Ariba to Buy Tradex for $1.97 Billion

Ariba Inc., a maker of online purchasing software, agreed to buy closely held Tradex Technologies Inc. for about $1.97 billion in stock, to be more competitive with rival Commerce One Inc. Tradex makes software that allows businesses to buy and sell goods and services as well as exchange information over the Internet. With Tradex, Mountain View, Calif.-based Ariba will be able to set up online trading communities where companies can buy products cheaper and more efficiently, said Ben Rose, an analyst at Adams, Harkness & Hill. Commerce One offers a similar system that allows companies to do it on their own.

Even though Ariba and Commerce One have little revenue and have yet to make a profit, the shares of both companies have soared amid optimism about the prospects for electronic commerce. Ariba surged $13.50 to close at $237.50 on Nasdaq, giving it a market value of about $10.8 billion. Its shares are up tenfold since it first sold shares to the public in June. Walnut Creek, Calif.-based Commerce One rose $6.69 to close at $419, also on Nasdaq. Ariba expects to take a charge of $10 million to $30 million in the quarter that the transaction closes, expected to be the second quarter. The purchase might cut profit for a few quarters, the company said.