Ariba buys sourcing software company FreeMarkets

The deal is worth an estimated $493 million and is expected to close by midyear

Looking to expand its reach, procurement software maker Ariba Inc. is buying supply chain management applications vendor FreeMarkets Inc. in a deal valued at roughly half a billion dollars.

Sunnyvale, Calif.-based Ariba today announced the buyout, billing it as a way to help global customers slash supply chain costs. Ariba plans to unite its enterprise spending management software and services with FreeMarkets' services-based sourcing and global supply management technology.

The combined company would have annual revenue and fees of about $360 million, Ariba said.

For now, there are no plans to sunset any products, said Bob Calderoni, president and CEO of Ariba. "We've got a full commitment that we are going to support each of our collective customers. Our plan is to take the best of both companies and incorporate that in the future releases of the products and migrate customers to them painlessly."

He said that upcoming releases of both FreeMarkets software and Ariba will go on as scheduled. While there is some operational overlap in the two companies, Calderoni said he doesn't expect a reduction in their sales forces.

According to Calderoni, there is only about a 20% overlap in the installed bases of the two companies. Ariba's strength is in the pharmaceuticals, financial services and consumer packaged goods markets, while Pittsburgh-based FreeMarkets is strong in the automotive and oil and gas industries, providing cross-sell and upsell opportunities.

Ariba plans to lay out a product road map in February at a product launch slated to be held in Venice.

The integrated company will retain the Ariba name, and Calderoni will keep his roles as CEO and chairman, while FreeMarkets President and CEO Dave McCormick will become president of Ariba and a board member.

The deal is expected to close by midyear.


Copyright © 2004 IDG Communications, Inc.

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