategy to support our growth objectives.”

Responsibility for finance will be transitioned to Ahmed Rubaie, who will join Ariba this week and assume the CFO position effective August 10. “Ahmed is a proven executive and I have great confidence in his ability to ensure that our finance operations remain world-class,” Calderoni said.

Mr. Rubaie comes to Ariba from Avery Dennison where he served as vice president of finance for the company’s Retail Information Services group and previously as corporate vice president of internal audit and tax. Mr. Rubaie held key finance positions at BHP Billiton prior to joining Avery Dennison, including his last position as vice president, commercial for the company’s global diamonds and industrial minerals division and various tax counsel roles. Mr. Rubaie began his career in public accounting with both Coopers & Lybrand and Deloitte & Touche. He is a seasoned financial executive with significant global experience, including mergers and acquisitions as well as financings.

Conference Call Information

Ariba will hold a conference call today at 5:00 p.m. ET to discuss its results for the third quarter of fiscal year 2008. To join the call, please dial (877) 407-8031 in the United States and Canada, or (201) 689-8031 if calling internationally. The conference call also will be webcast live, and can be accessed on the investor relations section of the company’s website at www.ariba.com or by logging in at www.vcall.com.

A replay of the conference will be available by calling (877) 660-6853 in the United States and Canada or (201) 612-7415 internationally and entering account number: 286 and conference ID number: 2289688.

Ariba, Inc.

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

Copyright ^© 1996 – 2008 Ariba, Inc.

Ariba, the Ariba logo, AribaLIVE and SupplyWatch are registered trademarks of Ariba, Inc. Ariba Spend Management, Ariba Spend Management. Find it. Get it. Keep it., Ariba. This is Spend Management, Ariba Solutions Delivery, Ariba Analysis, Ariba Buyer, Ariba Category Management, Ariba Category Procurement, Ariba Contract Compliance, Ariba Contracts, Ariba Contract Management, Ariba Contract Workbench, Ariba Data Enrichment, Ariba eForms, Ariba Electronic Invoice Presentment and Payment, Ariba Invoice, Ariba Sourcing, Ariba Spend Visibility, Ariba Travel and Expense, Ariba Procure-to-Pay, Ariba Workforce, Ariba Supplier Network, Ariba Supplier Connectivity, Ariba Supplier Performance Management, Ariba PunchOut, Ariba QuickSource, PO-Flip, Ariba Settlement, Ariba Spend Management Knowledge Base, Ariba Ready, Ariba Supply Lines, Ariba Supply Manager, Ariba LIVE and It’s Time for Spend Management are trademarks or service marks of Ariba, Inc. All other trademarks are property of their respective owners.

Ariba Safe Harbor

Safe Harbor Statement under the Private Securities Litigation Reform Act 1995: Information and announcements in this release involve Ariba's expectations, beliefs, hopes, plans, intentions or strategies regarding the future and are forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to Ariba as of the date of the release, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to Ariba's operating and financial results to differ materially from current expectations include, but are not limited to: delays in development or shipment of new versions of Ariba's products and services; lack of market acceptance of Ariba's existing or future products or services; inability to continue to develop competitive new products and services on a timely basis; introduction of new products or services by major competitors; the ability to attract and retain qualified employees; difficulties in assimilating acquired companies, long and unpredictable sales cycles and the deferrals of anticipated orders; declining economic conditions, including the impact of a recession; inability to control costs; changes in the company's pricing or compensation policies; significant fluctuations in our stock price; the outcome of and costs associated with pending or potential future regulatory or legal proceedings; the impact of our acquisitions, including the disruption or loss of customer, business partner, supplier or employee relationships; and the level of costs and expenses incurred by Ariba as a result of such transactions. Factors and risks associated with its business, including a number of the factors and risks described above, are discussed in Ariba's Form 10-Q filed with the SEC on May 7, 2008.

Contacts:

Investors

John Duncan

650-390-1200

InvestorInfo@ariba.com

Media

Karen Master

412-297-8177

kmaster@ariba.com

Ariba, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited; in thousands)

	June 30, 2008			September 30, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	78,545		$	61,311
Marketable securities		—			83,667
Restricted cash		287			820
Accounts receivable, net		28,881			29,130
Prepaid expenses and other current assets		8,992			10,743
Total current assets		116,705			185,671
Property and equipment, net		20,398			20,230
Long-term investments		20,917			8,048
Restricted cash, less current portion		29,641			29,200
Goodwill		406,119			326,101
Other intangible assets, net		25,563			10,461
Other assets		2,870			3,875
Total assets	$	622,213		$	583,586
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,288		$	10,882
Accrued compensation and related liabilities		21,296			24,192
Accrued liabilities		15,345			18,976
Restructuring obligations		17,961			19,065
Deferred revenue		94,039			76,110
Deferred income - Softbank		—			566
Total current liabilities		159,929			149,791
Deferred rent obligations		19,701			22,628
Restructuring obligations, less current portion		42,707			52,106
Deferred revenue, less current portion		6,243			7,917
Other long-term liabilities		6,413			—
Total liabilities		234,993			232,442
Stockholders’ equity:
Common stock		171			157
Additional paid-in capital		5,144,182			5,067,993
Accumulated other comprehensive (loss) income		(2,991	)		1,112
Accumulated deficit		(4,754,142	)		(4,718,118	)
Total stockholders’ equity		387,220			351,144
Total liabilities and stockholders’ equity	$	622,213		$	583,586

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,
	2008			2007			2008			2007
Revenues:
Subscription and maintenance	$	49,278		$	36,613		$	136,102		$	104,851
Services and other		35,738			38,951			106,426			121,299
Total revenues		85,016			75,564			242,528			226,150
Cost of revenues:
Subscription and maintenance		10,101			8,490			29,423			24,534
Services and other		23,689			28,490			72,324			88,016
Amortization of acquired technology and customer intangible assets		4,675			3,356			12,869			10,786
Total cost of revenues		38,465			40,336			114,616			123,336
Gross profit		46,551			35,228			127,912			102,814
Operating expenses:
Sales and marketing		28,682			23,389			83,226			69,461
Research and development		13,617			13,254			40,878			38,845
General and administrative		11,702			10,822			37,010			29,108
Other income - Softbank		—			(3,390	)		(566	)		(10,173	)
Amortization of other intangible assets		210			101			529			425
Restructuring and integration costs		(694	)		(3,805	)		3,834			(3,805	)
Litigation provision		—			—			5,900			—
Total operating expenses		53,517			40,371			170,811			123,861
Loss from operations		(6,966	)		(5,143	)		(42,899	)		(21,047	)
Interest and other income, net		2,353			3,456			8,560			11,462
Loss before income taxes		(4,613	)		(1,687	)		(34,339	)		(9,585	)
Provision for income taxes		(326	)		347			666			1,608
Net loss	$	(4,287	)	$	(2,034	)	$	(35,005	)	$	(11,193	)
Net loss per share - basic and diluted	$	(0.05	)	$	(0.03	)	$	(0.46	)	$	(0.16	)
Weighted average shares - basic and diluted		78,585			70,340			76,479			69,213

Ariba, Inc. and Subsidiaries

Cash Flows

(Unaudited; in thousands)

	Three Months Ended June 30,
	2008			2007
Operating activities:
Net loss	$	(4,286	)	$	(2,034	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for doubtful accounts		167			129
Depreciation		2,022			1,785
Amortization of intangible assets		4,885			3,457
Stock-based compensation		9,552			8,212
Restructuring charge		(694	)		—
Realized gain - currency translation adjustment		—			(425	)
Changes in operating assets and liabilities:
Accounts receivable		1,007			(2,183	)
Prepaid expense and other assets		83			503
Accounts payable		1,296			1,789
Accrued compensation and related liabilities		(1,768	)		(1,355	)
Accrued liabilities		(2,039	)		(1,738	)
Deferred income - Softbank		—			(3,390	)
Deferred revenue		5,166			3,369
Restructuring obligations		(6,670	)		(5,195	)
Net cash provided by operating activities		8,721			2,924
Investing activities:
Cash paid for acquisitions, net of cash acquired		(163	)		—
Purchases of property and equipment		(2,512	)		(2,169	)
Sales of investments, net of purchases		1,758			(17,637	)
Allocation from restricted cash, net		(53	)		—
Net cash used in investing activities		(970	)		(19,806	)
Financing activities:
Proceeds from issuance of common stock, net		836			353
Repurchase of common stock		(1,883	)		(15	)
Net cash (used in) provided by financing activities		(1,047	)		338
Effect of exchange rates on cash and cash equivalents		(690	)		174
Net change in cash and cash equivalents		6,014			(16,370	)
Cash and cash equivalents at beginning of period		72,529			39,636
Cash and cash equivalents at end of period	$	78,543		$	23,266

Non-GAAP Financial Measures

The accompanying press release dated July 23, 2008 contains non-GAAP financial measures. The following table reconciles the non-GAAP financial measures in the press release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP measures include non-GAAP revenues, non-GAAP cost of revenues, gross profit, operating expenses, (loss) income from operations, net (loss) income and net (loss) income per share amounts.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, GAAP financial measures, which should be considered as the primary financial metrics for evaluating our financial performance. Significantly, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Instead, they are based on subjective determinations by management designed to supplement our GAAP financial measures. They are subject to a number of important limitations and should be considered only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For example, our non-GAAP financial measures have the effect of excluding a purchase accounting adjustment, costs and expenses from our operating results that should be properly considered under a system of accrual accounting. In addition, our non-GAAP financial measures differ from GAAP measures with the same names, may vary over time and may differ from non-GAAP financial measures with the same or similar names used by other companies. Accordingly, investors should exercise caution when evaluating our non-GAAP financial measures.

Despite these limitations, we believe our non-GAAP financial measures provide meaningful supplemental information about our operating results, primarily because they exclude a purchase accounting adjustment and costs and expenses that we do not believe are indicative of the ongoing operating performance of our business and our senior management. Although these items should properly be considered in our GAAP financial measures, we believe they should be excluded when evaluating our current operating performance. The non-GAAP financial measures disclosed in the accompanying press release are used by our Board of Directors and senior management to evaluate our current operating performance, are used in evaluating the performance of our senior management, and are used in our budget and planning processes. We believe that our non-GAAP financial measures are helpful to investors by facilitating comparisons of our current and prior operating results and by facilitating comparisons of our operating results with those of other software companies.

Ariba, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Operating Results

(Unaudited; in thousands, except per share data)

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

	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Revenue reconciliation:
GAAP revenue	$	85,016		$	75,564
Purchase accounting adjustment		1,440			—
Total non-GAAP revenues	$	86,456		$	75,564
	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Expense reconciliation:
GAAP revenue	$	85,016		$	75,564
GAAP net loss		4,287			2,034
Total GAAP expenses		89,303			77,598
Amortization of intangible assets		(4,885	)		(3,457	)
Stock-based compensation		(9,552	)		(8,212	)
Restructuring and integration		694			3,805
Total non-GAAP operating expenses	$	75,560		$	69,734
	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Net income (loss) reconciliation:
GAAP net loss	$	(4,287	)	$	(2,034	)
Purchase accounting adjustment		1,440			—
Amortization of intangible assets		4,885			3,457
Stock-based compensation		9,552			8,212
Restructuring and integration		(694	)		(3,805	)
Non-GAAP net income	$	10,896		$	5,830
	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Net income (loss) per share reconciliation:
GAAP net loss per share - basic	$	(0.05	)	$	(0.03	)
Purchase accounting adjustment		0.02			—
Amortization of intangible assets		0.06			0.05
Stock-based compensation		0.12			0.12
Restructuring and integration		(0.01	)		(0.05	)
Non-GAAP net income per share - basic	$	0.14		$	0.08
Non-GAAP net income per share - diluted	$	0.13		$	0.08
Weighted average shares - basic		78,585			70,340
Weighted average shares - diluted		83,734			75,398

Discussion of Specific Items Excluded From Non-GAAP Financial Measures

Our non-GAAP financial measures include a purchase accounting adjustment related to deferred revenues and generally exclude costs and expenses for (i) amortization of intangible assets related to acquisitions, (ii) stock-based compensation and (iii) restructuring and integration. We exclude these items because we believe they are not closely related to the ongoing operating performance of our business and the performance of our senior management and are generally excluded from our budget and planning process. In addition to these reasons, we believe our non-GAAP financial measures are also helpful to investors by facilitating comparisons of our operating results over different time periods and by facilitating comparisons of our financial performance with that of other companies. In addition, except for costs and expenses related to restructuring and integration, these items are non-cash items that do not affect cash flows.

(1) Purchase accounting adjustment – deferred revenue. As announced on December 17, 2007, Ariba acquired Procuri, Inc. In accordance with the fair value provisions of EITF 01-3, Accounting in a Business Combination for Deferred Revenue of an Acquiree, acquired deferred revenue of approximately $4.5 million was recorded on the opening balance sheet, which was approximately $5.9 million lower than the historical carrying value. Although this purchase accounting requirement has no impact on the Company’s business or cash flow, it adversely impacts the Company’s reported GAAP revenue primarily for the first twelve months post- acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company has provided non-GAAP financial measures which exclude the impact of the purchase accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making and (b) compare past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related subscription terms are renewed in future periods.

(2) Amortization of Acquired Intangible Assets. In accordance with GAAP, we amortize intangible assets acquired in connection with acquisitions over the estimated useful lives of the assets. We exclude these amortization costs in our non-GAAP financial measures because they (i) result from prior acquisitions, rather than the ongoing operating performance of our business, and (ii) absent additional acquisitions, are expected to decline over time as the remaining carrying amounts of these assets are amortized. We believe excluding these costs helps investors compare our financial performance with that of other companies with different acquisition histories. However, as with impairment charges, we recognize that amortization costs provide a helpful measure of the financial impact and performance of prior acquisitions and consider our non-GAAP financial measures in conjunction with our GAAP financial results that include amortization costs.

(3) Stock-Based Compensation Expenses. We exclude stock-based compensation expense associated with stock options and stock granted to employees and non-executive directors in our non-GAAP financial measures. While stock-based compensation is a significant component of our expenses, we believe that investors wish to be able to exclude the effects of stock-based compensation expense in comparing our financial performance with that of other companies.

(4) Restructuring and integration. We recorded restructuring related to lease abandonment accruals and severance and related benefits in the three months ended June 30, 2008. We exclude this from our non-GAAP financial measures because it is unrelated to our ongoing operations and is significantly impacted by factors outside our control. We believe excluding restructuring and integration helps investors compare our operating performance with that of other companies. We recognize, however, that restructuring and integration will impact cash flows and that we and investors should carefully consider the impact of these costs on future cash flows.