Commentary: Watching that bottom line

After all that is said and done, companies that help other companies do business seem to come out the winning end.

I'm not a number cruncher. Yet, with each financial reporting season, I find myself spending hours pouring over earnings reports, reading between the numbers to get the right take on a firm's direction, dig out an interesting company tidbit, or, sometimes, spot an emerging corporate trend. (And, yes, I do need a life).

Raking through this quarter's crop of mostly depressed high-tech earnings, I found some impressive quarterly gains coming from Internet software developers or, more specifically, software companies developing and marketing packages that help businesses do business with their customers and trading partners.

Why are these companies bucking the trend? Simple. They provide the Web tools corporate America needs to become better marketers, more effective sellers and more efficient business managers - traits companies universally aspire to, but no more so than when a downturn looms.

AMR Research Chief Executive and President Tony Friscia last week released a survey his firm did of senior managers from the energy, financial services, manufacturing and retail markets. Friscia found that nearly all the executives were planning to increase spending on software they felt could boost sales, better customer service and improve transactions with business partners.

"The survey results make it clear that achieving sell-side and buy-side transaction efficiencies continues to be important, and it may become more vital because of economic pressure," Friscia wrote in a brief that accompanied the AMR report. "We expect that companies will maintain or even expedite these fast returns on investments. As a result, even as technology spending slows, companies that lead supply chain management and procurement, trading exchange infrastructure and sales and channel management software sectors . . . are well-positioned to remain successful in 2001."

An example is Siebel Systems, one of the hottest names in business software, which plowed past expectations. The customer relationship management software vendor posted a very impressive $106 million fourth-quarter profit on sales of $581 million. Siebel's primary business is providing software that helps companies use the Web to link enterprise-level systems containing customer data.

Another company that came up big was Commerce One. The company's quarter-over-quarter sales were nothing short of spectacular - booming from just under $17 million to $191 million, an incredible increase of more than 1,000 percent. Commerce One, which makes software that helps companies trade online with each other, posted a smaller-than-expected loss and, not surprisingly, was bullish on business through the early part of this year.

Commerce One's rival Ariba also beat consensus estimates with quarterly income of $14 million, excluding special charges, on revenue of $170.2 million. With the good news, Ariba made a $2.5 billion bid for Agile Software in order to enter the "collaboration" software market. Agile makes tools that ease communications between business partners.

Still, doubts linger about Ariba, Commerce One and other e-market suppliers' ability to keep pace with sectors that are expected to really heat up this year, such as supply chain software. One of the leaders in the supply chain market, i2 Technologies, reported fourth-quarter profit of $44 million on a 116 percent increase in revenue to $378 million.

So, what's the bottom line? Despite signs that the economy is slowing, many companies will continue to spend if, in the end, that spending is seen as a way to improved sales or savings.

"Companies that invest wisely to improve supply chain performance through customer and supply chain management initiatives will benefit and gain competitive advantage," Friscia wrote in his report. "The best companies know this and will continue to invest."