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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K



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

For the fiscal year ended September 30, 2009

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) |  | (IRS Employer Identification Number)
|                                                               | 
|807 11th Avenue Sunnyvale, California                          |  | 94089                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(650) 390-1000

(Registrants telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.002 par value





Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No   ̈

Indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

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

Large accelerated filer  x          Accelerated filer   ̈          Non-accelerated filer   ̈          Smaller reporting company   ̈

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

The aggregate market value of the common stock held by non-affiliates of the registrant as of March 31, 2009 the last business day of
the registrants most recently completed second fiscal quarter (based on the closing price of $8.73 on the Nasdaq Global Market as of that date) was approximately $762.8 million.

As of October 31, 2009, there were 89,703,885 shares of the registrants common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive proxy statement to be delivered to stockholders in connection with the 2010 annual meeting of stockholders are incorporated herein by reference in Part III of
this Annual Report on Form 10-K to the extent stated herein.









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ARIBA, INC.

FORM 10-K

September 30, 2009

TABLE OF CONTENTS



|           |  |                                                                                                              |  |        
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | -------
|Item       |  |                                                                                                              |  | PageNo.
|           |  | PART I                                                                                                       |  |        
|           |  |                                                                                                             
|1.         |  | Business                                                                                                     |  | 4      
|1A.        |  | Risk Factors                                                                                                 |  | 15     
|1B.        |  | Unresolved Staff Comments                                                                                    |  | 25     
|2.         |  | Properties                                                                                                   |  | 25     
|3.         |  | Legal Proceedings                                                                                            |  | 25     
|4.         |  | Submission of Matters to a Vote of Security Holders                                                          |  | 26     
|           |  |                                                                                                             
|           |  | PART II                                                                                                      |  |        
|           |  |                                                                                                             
|5.         |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 27     
|6.         |  | Selected Financial Data                                                                                      |  | 29     
|7.         |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                        |  | 31     
|7A.        |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 50     
|8.         |  | Financial Statements and Supplementary Data                                                                  |  | 52     
|9.         |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 88     
|9A.        |  | Controls and Procedures                                                                                      |  | 88     
|9B.        |  | Other Information                                                                                            |  | 91     
|           |  |                                                                                                             
|           |  | PART III                                                                                                     |  |        
|           |  |                                                                                                             
|10.        |  | Directors, Executive Officers and Corporate Governance                                                       |  | 92     
|11.        |  | Executive Compensation                                                                                       |  | 92     
|12.        |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |  | 92     
|13.        |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 92     
|14.        |  | Principal Accountant Fees and Services                                                                       |  | 92     
|           |  |                                                                                                             
|           |  | PART IV                                                                                                      |  |        
|           |  |                                                                                                             
|15.        |  | Exhibits and Financial Statement Schedules                                                                   |  | 93     
|           | 
|SIGNATURES |  | 97                                                                                                          



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FORWARD-LOOKING STATEMENTS

The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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 the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to,
those discussed in this report in the section entitled Risk Factors and elsewhere in this report. We undertake no obligation to revise or update publicly any forward-looking statements after the date of this document. Ariba, Inc. is
referred to herein as Ariba or we.



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PART I



|ITEM 1. | BUSINESS
|------- | --------

Overview

Ariba is the leading provider of on-demand spend management solutions. Our mission is to transform the way companies of
all sizes, industries, and geographies operate by delivering software, service, and network solutions that enable them to holistically source, contract, procure, pay, manage, and analyze their spend and supplier relationships. Delivered on demand,
our enterprise-class offerings empower companies to achieve greater control of their spend and drive continuous improvements in financial and supply chain performance. Ariba® Spend Management solutions are easy to use, cost effective and quick to deploy and integrate with enterprise resource planning (ERP) and other
software systems. More than 1,000 companies, including more than half of the companies on the Fortune 500 list published in April 2009, use Ariba solutions to manage their spend from sourcing and orders through invoicing and payment.

Ariba was incorporated in Delaware in September 1996. Our principal executive offices are located at 807
11thAvenue, Sunnyvale, California 94089.

Industry Background

In the
last decade, technology-based solutions have emerged to help companies increase the efficiency of the procurement and cash management processes and more effectively manage their spend. These solutions allow organizations to automate critical tasks
such as identifying global suppliers, sourcing goods and services, negotiating and managing contracts, processing invoices and payments and managing trading relationships.

Procurement organizations were among the first to embrace spend management solutions as a way to achieve corporate savings targets. Today,
finance departments are leveraging them to drive improved cost management, business unit decision making and planning, budgeting, forecasting and cash and working capital management. Legal departments are implementing them to more effectively author
and manage contracts and IT departments are deploying them to enhance the value of existing systems and increase returns on investment.

Sourcing and Procurement Software Market

In its most recent Supply Management Market Sizing Report, AMR
Research, a third-party research firm, projected the supply management market to grow at 10% Compound Annual Growth Rate (CAGR), becoming a $4.3 billion market in 2012. Further, it noted that the highest growth segments over the next
five years are projected to be sourcing (projected to grow at a 10% CAGR) and indirect supply management (projected to grow at an 11% CAGR). Contract management is expected to grow substantially in 2010 as buying companies increasingly become aware
of this applications strength. The supply management license, alternate revenue and market share by company grew 45% in the $1 billion or more customer revenue market. Actual annual growth rates may differ significantly from those forecast by
AMR Research.

Ariba Spend Management Solutions

Ariba provides spend management solutions that enable enterprises to drive rapid and sustainable bottom-line results. We understand that software is only one part of helping companies achieve success. As
such, we deliver an integrated portfolio of enterprise-class software, global services, expertise, and a global supplier network to help companies accelerate adoption and drive performance improvements and competitive advantage. Our solutions allow
enterprises to take a step-by-step approach with products and services that work together to address six key areas of spend management:



| |  |  | Ariba Spend Analysis Solutionsprovide enterprises with a comprehensive set of products and services that enhance visibility into spend,
processes and performance and allows enterprises to identify and prioritize savings opportunities and enable more effective decision-making.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Ariba Sourcing Solutionsallow enterprises to identify top suppliers across a broad range of categories to negotiate procurement terms,
leverage and aggregate spend, implement best practices and manage procurement contracts.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Contract Management Solutionsenable enterprises to streamline and automate the contract process from contract creation to compliance
management.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Procurement and Expense Solutionsdeliver flexible, easy-to-use applications and services for requisitioning and procurement across
all types of spend.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Invoice and Payment Solutionsenable enterprises to streamline and automate less efficient, paper-intensive invoicing and payment
processes to improve speed and accuracy.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Supplier Management Solutionsprovide enterprises with a broad set of products and services to optimize buyer-supplier interactions
throughout the spend management lifecycle.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Ariba software is built to leverage the Internet and provide
enterprises with real-time access to their business data and their business partners. Our spend management solutions are delivered in a flexible manner, depending upon the needs and preferences of the customer. Historically, our software was
primarily provided as installed applications that were deployed behind a customers firewall. However, in response to customer demand, we began providing on-demand delivery of our software solutions in 2006, whereby applications are hosted by
Ariba or a third party, and customers access the solution via the Internet. Our on-demand delivery model is designed to empower companies of all sizes to achieve greater control of their spend and drive continuous improvements in financial and
supply chain performance. The following modules are offered on an on-demand basis or an installed basis.

Ariba Spend
Analysis Solution offerings:

By combining spend data from across the enterprise into comprehensive dashboards and reports,
Ariba Spend Analysis Solution offerings allow buyers to improve their spend management with a clear perspective of their spend history, trends, and performance. Ariba Spend Analysis Solution modules include Ariba Spend Visibility,
Ariba Analysis and Ariba Data Enrichment.

Ariba Spend Visibilitymodule presents
spend data for analysis. The offering includes project management services, data enrichment services and web-based access to dashboards and pre-packaged reports that help identify sourcing and compliance opportunities.

Ariba Analysis module delivers a unified view of spending activities across all suppliers, divisions and purchased goods or
services. Dashboards help purchasing and sourcing professionals identify and realize significant spend reductions.

Ariba Data Enrichment module facilitates spend analysis by normalizing, classifying and enriching real spend data from an enterprises various data systems.

Ariba Sourcing Solution offerings:

The Ariba Sourcing Solution offerings cover the full spectrum of sourcing activities, from the development of a strategic approach to capture savings, to the sourcing and award negotiation phase, and
finally the monitoring of supplier performance. Ariba Sourcing Solution modules include Ariba Sourcing On-Demand, Ariba Sourcing, Ariba Supplier Performance Management and Ariba Category Playbooks.

Ariba Sourcing On-Demandis our hosted multi-tenant module that provides substantially equivalent capabilities of
our Sourcing modules including: request-for-quote/request-for-proposal (RFX) capabilities, process management, advanced sourcing analysis tools and supplier performance management capabilities.



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Ariba Sourcing module is an enterprise-wide strategic sourcing application
designed for all spend categories. It assists professional buyers throughout the sourcing process, from defining spending baselines and category requirements, to finding suppliers and negotiating agreements. Ariba Sourcing helps speed up and
streamline the RFX process, dynamic events, auctions, and award negotiations management.

Ariba Supplier
Performance Management module helps enterprises define, measure, and enhance the performance of their suppliers. Buyers use it to gather and monitor supplier performance data through surveys, compare suppliers across a category for better
sourcing and procurement decisions, collaborate throughout the sourcing process, and provide visibility of supplier performance with key performance indicator trend analysis and scorecards.

Ariba Category Playbooks module enables sourcing and procurement professionals to drive their activities programmatically
by project management, knowledge management and resource management, all supported by collaboration capabilities in order to capture category sourcing knowledge.

Ariba Contract Management Solution offerings:

The Ariba Contract Management Solution offerings cover the full spectrum of a contracts lifecycle, from the creation and authoring of templates and contracts by buyers and suppliers, to the tracking
of contract compliance for procurement activity. Our modules include Ariba Contract Management, Ariba Contract Workbench and Ariba Contract Compliance.

Ariba Contract Managementis our hosted multi-tenant module that provides substantially equivalent capabilities of
our Ariba Contract Workbench and Ariba Contract Compliance modules including: contract creation and storage which allows contract portfolio visibility, clause usage and editorial processes. Our on-demand module enables the structuring of item
pricing terms, conditions and service level agreements, supports buyer and supplier contract compliance, and integrates to legacy or ERP systems.

Ariba Contract Workbench module supports the entire lifecycle of contracts, by enabling the creation, authoring and storage of contracts. It includes functionality such as contract search,
template selection, clause usage and process and document management.

Ariba Contract Compliance module gives
buyers access to a centralized repository of contracted products and services so that they can create, search, amend and re-source contracts, as well as monitor and manage contract usage and supplier price compliance.

Ariba Procurement and Expense Solution offerings:

The Ariba Procurement and Expense Solution offerings allow customers to manage the procurement process from requisition, through ordering, receiving, invoice reconciliation and payment. The offerings
include modules designed to facilitate the procurement process for complex categories of spend, including travel. Our modules include the integrated Ariba Procure-to-Paymodule,Ariba Buyer, Ariba Category
Procurement, Ariba Travel and Expense and Ariba Procurement Content.

Ariba Procure-to-Payis our web-based procurement and expense module. It addresses catalog-based indirect spend, complex non-purchase order spend for services and some types of inventory spend. It allows customers to control the procurement process from
requisition, through ordering, receiving and invoice reconciliation for payment via purchasing cards and other pre-payment vehicles. Customers can also use the module to manage their travel and expense spend processes (see also the descriptions for
the relatedAriba Contract Compliance and Ariba Invoice and Settlement modules).



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Ariba Buyer module enables organizations to manage purchasing transactions for
any good or service. It links end users throughout an organization with approvers, and connects to back-end financial, purchasing and human resource systems to access important procurement information, such as supplier product information, price
lists, web sites and order status. Ariba Buyer helps enforce purchasing compliance against corporate policies and contracts, and measure progress. Ariba Buyer leverages the Ariba Supplier Network (described below) to securely automate commerce
transactions with suppliers on the Internet.

Ariba Category Procurement module enables customers to better
manage complex categories of spend, such as catalog, travel, third-party, time-based and project-based purchases, including but not limited to facilities management, information technology and management consulting, temporary labor and print
services.

Ariba Travel and Expense module helps enterprises to manage the procurement of corporate travel and
expenses. The application automates the manual processes required for travel purchases to increase expense policy compliance, decrease administrative costs, and helps reduce travel approval and expense reimbursement cycle times.

Ariba Procurement Content module delivers Aribas proven catalog, product search, supplier management, contract
compliance, and category procurement solutions as a complimentary add-on to ERP systems such as those provided by Oracle and SAP. This combination enables companies of all sizes to extend the value of investments already made and enjoy some of the
savings created by Aribas spend management solutions.

Ariba Invoice and Payment Solution offerings:

The Ariba Invoice and Payment Solution offerings allow customers to automate the invoice management process. Our modules include the
integrated Ariba Invoice and Paymentmodule and Ariba Invoice and Settlement.

Ariba
Electronic Invoice Presentment and Payment On-Demand is our web-based invoice and payment module that provides customers with comprehensive capture, validation, matching, reconciliation and payment capabilities throughout the invoice
lifecycle.

Ariba Invoice and Settlement module automates the invoice capture, matching, reconciliation and
payment processes, and drives additional discounts and cash forecast visibility. Enterprises use it to automate supplier interactions, schedule payments, send batch payments, optimize vendor discounts and share remittance details with suppliers on
the Ariba Supplier Network.

Ariba Supplier Management Solution offering:

Ariba Supplier Connectivity provides access to the Ariba Supplier Network (described below) for customers who are using either
Ariba Spend Management solutions or a non-Ariba solution (e.g., a legacy ERP system) to communicate and transact with their suppliers. Ariba Supplier Connectivity enables Ariba customers to reliably transact with more than 180,000 registered global
suppliers via the Ariba Supplier Network.

Ariba Supplier Network

Ariba Spend Management solutions also integrate with and leverage the Ariba Supplier Network. The Ariba Supplier Network is a scalable
Internet infrastructure that connects 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 200,000 registered suppliers of a
wide array of goods and services are connected to the Ariba Supplier Network. As a result, buying organizations can connect once to the Ariba Supplier Network and simultaneously access many suppliers. By using the Ariba Supplier Network, businesses
can realize cost savings through greater process efficiencies, better employee and contract compliance, reduced inventories and fair pricing opportunities.



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The Ariba Supplier Network is a multi-protocol network that allows buyers to send orders
from Ariba Buyer or other eProcurement systems in one standard format that are then converted into the suppliers preferred transaction format. Supported formats include: cXML (Commerce eXtensible Markup Language), a format used on the Internet
to describe commerce data and documents; EDI (Electronic Data Interchange), a format used to electronically exchange data and documents; CIF (Catalog Interchange Format), a format commonly used to electronically transfer catalog information;
electronic mail; and fax. In addition, by using Ariba PunchOut, a cXML-based technology, buyers can link to a suppliers web site to find, configure and select products while keeping the purchasing process within Ariba Buyer or Ariba
Procure-to-Pay for internal approval, accounting and administrative controls. This feature is particularly useful when working with suppliers that have extensive web sites, product configuration systems and large product catalogs.

Frequently, suppliers join the Ariba Supplier Network at the request of buyers who purchase goods and services using Ariba Spend Management
solutions. To help buyers attract and rapidly enable their target suppliers, Ariba has created Ariba Supplier Enablement solutions that provide a broad range of products and services to enable suppliers of various sizes in all industries to join the
Ariba Supplier Network. Ariba Supplier Enablement solutions include tools for content management, order management, order fulfillment, invoicing and payment that help suppliers manage business transactions and content simply through a web browser or
by using electronic methods (including XML and EDI). We have also created other Ariba Supplier Programs, including Ariba Ready and Ariba Supplier Consulting, to help suppliers develop, deploy and promote their capabilities on the Ariba Supplier
Network.

Access to the Ariba Supplier Network is provided in one of two ways: (1) through a direct access license to the
Ariba Supplier Network itself whereby suppliers joining the Ariba Supplier Network must agree to a standard web-based terms of use agreement with us, and link to the network through any of several formats (e.g., cXML, e-mail, EDI or fax) and
(2) through buying organizations as part of their purchase of procurement software. Suppliers that exceed certain transaction volumes are charged a fee for access to the Ariba Supplier Network. In addition, suppliers are charged fees for
optional solutions such as data retention and technical support services.

Ariba Spend Management Expertise

In addition to software, Ariba Spend Management solutions include a broad range of services designed to improve the return on investment our
customers receive through the use of our solutions. Ariba Spend Management Expertise is focused on delivering sustainable, company-wide capability and rapid results and includes:



| |  |  | Ariba Strategic Consultingenables strategic decision making, organization assessment, process design and performance improvement.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Sourcing Servicessupports creation of sourcing programs and projects and includes category knowledge, supply market intelligence and
low-cost country sourcing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Implementation Servicesexecutes installation and set-up of software.
| | - |  | ---------------------------------------------------------------------------



| |  |  | Ariba Customer Support Servicessupports customers direct usage of software (training and product support).
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | Ariba Supplier Enablement Serviceshelps to ensure that buyers and suppliers transact in a cost-effective, scalable manner.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

Ariba has over 700 global consultants, including more than 400 category experts that assist our customers in sourcing
strategy, supplier identification and assessment, negotiation and project execution, and supplier management across more than 500 spend categories. These experts are stationed around the globe, including in our service centers in Prague, Shenzhen,
Bangalore, and Pittsburgh. Specific sourcing expertise and support is also available as a remote, on-demand service via our Best Practice Center (BPC) and our Category Playbooks.



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Employees

As of September 30, 2009, we had a total of 1,632 employees, including 334 in research and development, 351 in sales and marketing, 769 in professional services, customer support and training, and
178 in administration, finance, legal, human resources and information technology. Of these employees, 971 were located in the United States and 661 were located outside the United States. None of our employees are represented by a collective
bargaining agreement, nor have we experienced any work stoppage. We consider our relations with our employees to be good.

Sales

We sell our solutions primarily through our worldwide direct sales organization. Our sales force is organized by
geographic regions, including North America, Europe and the Asia Pacific region. The direct sales force consists of sales professionals, application specialists and supporting personnel. As of September 30, 2009, we had 173 employees in our
global sales organization.

Marketing

Our marketing strategy is to continually elevate our brand, expand the awareness of our Spend Management solutions in new market segments, and generate significant demand for our solutions.

Our primary marketing activities include:



| |  |  | Developing press and industry analyst relations to garner third-party validation and generate positive coverage for us and our solutions, worldwide;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Participation in, and sponsorship of, conferences, tradeshows and industry events targeted to finance, accounting, procurement, contract management and
travel executives;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Field marketing events and sales tools to enable our sales organization to create awareness and effectively convert leads into pipeline;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | E-mail, direct mail, webinars and telemarketing campaigns to stimulate interest and drive demand;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Collateral, white papers, case studies and thought leadership distributed through various mediums; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | Website development to engage and educate prospects and generate interest through product information and demonstrations, customer testimonials, case
studies and marketing collateral.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Customer Service, Training and Support

We believe that customer satisfaction is essential for our long-term success, and therefore offer comprehensive customer assistance programs.
Our technical support provides response to and resolution of customer technical inquiries and is available to clients by telephone, over the web or by e-mail. We use a customer service automation system to track each customer inquiry until it is
resolved.

Our Ariba Education Services group delivers education and training to our clients and partners at our headquarters
in Sunnyvale, California and in our offices in Pittsburgh, Pennsylvania and London. We offer a comprehensive series of classes to provide the knowledge and skills to successfully deploy, use and maintain our products and solutions through Ariba
University. Ariba University delivers Institute for Supply Management (ISM) training and change management services to customers and partners. Through a comprehensive offering of traditional classroom delivery at an Ariba campus, client
on-site delivery, web-based training and consulting services, Ariba Education Services provide the knowledge and skills required to successfully deploy, use and maintain the Ariba product line.



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Seasoned instructors, instructional designers and education consultants deliver more than
350 classes per year to more than 3,000 students in a hands-on, role-based learning environment in our learning centers or on-site at the customers location. Participants who successfully complete our programs will receive continuing education
hours. These hours may be applied toward ISM Certified Purchasing Manager recertification and/or Accredited Purchasing Practitioner reaccreditation program requirements.

Research and Development

We introduced our initial product, Ariba Buyer,
in June 1997, and since then have released a number of new products and product enhancements to address the needs of sourcing and procurement professionals. We began to operate the Ariba Supplier Network in April 1999 and continue to provide
enhancements to it on an ongoing basis. We introduced Ariba Sourcing in September 2001, and upgraded the solution in September 2004 to incorporate functionality from legacy FreeMarkets, Inc. (FreeMarkets) applications. In addition, we
have introduced several products, including Ariba Data Enrichment (based on technology acquired from Softface, Inc. (Softface)) and several internally developed products such as Ariba Contract Workbench, Ariba Category Procurement and
Ariba Invoice and Settlement. In addition, we have also been re-architecting our applications to be more easily deployed via an on-demand model. During fiscal years 2006, 2007, 2008 and 2009, we released, and continuing in fiscal year 2010 we plan
to release, on-demand versions of many of our software applications. If we are unable to develop new products or enhancements to existing products or corrections on a timely and cost-effective basis, particularly on-demand versions of our products,
or if these new products or enhancements do not have the features or quality measures to make them successful in the marketplace, our business will be harmed.

Our research and development expenses were $43.5 million, $52.3 million and $51.2 million during the fiscal years ended September 30, 2009, 2008 and 2007, respectively. We also recorded amortization
of acquired technology as part of cost of revenues of $1.5 million, $1.1 million and $885,000 during the fiscal years ended September 30, 2009, 2008 and 2007, respectively.

Our research and development organization is divided into teams focused on our various Ariba Spend Management solutions and the Ariba
Supplier Network, as well as on server and infrastructure development, user interface and Internet application design, tools development, enterprise integration, operations, quality assurance, documentation, release management and advanced
development. These teams regularly share resources and collaborate on code development, quality assurance and documentation.

International
Operations

We sell our software and provide services and expertise worldwide. Our geographic coverage allows us to draw on
business, technical and sourcing expertise from a worldwide workforce which provides stability to our operations and revenue streams to leverage geography-specific economic trends.

We currently have offices in 22 countries. All of our international operations are conducted through wholly-owned subsidiaries. Revenues
from our international operations were $100.3 million, $102.9 million and $87.5 million for the fiscal years ended September 30, 2009, 2008 and 2007, respectively.

We operate in three geographic operating segments: North America; Europe, Middle East and Africa (EMEA); and Asia-Pacific (APAC). See Note 9 of Notes to Consolidated Financial
Statements for additional financial information about our geographic areas and Risk FactorsOur Business is Susceptible to Numerous Risks Associated with International Operations for risks relating to our international operations.



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Competition

The market for spend management applications is highly competitive, rapidly evolving and fragmented and subject to changing technology and shifting customer needs.

Our principal direct competition comes from ERP vendors whose software is installed by customers directly. We also compete with specialty
vendors that offer their software on a hosted basis or under a perpetual license. In our services business, we compete with several large and regional service providers. We anticipate additional competition from other established and emerging
companies as the spend management market continues to expand.

Our current principal competitors include:



| |  |  | Enterprise software application vendors, including SAP AG and Oracle;
| | - |  | ---------------------------------------------------------------------



| |  |  | Smaller specialty vendors, including Emptoris, BravoSolution, Zycus and American Express S2S;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Smaller niche SaaS vendors, including Perfect Commerce, cc-Hubwoo, Ketera Technologies and Iasta; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Service providers, including A.T. Kearney and McKinsey & Company.
| | - |  | -----------------------------------------------------------------

We believe the principal competitive factors considered with respect to, and the relative competitive standing of, our spend management
software solutions are:



| |  |  | Interoperability with existing commonly-used ERP systems;
| | - |  | ---------------------------------------------------------



| |  |  | Ease of use and rates of user adoption;
| | - |  | ---------------------------------------



| |  |  | Price and demonstrable cost-effective benefits for customers;
| | - |  | -------------------------------------------------------------



| |  |  | Performance, security, scalability, flexibility and reliability of the software;
| | - |  | --------------------------------------------------------------------------------



| |  |  | Vendor reputation and referenceable customers;
| | - |  | ----------------------------------------------



| |  |  | Quality of customer support; and
| | - |  | --------------------------------



| |  |  | Financial stability of the vendor.
| | - |  | ----------------------------------

Many of our current and potential competitors, such as ERP software vendors including Oracle and SAP, have longer operating histories, greater name recognition, larger marketing budgets and significantly
greater resources, and a larger installed base of customers than we do. These vendors could also introduce spend management solutions that are included as part of broader enterprise application solutions at little or no cost to their customers. They
may also be able to devote greater resources to the development, promotion and sale of their products than we can to ours, which can enable them to respond more quickly to new technology, introduce new spend management modules and respond to changes
in customer needs. In addition, many of our competitors have well-established relationships with our current and 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 other incentives not matched by us. 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 and achieve greater market acceptance. The industry has experienced consolidation with both larger and smaller competitors acquiring companies to broaden their offerings or increase scale. As a result, we may not
be able to successfully compete against our current and future competitors.

Intellectual Property and Other Proprietary Rights

We depend on our ability to develop and maintain the proprietary aspects of our technology. To protect our proprietary
technology, we rely primarily on a combination of contractual provisions, confidentiality procedures, trade secrets, and patent, copyright and trademark laws.



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We license rather than sell our software products and require our customers to enter into
license agreements, which impose restrictions on their ability to utilize the software. The license agreements generally do not provide for a right to return. See Note 1 to the consolidated financial statements. In addition, we seek to avoid
disclosure of our trade secrets through a number of means, including but not limited to requiring those persons with access to our proprietary information to execute confidentiality agreements with us and restricting access to our source code. We
seek to protect our software, documentation and other written and electronic materials under trade secret and copyright laws, which may afford only limited protection. We can make no assurance that any of our proprietary rights with respect to our
solutions will be viable or of value in the future since the validity, enforceability and type of protection of proprietary rights in these evolving technologies are uncertain and still evolving.

We currently have 41 U.S. patents issued and 54 U.S. patent applications pending. We also have five foreign patents issued and zero foreign
patent applications pending. It is possible that no patents will be issued from our pending patent applications or that, if issued, or our potential future patents may be successfully challenged. It is also possible that we may not develop
proprietary products or technologies that are patentable, that any patent issued to us may not provide us with any competitive advantages, or that the patents of others will harm our ability to do business.

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 product. These delays, if they occur, could materially and adversely affect Ariba.

Ariba and the Ariba logo are registered trademarks in the United States. In addition, Ariba, the Ariba logo and the Ariba
boomerang design are registered in one or more foreign countries. The above-mentioned trademark applications are subject to review by the applicable governmental authorities, may be opposed by private parties, and may not issue.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to
obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be
a persistent problem. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products or design around patents issued to us or our other intellectual property.

There has been a substantial amount of litigation in the software and Internet industries regarding intellectual property rights. It is possible that in the future, 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 as the number of products
and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could be time-consuming, result in costly litigation, divert managements time from
developing our business, cause product shipment delays, require us to enter into royalty or licensing agreements or require us to satisfy indemnification obligations to customers. Royalty or licensing agreements, if required, may not be available on
terms acceptable to us or at all, which could harm our business. In addition, we may need to commence litigation or take other actions to protect our intellectual property rights which may be costly, time-consuming and distracting to management and
would result in the loss of our intellectual property.



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Available Information

We file reports required of public companies with the Securities and Exchange Commission (SEC). These include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
proxy statements and other reports, and amendments to these reports. The public may read and copy the materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 202-551-8090. The SEC also maintains a Web site at www.sec.govthat contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC. We make available free of charge on the Investor Relations section of our corporate Web site all of the reports we file with the SEC as soon as reasonably practicable after the reports are filed. Copies of
Aribas fiscal 2009 Annual Report on Form 10-K may also be obtained without charge by contacting Investor Relations at InvestorInfo@ariba.com or by calling 650-390-1200.



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EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and their ages as of October 31, 2009 are as follows:



|                    |  |     |  |                                                     
|------------------- |  | --- |  | ----------------------------------------------------
|Name                |  | Age |  | Position(s)                                         
|Robert M. Calderoni |  | 49  |  | Chairman and Chief Executive Officer                
|Kevin Costello      |  | 47  |  | President                                           
|Kent Parker         |  | 48  |  | Chief Operating Officer                             
|Ahmed Rubaie        |  | 43  |  | Executive Vice President and Chief Financial Officer

Robert M. Calderonihas served as Aribas Chairman and Chief Executive
Officer since July 2003. From October 2001 to July 2003, Mr. Calderoni served as Aribas President and Chief Executive Officer. From October 2001 to December 2001, Mr. Calderoni also served as Aribas Interim Chief Financial
Officer. From January 2001 to October 2001, Mr. Calderoni served as Aribas Executive Vice President and Chief Financial Officer. Mr. Calderoni was also an employee of the Company from November 2000 to January 2001. In addition to
serving as a director of Ariba, he is also a member of the board of directors of Juniper Networks, Inc., a provider of network infrastructure systems, and KLA-Tencor Corporation, a supplier of process control and yield management solutions for the
semiconductor and related microelectronics industries. Mr. Calderoni holds a Bachelor of Science degree in Accounting and Finance from Fordham University.

Kevin Costellohas served as Aribas President since November 2007. Mr. Costello also served as Aribas Executive Vice President and Chief Commercial Officer from October 2004 until
November 2007. From October 2003 until October 2004, Mr. Costello served as Aribas Executive Vice President of Sales and Solutions. From May 2002 until October 2003, Mr. Costello served as Aribas Executive Vice President,
Ariba Solutions Delivery. Mr. Costello holds a Bachelor of Science degree in Accounting from the University of Illinois.

Kent Parkerhas served as Aribas Chief Operating Officer since November 2007. Mr. Parker also served as Aribas Executive Vice President, Ariba Global Services Organization from July 2004 until November 2007. From
April 2000 to July 2004, Mr. Parker held numerous positions including Senior Vice President of Global Sourcing Services at FreeMarkets, which we acquired in July 2004. Mr. Parker holds a degree in mechanical engineering from the University
of Evansville and an M.B.A from the Amos Tuck School of Business Administration at Dartmouth College.

Ahmed Rubaie has
served as Aribas Executive Vice President and Chief Financial Officer since August 2008. From December 2000 to July 2008, Mr. Rubaie held various positions at Avery Dennison, a global leader in pressure-sensitive labeling materials,
retail tag, ticketing and branding systems, and office products. Mr. Rubaie most recently served as the vice president, group finance for the retail information services group of Avery Dennison. Mr. Rubaie held numerous other 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.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

In addition
to other information in this Form 10-K, the following risk factors should be carefully considered in evaluating Ariba and our business because such factors may have a significant impact on our business, operating results and financial condition. As
a result of the risk factors set forth below and elsewhere in this Form 10-K, actual results could differ materially from those projected in any forward-looking statements.

The Current Economic Downturn Has Adversely Impacted Our Business and May Adversely Impact Our Business Beyond Our Expectations.

Our business has been adversely affected by the ongoing credit crises and adverse worldwide economic conditions. Although our
spend management solutions help companies reduce the cost of their goods and services and may therefore be perceived as even more strategic during adverse economic conditions, we experienced a challenging selling environment during the year ended
September 30, 2009. Adverse economic conditions could, among other things, result in reduced revenues, increased operating losses and reduced cash flows from operations, greater than anticipated uncollectible accounts receivables and increased
allowances for doubtful accounts receivable, impairment of financial and non-financial assets and increased restructuring charges.

We May Fail to Achieve Our Financial Forecasts Due to Inaccurate Sales Forecasts and Other Factors.

Our
revenues are difficult to predict and, as a result, our quarterly financial results can fluctuate substantially. We estimate quarterly revenues in part based on our sales pipeline, which is an estimate of potential customers, their stage of the
sales process, the potential amount of their sales contracts and the likelihood that we will convert them into actual customers during the quarter. To the extent that any of these estimates are inaccurate, our actual revenues may be different than
our forecast revenues.

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;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | 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. 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 continue to occur, our net revenues could be seriously impacted, since a significant portion of our net revenues are derived from
international operations. We have partially hedged risks associated with foreign currency transactions in order to minimize the impact of changes in foreign currency exchange rates on earnings. We utilize forward



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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. For example, in the year ended September 30, 2009 as compared to the year ended September 30, 2008, we had an increase in realized and unrealized foreign currency transaction losses
of $6.7 million on accounts receivable billed from Ariba, Inc. in foreign currencies to customers headquartered in foreign countries and realized losses on foreign denominated cash balances maintained in the United States, primarily due to the U.S.
dollar strengthening against the Euro, the British Pound, the Australian dollar and the Canadian dollar.

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 us, rather than solutions from 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 September 30, 2009, 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:



| |  |  | declines in average selling prices of our products and services resulting from adverse economic conditions, competition and other factors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure to successfully grow our sales channels;
| | - |  | ------------------------------------------------



| |  |  | failure to maintain control over costs;
| | - |  | ---------------------------------------



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



| |  |  | charges incurred in connection with any future restructurings or acquisitions; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | additional impairment charges as a result of the decline in value and credit quality of our investments in auction rate securities (ARS) or
changes in the accounting treatment of these securities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



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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; and,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the mix of types of customer agreements and related timing of revenue recognition.
| | - |  | ---------------------------------------------------------------------------------------------

Risks Related to Expenses:



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



| |  |  | costs associated with changes in our pricing policies and business model;
| | - |  | -------------------------------------------------------------------------



| |  |  | 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.

We derive a substantial portion of our revenue from subscriptions to our on-demand applications. We have experienced and may
continue to experience a deferral of revenues and cash payments from customers.

Additional risks with the on-demand
model include the following:



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



| |  |  | we have experienced and expect to continue to experience a decrease in the demand for our implementation services to the extent fewer customers license
our software products as installed applications;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we have experienced and expect to continue to experience a decrease in the demand for our maintenance services, which is related to our CD business, as
many new customers are purchasing our on-demand products and a small number of legacy CD customers are converting to on-demand products;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | because we recognize revenue from subscription to our our-demand services over the term of the agreements, downturns or upturns in sales may not be
immediately reflected in our operating results;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not successfully achieve market penetration in our newly targeted markets, including target customers we characterize as middle-market
companies;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may incur costs at a higher than forecasted rate as we expand our on-demand operations; and,
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | product quality issues may affect forecasted adoptions and renewals.
| | - |  | --------------------------------------------------------------------



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

We have recorded significant restructuring charges relating to the abandonment of numerous leased facilities,
including most notably portions of our Sunnyvale, California headquarters. For example, in the year ended September 30, 2009, the Company revised its estimates for sublease commencement dates and sublease rental rate projections to reflect
continued soft market conditions in the Northern California real estate market, resulting in a charge of $6.8 million. Moreover, we have 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 $1.2 million as of September 30, 2009. 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. Our lease abandonment accrual is net of $54.6 million of estimated sublease
income. Actual sublease payments due under noncancelable subleases of excess facilities totaled $43.7 million as of September 30, 2009, 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 September 30, 2009, 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.

Limitations of Our Existing ERP System and Problems With the Timing, Design or Implementation of Our Planned New ERP System Could Adversely Impact Our Business and Operations.

In fiscal year 2008, we commenced a project to implement an ERP system for finance and human resources in response to strategic business
needs. We invested significant capital and human resources in the design and implementation of the planned new ERP system. Due to the current economic downturn, restructuring actions taken in the year ended September 30, 2009 and a review of
all discretionary spending and projects, we deferred the ERP system implementation to an uncertain date. Limitations of our existing ERP systems and problems in the timing, design and implementation of a new ERP system, when resumed, could make it
more difficult to respond to strategic business needs and adversely affect our financial position, results of operations and cash flows.

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, Pittsburgh, Pennsylvania, Atlanta, Georgia and Bangalore, India. 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



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organization. We have experienced longer sales cycles as a result of the current economic downturn and more levels of required customer management approvals. 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.

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.

Revenues From Our Ariba Spend Management Sourcing Services Could Be Negatively Affected If Customers Elect Not to Renew Their Contracts and New Deals Are Signed More Infrequently and at Lower Selling
Prices.

We have several large multi-year contracts for our spend management services, some of which come up for renewal in
the next year or 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



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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.

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 as a result of increase access charges or otherwise, 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 Our On-Demand Solutions, As Well As the Ariba Supplier Network.

We warrant to our customers that our on-demand solutions and 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 or credits for future use or maintenance. Further, to the extent that a customer incurs significant
financial hardship due to the failure of our on-demand solutions or the Ariba Supplier Network to perform as specified, 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 AG and
Oracle. We also compete with several service providers, including A.T. Kearney and McKinsey & Company. In addition, we compete with smaller specialty vendors or smaller niche providers of sourcing or procurement products and services,
including Emptoris, BravoSolution, Zycus, American Express S2S, Perfect Commerce, cc-Hubwoo, Ketera Technologies and Iasta. Because spend management is a relatively new software and solutions 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.



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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. Other competition includes established business process outsourcing organizations in the procuring industry including Accenture, Genpact and EDS.

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 to their customers. In addition, many of our competitors have well-established relationships with our current and 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. The industry has experienced consolidation with both larger and smaller competitors acquiring companies to broaden their offerings or increase scale. 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.



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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 8 of Notes to the Consolidated Financial Statements.

We May Be Required to Record Additional Impairment Charges in Future Quarters as a Result of the Decline in Value of Our Investments in
Auction Rate Securities (ARS).

We hold a variety of interest bearing ARS that represent investments in pools
of assets, including student loans, commercial paper and credit derivative products. These ARS investments are intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals,
allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. The continuing uncertainties in the credit markets have affected all of our holdings in ARS investments and auctions for our
investments in these securities have failed to settle on their respective settlement dates. Consequently, the investments are not currently liquid and we will not be able to access these funds until a future auction of these investments is
successful or a buyer is found outside of the auction process. Contractual maturity dates for these ARS investments range from 2016 to 2047 with principal distributions occurring on certain securities prior to maturity.

The valuation of our ARS, along with the rest of our investment portfolio, is subject to uncertainties that are difficult to predict.
Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and
ongoing strength and quality of market credit and liquidity.

Although we currently have no intent to sell these ARS
investments prior to recovery nor are aware of any factors that would make such a sale of the ARS investments more likely than not, if the current market conditions deteriorate further, or the anticipated recovery in market values does not occur, we
may be required to record additional unrealized losses in other comprehensive income (loss) or to record all current and any future unrealized losses as a charge in our statement of operations in future quarters. See Note 5Fair Value of Our
Notes to Consolidated Financial Statements for additional information about the potential adverse impact of our investments in ARS.

We May Incur 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 recently. The balance of goodwill is $406.5 million as of September 30, 2009 and, there can be no assurance that future goodwill impairments will not occur.

Our Stock Price Is Highly Volatile and the Market Price of Our Common Stock May Decrease in the Future.

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, including those discussed in other risk factors, some of which are beyond our control:



| |  |  | variations in our quarterly operating results;
| | - |  | ----------------------------------------------



| |  |  | announcements that our revenues or income are below analysts expectations;
| | - |  | ---------------------------------------------------------------------------



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| |  |  | changes in analysts estimates of our performance or industry performance;
| | - |  | --------------------------------------------------------------------------



| |  |  | 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 subscription transactions; and
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | additions or departures of key personnel.
| | - |  | -----------------------------------------

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 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.

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 41 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. It is possible that in the future, 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, divert managements time from developing our business, cause product shipment delays, require us to enter into royalty or licensing agreements or require us to satisfy indemnification obligations to our customers.
Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business.

In addition, we may need to commence litigation or take other actions to protect our intellectual property rights. These lawsuits and other potential litigation and actions brought by us could be costly,
time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and
countersuits attacking the validity and enforceability of our intellectual property rights.



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We Rely on Third-Party Technology for Our Solutions which Might Not be Available to Us in
the Future.

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 ERP, 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 or require us to satisfy indemnification obligations to our customers. These delays, if they occur, could materially adversely affect our business.

If Our Security Measures Fail or Unauthorized Access to Customer Data Is Otherwise Obtained, Our Solutions May Be Perceived As Not Being
Secure, Customers May Curtail or Stop Using Our Solutions, And We May Incur Significant Liabilities.

Our operations
involve the storage and transmission of our customers confidential information, and security breaches could expose us to a risk of loss of this information, litigation, indemnity obligations and other liability. If our security measures are
breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to our customers data, our reputation will be damaged, our business may suffer and we could incur
significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement
adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose potential revenues and existing customers.

Further, because our products transmit data and information belonging to our customers, many customers and prospects require
us to meet specific security standards or to maintain security certifications with respect to our products and operations. Given the complexity of our business and the costs and efforts required to meet the high standards to
maintain these security certifications, there is no guarantee that we can achieve or maintain any such certifications or standards. If we fail to meet the standards for these security certifications, it could negatively
impact our ability to attract new or keep existing customers and it could seriously harm our business.

Business Disruptions Could Affect Our Operating Results.

A significant portion of our research and development
activities and certain other critical business operations is concentrated in a few geographic areas. We are a highly automated business and a disruption or failure of our systems could cause delays in completing sales and providing services. A major
earthquake, fire or other catastrophic event that results in the destruction or disruption of any of our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result,
our future operating results could be materially and adversely affected.

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.



24



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##### Table of Contents

|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable.



|ITEM 2. | PROPERTIES
|------- | ----------

Ariba
occupies three principal office locations in Sunnyvale, California, Pittsburgh, Pennsylvania and Atlanta, Georgia.

Operations
at our corporate headquarters in Sunnyvale, California consist principally of marketing, research and development and some administrative activities. We occupy approximately 150,000 square feet in a 716,000 square foot, five building office park.
Our lease for the entire office park commenced in January 2001 and expires in January 2013. We currently sublease over two buildings totaling 396,000 square feet to third parties. These subleases expire in January 2013. The remaining 170,000 square
feet is available for sublease for the remaining lease term.

We occupy approximately 91,000 square feet of office space in
Pittsburgh, Pennsylvania under a lease that expires in December 2017. Our operations at this location consist principally of our services organization and administrative activities.

We occupy approximately 26,000 square feet of office space in Atlanta, Georgia under a lease that expires in June, 2013. Our operations at
this location consist principally of our sales and support activities.

We also lease several North American sales and support
offices throughout the United States, Canada and Mexico. We lease international sales and support offices including offices in China, Czech Republic, France, Germany, Hong Kong, India, Ireland, Japan, Singapore, Slovakia and the United Kingdom.

We may add additional offices in the United States and in other countries as growth opportunities present themselves, as well
as from time to time abandon locations that are no longer required to meet the needs of our business.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

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), certain of the two companies former officers and
directors, and the underwriters who handled the IPOs. These consolidated complaints were then further consolidated, along with similar complaints filed against over 300 other issuers in connection with their initial public offerings, before a
single judge for case management purposes. After many years of litigation and appeals related to the sufficiency of the pleadings and class certification, the parties have agreed to a settlement of the entire litigation, which was approved by
the Court on October 5, 2009. Under the settlement, neither the Company nor FreeMarkets will be required to make any payment. Notices of appeal have been filed by various objectors to the Courts order. As of September 30, 2009,
no amount is accrued as a loss is not considered probable or estimable.

General

Defending against various 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, be subject to an injunction that could seriously harm its business and results of operations.



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##### Table of Contents

During the year ended September 30, 2009, the Company recorded $7.5 million of income
related to an insurance reimbursement for previously unreimbursed litigation costs.

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, we have not had to reimburse any of our customers for any losses related to these indemnification provisions and no material customer claims for such indemnification are outstanding as of September 30, 2009.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

Not applicable.



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##### Table of Contents

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market for Our Common Stock

Our common stock is traded on the Nasdaq Global Market under the symbol ARBA. The price range per share in the table below reflects the highest and lowest sale prices for our stock as reported by the Nasdaq Global Market for
each quarter during the last two fiscal years. Our present policy is to retain earnings, if any, to finance future growth. We have never paid cash dividends and have no present intention to pay cash dividends. As of October 31, 2009, there were
approximately 952 stockholders of record.



|                    |  |                      |       |     |   |      
|------------------- |  | -------------------- | ----- | --- | - | -----
|                    |  | Price RangePer Share
|Three Months Ended: |  | High                 |       | Low
|September 30, 2009  |  | $                    | 12.53 |     | $ | 8.27 
|June 30, 2009       |  | $                    | 11.19 |     | $ | 8.15 
|March 31, 2009      |  | $                    | 9.56  |     | $ | 6.43 
|December 31, 2008   |  | $                    | 14.01 |     | $ | 6.00 
|                    |  |                     
|September 30, 2008  |  | $                    | 18.58 |     | $ | 11.88
|June 30, 2008       |  | $                    | 16.26 |     | $ | 8.37 
|March 31, 2008      |  | $                    | 11.35 |     | $ | 8.26 
|December 31, 2007   |  | $                    | 13.30 |     | $ | 10.35

Equity Compensation Plan Information

The following table sets forth as of September 30, 2009 certain information regarding our equity compensation plans.



|                                                               |  |                                                                                          |     |  |                                                                         |       |     |                                                                                                                                      |            |    
|-------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | --- |  | ----------------------------------------------------------------------- | ----- | --- | ------------------------------------------------------------------------------------------------------------------------------------ | ---------- | ---
|                                                               |  | A                                                                                        |     |  | B                                                                       |       |     | C                                                                                                                                    |           
|Plan category                                                  |  | Number of securities tobe issued upon exerciseof outstanding options,warrants and rights |     |  | Weighted-averageexercise price ofoutstandingoptions, warrantsand rights |       |     | Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in Column A) |           
|Equity compensation plans approved by security holders         |  | 461,375                                                                                  |     |  | $                                                                       | 17.06 |     |                                                                                                                                      | 10,371,852 | (1)
|Equity compensation plans not approved by security holders (2) |  | 122,280                                                                                  | (3) |  | $                                                                       | 16.50 | (3) |                                                                                                                                      |           |    
|                                                               |  |                                                                                          |     |  |                                                                         |       |     |                                                                                                                                      |            |    
|Total                                                          |  | 583,655                                                                                  |     |  | $                                                                       | 16.95 |     |                                                                                                                                      | 10,371,852 |    
|                                                               |  |                                                                                          |     |  |                                                                         |       |     |                                                                                                                                      |            |    



|(1) | Includes 1.6 million shares available for future purchase under the Ariba, Inc. Employee Stock Purchase Plan. Securities available for future issuance under the
Ariba, Inc. 1999 Equity Incentive Plan excluding unvested shares of restricted common stock as of September 30, 2009.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | See Note 10 of Notes to Consolidated Financial Statements for a narrative description of these plans.
|--- | -----------------------------------------------------------------------------------------------------

|(3) | Represents shares of common stock issuable pursuant to awards outstanding under equity compensation plans assumed by us in connection with our fiscal year 2004 merger
with FreeMarkets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, which did not exceed the statutory required withholding limits, during the quarter ended
September 30, 2009.



27



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##### Table of Contents

ISSUER PURCHASES OF EQUITY SECURITIES



|                                       |  |                                |  |                             |       |                                                                               |  
|-------------------------------------- |  | ------------------------------ |  | --------------------------- | ----- | ----------------------------------------------------------------------------- | -
|Period                                 |  | Total Number ofSharesPurchased |  | Average Price Paidper Share |       | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs
|July 1, 2009  July 31, 2009           |  |                               |  | $                           |      |                                                                               | 
|August 1, 2009  August 31, 2009       |  | 19,464                         |  |                             | 11.86 |                                                                               | 
|September 1, 2009  September 30, 2009 |  |                               |  |                             |      |                                                                               | 
|                                       |  |                                |  |                             |       |                                                                               |  
|Total                                  |  | 19,464                         |  | $                           | 11.86 |                                                                               | 
|                                       |  |                                |  |                             |       |                                                                               |  

Stock Performance Graphs and Cumulative Total Return

The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Morgan Stanley
Technology Index and the Standard and Poors 500 Index (the S&P 500 Index), for each of the last five fiscal years ended September 30, 2009, assuming an investment of $100 at the beginning of such period and the
reinvestment of any dividends, if any. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.

LOGO



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##### Table of Contents

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following selected consolidated financial data should be read in conjunction with the consolidated financial statements, the notes to the consolidated financial statements, and Managements Discussion and Analysis of
Financial Condition and Results of Operations, which are included elsewhere in this Form 10-K. The consolidated statements of operations data for each of the five fiscal years in the period ended September 30, 2009, and the consolidated
balance sheet data as of the end of each such fiscal year, are derived from our consolidated financial statements. The operating results for any period should not be considered indicative of results for any future period.



|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|----------------------------------------------------------------------------- | ------------------------------------- | --------------------------------- | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | ------- | - |  | - | -------- | -
|                                                                              |                                       | For the Years Ended September 30, |        
|                                                                              | 2009                                  |                                   |         | 2008 |  |   | 2007    |   |  | 2006 |         |   | 2005 |  
|                                                                              | (in thousands, except per share data) |                                  
|Consolidated Statements of Operations Data (1):                               |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Revenues:                                                                     |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Subscription and maintenance                                                  |                                       | $                                 | 222,206 |      |  | $ | 187,150 |   |  | $    | 142,309 |   |      | $ | 130,057 |   |  | $ | 130,294  |  
|Services and other                                                            |                                       |                                   | 116,766 |      |  |   | 140,910 |   |  |      | 159,358 |   |      |   | 165,959 |   |  |   | 192,749  |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Total revenues                                                                |                                       |                                   | 338,972 |      |  |   | 328,060 |   |  |      | 301,667 |   |      |   | 296,016 |   |  |   | 323,043  |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Cost of revenues:                                                             |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Subscription and maintenance (2)                                              |                                       |                                   | 47,907  |      |  |   | 40,088  |   |  |      | 32,709  |   |      |   | 27,039  |   |  |   | 27,628   |  
|Services and other (2)                                                        |                                       |                                   | 75,465  |      |  |   | 94,189  |   |  |      | 114,615 |   |      |   | 131,551 |   |  |   | 128,798  |  
|Amortization of acquired technology and customer intangible assets            |                                       |                                   | 5,550   |      |  |   | 14,257  |   |  |      | 14,074  |   |      |   | 15,702  |   |  |   | 19,501   |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Total cost of revenues                                                        |                                       |                                   | 128,922 |      |  |   | 148,534 |   |  |      | 161,398 |   |      |   | 174,292 |   |  |   | 175,927  |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Gross profit                                                                  |                                       |                                   | 210,050 |      |  |   | 179,526 |   |  |      | 140,269 |   |      |   | 121,724 |   |  |   | 147,116  |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Operating expenses:                                                           |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Sales and marketing (2)                                                       |                                       |                                   | 103,739 |      |  |   | 110,834 |   |  |      | 93,904  |   |      |   | 82,456  |   |  |   | 94,299   |  
|Research and development (2)                                                  |                                       |                                   | 43,483  |      |  |   | 52,270  |   |  |      | 51,159  |   |      |   | 50,085  |   |  |   | 49,610   |  
|General and administrative (2)                                                |                                       |                                   | 43,289  |      |  |   | 48,919  |   |  |      | 39,780  |   |      |   | 32,850  |   |  |   | 34,725   |  
|Other incomeSoftbank                                                         |                                       |                                   |        |      |  |   | (566    | ) |  |      | (13,564 | ) |      |   | (13,585 | ) |  |   | (9,490   | )
|Insurance reimbursement                                                       |                                       |                                   | (7,527  | )    |  |   |        |   |  |      |        |   |      |   |        |   |  |   |         |  
|Amortization of other intangible assets                                       |                                       |                                   | 755     |      |  |   | 739     |   |  |      | 525     |   |      |   | 800     |   |  |   | 798      |  
|Restructuring and integration costs (benefit)                                 |                                       |                                   | 10,837  |      |  |   | 10,108  |   |  |      | (4,194  | ) |      |   | 26,321  |   |  |   | 41,248   |  
|Impairment of goodwill (3)                                                    |                                       |                                   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   | 247,830  |  
|Litigation provision                                                          |                                       |                                   |        |      |  |   | 5,900   |   |  |      |        |   |      |   |        |   |  |   | 37,000   |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Total operating expenses                                                      |                                       |                                   | 194,576 |      |  |   | 228,204 |   |  |      | 167,610 |   |      |   | 178,927 |   |  |   | 496,020  |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Income (loss) from operations                                                 |                                       |                                   | 15,474  |      |  |   | (48,678 | ) |  |      | (27,341 | ) |      |   | (57,203 | ) |  |   | (348,904 | )
|Interest and other (expense) income, net                                      |                                       |                                   | (6,055  | )    |  |   | 8,359   |   |  |      | 14,301  |   |      |   | 10,935  |   |  |   | 5,863    |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Net income (loss) before income taxes and minority interests                  |                                       |                                   | 9,419   |      |  |   | (40,319 | ) |  |      | (13,040 | ) |      |   | (46,268 | ) |  |   | (343,041 | )
|Provision for income taxes                                                    |                                       |                                   | 1,226   |      |  |   | 743     |   |  |      | 1,937   |   |      |   | 1,533   |   |  |   | 6,570    |  
|Minority interests in net income of consolidated subsidiaries                 |                                       |                                   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   | 17       |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Net income (loss)                                                             |                                       | $                                 | 8,193   |      |  | $ | (41,062 | ) |  | $    | (14,977 | ) |      | $ | (47,801 | ) |  | $ | (349,628 | )
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Net income (loss) per sharebasic and diluted                                 |                                       | $                                 | 0.10    |      |  | $ | (0.53   | ) |  | $    | (0.21   | ) |      | $ | (0.73   | ) |  | $ | (5.49    | )
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Weighted average shares used in computing net income (loss) per sharebasic   |                                       |                                   | 82,733  |      |  |   | 77,318  |   |  |      | 70,106  |   |      |   | 65,924  |   |  |   | 63,655   |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  
|Weighted average shares used in computing net income (loss) per sharediluted |                                       |                                   | 85,424  |      |  |   | 77,318  |   |  |      | 70,106  |   |      |   | 65,924  |   |  |   | 63,655   |  
|                                                                              |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |          |  



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|                                                                                             |  |               |         |      |   |         |      |  |      |         |      |   |         |  |   |        
|-------------------------------------------------------------------------------------------- |  | ------------- | ------- | ---- | - | ------- | ---- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                                                                             |  | September 30,
|                                                                                             |  | 2009          |         | 2008 |   |         | 2007 |  | 2006 |         | 2005
|Consolidated Balance Sheets Data (1)                                                         |  |               |         |      |   |         |      |  |      |         |      |   |         |  |   |        
|Cash and cash equivalents, restricted cash, short-term investments and long-term investments |  | $             | 195,446 |      | $ | 136,970 |      |  | $    | 183,046 |      | $ | 170,616 |  | $ | 147,435
|Working capital (deficit)                                                                    |  | $             | 1,031   |      | $ | (41,172 | )    |  | $    | 35,880  |      | $ | 39,404  |  | $ | 17,989 
|Total assets                                                                                 |  | $             | 668,171 |      | $ | 627,461 |      |  | $    | 583,586 |      | $ | 586,944 |  | $ | 594,239
|Restructuring obligations, less current portion and deferred rent obligations                |  | $             | 45,637  |      | $ | 59,295  |      |  | $    | 74,734  |      | $ | 103,074 |  | $ | 90,540 
|Total stockholders equity                                                                   |  | $             | 434,051 |      | $ | 391,018 |      |  | $    | 351,144 |      | $ | 333,023 |  | $ | 336,242



|(1) | The consolidated statements of operations data and the consolidated balance sheet data as of and for each of the fiscal years in the five-year period ended
September 30, 2009 reflects the results of operations of Procuri subsequent to its acquisition on December 17, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In connection with the adoption of changes issued by the Financial Accounting Standards Board (FASB) to accounting for stock compensation, we reclassified
stock-based compensation for the years ended September 30, 2005 of $19.6 million into cost of revenues, sales and marketing, research and development and general administrative to conform with the current year presentation. The following table
reflects stock-based compensation expense, net of the effects of cancellations, by operating expense category (in thousands):
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                              |  |                              |       
|--------------------------------------------- |  | ---------------------------- | ------
|                                              |  | Year EndedSeptember 30, 2005
|Cost of revenuessubscription and maintenance |  | $                            | 865   
|Cost of revenuesservices and other           |  |                              | 3,665 
|Sales and marketing                           |  |                              | 8,986 
|Research and development                      |  |                              | 2,398 
|General and administrative                    |  |                              | 3,690 
|                                              |  |                              |       
|Total                                         |  | $                            | 19,604
|                                              |  |                              |       

|(3) | We recorded a $247.8 million impairment charge to reduce goodwill in the year ended September 30, 2005.
|--- | -------------------------------------------------------------------------------------------------------

See Note 11 of Notes to Consolidated Financial Statements for an explanation of the determination of the number of shares used to compute
basic and diluted net income (loss) per share. We have paid no cash dividends during the five-year period ended September 30, 2009.



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion contains forward-looking statements, including, without limitation, our expectations regarding our outlook and
future revenues. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future actual results to differ materially from our recent results or those projected in the
forward-looking statements include, but are not limited to, those discussed in the section entitled Risk Factors and in Outlook for Fiscal Year 2010 in this section. We assume no obligation to update the forward-looking
statements or our risk factors after the date of this document.

Overview of Our Business

Ariba is the leading provider of on-demand spend management solutions. Our solutions combine on-demand software, category
expertise and services to help companies automate the procurement process and drive best practice processes that lower costs, improve profits and increase competitive advantage. Ariba® Spend Management solutions are easy to use, cost effective and quick to deploy, integrate with ERP and other software systems and can be used by companies of
all sizes across industries worldwide.

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 180,000 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.

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 and/or pay for services on a time-and-materials or milestone
basis, depending upon their business requirements. Our revenue is comprised of subscription and maintenance fees, and services and other fees. Subscription and maintenance revenue consists of fees charged for hosted on-demand software solutions and
fees for product updates and support, as well as fees paid by suppliers for access to the Ariba Supplier Network. 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.



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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.
Similarly, maintenance fees are generally fixed for a specific period of time, and revenue is customarily recognized ratably over the maintenance term. 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 stable over time. 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. Individual subscription software license sales can be significant (greater than $1.0
million) and sales cycles are often lengthy and difficult to predict.

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% to 80%. 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 40% range. Our overall gross margins could fluctuate from period to period
depending upon the mix of revenue. For example, a period with a higher mix of subscription revenue versus services revenue would drive overall gross margin higher and vice versa.

Overview of Fiscal Year 2009

Our revenues increased to $339.0 million in
the year ended September 30, 2009 compared to $328.1 million in the year ended September 30, 2008. Subscription and maintenance revenues increased $35.1 million, or 19%, partially offset by a decrease in services and other revenues of
$24.1 million, or 17%. Subscription revenues were $151.2 million in the year ended September 30, 2009, as compared to $112.3 million in the year ended September 30, 2008. This is primarily due to an increase in the organic demand for our
subscription software products, including on-demand software solutions and fees paid for access to the Ariba Supplier Network, and the acquisition of Procuri in December 2007. Services and other revenues decreased primarily due to declines in
implementation revenues and perpetual license revenues in the year ended September 30, 2009.

Operating expenses
decreased to $194.6 million in the year ended September 30, 2009 compared to $228.2 million in the year ended September 30, 2008. The decrease in operating expenses was primarily attributable to a decrease in compensation and benefits
expense due to a decrease in headcount associated with restructuring initiatives in fiscal year 2009, a decrease in stock-based compensation expense due to a decrease in restricted stock grants in the year ended September 30, 2009, a decline in
legal expenses associated with patent infringement matters and an insurance reimbursement of $7.5 million in the year ended September 30, 2009. These amounts were partially offset by foreign currency transaction losses related to the
strengthening of the U.S. dollar in the year ended September 30, 2009 and an increase in bonus expense primarily associated with financial results for the year ended September 30, 2009. Additionally, the Compensation Committee of our Board
of Directors decided to eliminate bonuses for executives and reduce bonuses for certain key employees in the year ended September 30, 2008. In summation, our total net expenses, including cost of revenue and other items, decreased to $330.8
million compared to $369.1 million in the year ended September 30, 2008, which resulted in net income for the year ended September 30, 2009 of $8.2 million compared to a net loss of $41.1 million in the year ended September 30, 2008.

Outlook for Fiscal Year 2010

With the increase in our backlog and continued shift in demand toward subscription software sales, we expect continued growth in subscription revenue in fiscal year 2010 compared to fiscal year 2009 but
at a lower growth rate than in 2009. We also expect total revenues to grow in fiscal year 2010 compared to fiscal year 2009 at a comparable growth rate as 2009 with growth in subscription revenue being partially offset by modest declines in
maintenance and services and other revenues.



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We plan to continue to carefully monitor expenses in fiscal year 2010. We expect that total
expenses, excluding expenses for amortization of intangibles, stock-based compensation and restructuring and integration, will grow, if at all, at a lower rate than revenues. Our expense outlook includes targeted investments in our business that are
planned depending on economic conditions in fiscal year 2010. As a result of our revenue and expense outlooks, we anticipate continued improvement in our results from operations, before giving effect to these excluded expenses.

The current economic downturn may continue to adversely impact our business. Although we believe that our spend management solutions may be
even more strategic to customers during adverse economic conditions, because they help companies reduce the costs of their goods and services, a weakening global economy, or decline in confidence in the economy, could, among other things, result in
reduced revenues, impairment of financial and non-financial assets and reduced cash flows.

We believe that our success for
fiscal year 2010 will depend largely on our ability to: (1) renew our subscription or time-based revenues, including on-demand software fees, maintenance fees, and fees for certain services; (2) sell bundled solution offerings that include
both technology and expert services; and (3) capitalize on new revenue opportunities, such as fees for the Ariba Supplier Network and selling on-demand spend management solutions to smaller and mid-market customers.

In addition to the impact of global economic downturn, we believe that key risks to our revenues in fiscal year 2010 include: our ability to
renew ratable revenue streams without substantial declines from prior arrangements, including subscription software, software maintenance and subscription services; our ability to generate organic growth; the market acceptance of spend management
solutions as a standalone market category; the overall level of information technology spending; and potential further 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 our ability to find new tenants for abandoned space. 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 indicates the year over year change (on a percentage basis) and the percentage of total revenues represented by line items in our consolidated statements of operations (certain items
may not foot due to rounding). This data has been derived from the consolidated financial statements contained elsewhere in this Form 10-K. 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 elsewhere in this Form 10-K.



|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|------------------------------------------------------------------ |  | ------------------------------- | - |  | --------------------------- | -- |  | ---- | - |  | ---- | -- |  | ---- | --
|                                                                   |  | Year Ended September 30,        |  
|                                                                   |  | Percentage ChangeYear Over Year |   |  | Percentage of TotalRevenues |   
|                                                                   |  | 2009/2008                       |   |  | 2008/2007                   |    |  | 2009 |   |  | 2008 |    |  | 2007 |   
|Revenues:                                                          |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Subscription and maintenance                                       |  | 19                              | % |  | 32                          | %  |  | 66   | % |  | 57   | %  |  | 47   | % 
|Services and other                                                 |  | (17                             | ) |  | (12                         | )  |  | 34   |   |  | 43   |    |  | 53   |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Total revenues                                                     |  | 3                               |   |  | 9                           |    |  | 100  |   |  | 100  |    |  | 100  |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Cost of revenues:                                                  |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Subscription and maintenance                                       |  | 20                              |   |  | 23                          |    |  | 14   |   |  | 12   |    |  | 11   |   
|Services and other                                                 |  | (20                             | ) |  | (18                         | )  |  | 22   |   |  | 29   |    |  | 38   |   
|Amortization of acquired technology and customer intangible assets |  | (61                             | ) |  | 1                           |    |  | 2    |   |  | 4    |    |  | 5    |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Total cost of revenues                                             |  | (13                             | ) |  | (8                          | )  |  | 38   |   |  | 45   |    |  | 54   |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Gross profit                                                       |  | 17                              |   |  | 28                          |    |  | 62   |   |  | 55   |    |  | 46   |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Operating expenses:                                                |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Sales and marketing                                                |  | (6                              | ) |  | 18                          |    |  | 30   |   |  | 34   |    |  | 31   |   
|Research and development                                           |  | (17                             | ) |  | 2                           |    |  | 13   |   |  | 16   |    |  | 17   |   
|General and administrative                                         |  | (12                             | ) |  | 23                          |    |  | 13   |   |  | 15   |    |  | 13   |   
|Other incomeSoftbank                                              |  | (100                            | ) |  | (96                         | )  |  |     |   |  | (0   | )  |  | (5   | ) 
|Insurance reimbursement                                            |  | NM                              |   |  | NM                          |    |  | (2   | ) |  |     |    |  |     |   
|Amortization of other intangible assets                            |  | 2                               |   |  | 41                          |    |  | 0    |   |  | 0    |    |  | 0    |   
|Restructuring and integration costs (benefit)                      |  | 7                               |   |  | NM                          |    |  | 3    |   |  | 3    |    |  | (1   | ) 
|Litigation provision                                               |  | NM                              |   |  | NM                          |    |  |     |   |  | 2    |    |  |     |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Total operating expenses                                           |  | (15                             | ) |  | 36                          |    |  | 57   |   |  | 70   |    |  | 55   |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Income (loss) from operations                                      |  | 132                             |   |  | (78                         | )  |  | 5    |   |  | (15  | )  |  | (9   | ) 
|Interest and other (expense) income, net                           |  | (172                            | ) |  | (42                         | )  |  | (2   | ) |  | 2    |    |  | 5    |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Net income (loss) before income taxes                              |  | 123                             |   |  | (209                        | )  |  | 3    |   |  | (13  | )  |  | (4   | ) 
|Provision for income taxes                                         |  | 65                              |   |  | (62                         | )  |  | 1    |   |  | 0    |    |  | 1    |   
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   
|Net income (loss)                                                  |  | 120                             | % |  | (174                        | )% |  | 2    | % |  | (13  | )% |  | (5   | )%
|                                                                   |  |                                 |   |  |                             |    |  |      |   |  |      |    |  |      |   



NM means not meaningful

Comparison of the Fiscal Years Ended September 30,
2009, 2008 and 2007

Revenues

Please refer to Note 1 of Notes to Consolidated Financial Statements and Application of Critical Accounting Policies and Estimates below for a description of our accounting policy related to
revenue recognition.



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Subscription and maintenance

Subscription and maintenance revenues for the year ended September 30, 2009 were $222.2 million, a 19% increase from subscription and
maintenance revenues of $187.2 million for the year ended September 30, 2008. Subscription revenues consist mainly of fees for software access subscription and hosted software services. Subscription revenues for the year ended
September 30, 2009 were $151.2 million compared to $112.3 million for the year ended September 30, 2008. The increase of $38.9 million, or 35%, was primarily due to an increase in the demand for our subscription software products, the
continued growth of Ariba Supplier Network revenues and the acquisition of Procuri in December 2007. Maintenance revenues consist primarily of Ariba Buyer and Ariba Sourcing product maintenance fees. Maintenance revenues for the year ended
September 30, 2009 were $71.0 million compared to $74.9 million for the year ended September 30, 2008. The slight decline in maintenance revenues was primarily due to a decline in perpetual license revenues. We anticipate that subscription
revenues will increase in fiscal year 2010 compared to fiscal year 2009, partially offset by modest declines of maintenance revenues in fiscal year 2010.

Subscription and maintenance revenues for the year ended September 30, 2008 were $187.2 million, a 32% increase from subscription and maintenance revenues of $142.3 million for the year ended
September 30, 2007. Subscription revenues consist mainly of fees for software access subscription and hosted software services. Subscription revenues for the year ended September 30, 2008 were $112.3 million compared to $67.6 million
for the year ended September 30, 2007. The increase of $44.7 million, or 66%, was primarily due to an increase in the demand for our subscription software products, the continued growth of Ariba Supplier Network revenues and the acquisition of
Procuri in December 2007. Maintenance revenues for the year ended September 30, 2008 were $74.9 million compared to $74.7 million for the year ended September 30, 2007.

Services and other

Services and other revenues were $116.8 million for the year ended September 30, 2009, a 17% decrease from services and other revenues of $140.9 million for the year ended September 30, 2008. The decrease of $24.1 million in
services and other revenues was primarily attributable to declines in implementation revenues and perpetual license revenues in the year ended September 30, 2009. We anticipate that services and other revenues will decline slightly in fiscal
year 2010 compared to fiscal year 2009.

Services and other revenues were $140.9 million for the year ended September 30,
2008, a 12% decrease from services and other revenues of $159.4 million for the year ended September 30, 2007. The decrease of $18.4 million in services and other revenues was primarily attributable to declines in managed services revenues and
perpetual license revenues in the year ended September 30, 2008.

Cost of Revenues

Subscription and maintenance

Cost of subscription and maintenance revenues includes hosting services, technical support, training personnel, facilities, equipment costs and stock-based compensation costs. Cost of subscription and
maintenance revenues for the year ended September 30, 2009 was $47.9 million, a 20% increase from cost of subscription and maintenance revenues of $40.1 million for the year ended September 30, 2008. This increase was primarily the result
of an increase in hosted support costs associated with the overall 35% increase in subscription revenues in the year ended September 30, 2009. We anticipate that cost of subscription and maintenance expenses will remain relatively consistent as
a percentage of revenues in the year ending September 30, 2010 compared to the year ended September 30, 2009.

Cost
of subscription and maintenance revenues for the year ended September 30, 2008 was $40.1 million, a 23% increase from cost of subscription and maintenance revenues of $32.7 million for the year ended September 30, 2007. This increase was
primarily the result of an increase in hosted support costs associated with the overall 66% increase in subscription revenues in the year ended September 30, 2008.



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Services and other

Cost of services and other revenues consists of labor costs for consulting services, including stock-based compensation costs, training
personnel, facilities and equipment costs. Cost of services and other revenues was $75.5 million for the year ended September 30, 2009, a 20% decrease from cost of services and other revenues of $94.2 million for the year ended
September 30, 2008. This decrease of $18.7 million was primarily due to the following: (1) decreased compensation and benefits expense, travel expense and overhead costs of $10.1 million, $3.3 million and $2.1 million, respectively, due to
a slight decrease in average consulting headcount in the year ending September 30, 2009; (2) decreased third party software royalty costs of $2.1 million primarily due to the associated declines in perpetual license revenues in the year
ended September 30, 2009; (3) decreased stock-based compensation of $2.0 million primarily due to a decrease in restricted stock grants in the year ending September 30, 2009; and (4) increased bonus expense of $1.8 million
primarily associated with our financial results for the year ended September 30, 2009. Additionally, the Compensation Committee of our Board of Directors decided to eliminate bonuses for executives and reduce bonuses for certain key employees
in the year ended September 30, 2008. We anticipate that cost of services and other revenues will remain relatively consistent as a percentage of services and other revenues in the year ending September 30, 2010 compared to the year ended
September 30, 2009.

Cost of services and other revenues was $94.2 million for the year ended September 30, 2008, a
18% decrease from cost of services and other revenues of $114.6 million for the year ended September 30, 2007. This decrease of $20.4 million was primarily due to the following: (1) decreased compensation and benefits expense and travel
expense of $9.2 million and $1.5 million, respectively, due to (i) a slight decrease in average headcount resulting from our re-allocation of services personnel to sales efforts in fiscal year 2008 in managing our transition to an on-demand
model, and (ii) an increase in paid time off taken of $847,000, resulting in a decrease in compensation expense. The increase in paid time off taken is attributed to a change in the Companys paid time off policy during the year ended
September 30, 2008; (2) decreased temporary and contract labor costs of $4.2 million primarily due to cost-cutting efforts initiated in fiscal year 2008; (3) decreased overhead costs of $3.7 million associated with the slight decrease
in average headcount; (4) decreased stock-based compensation 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 of Notes
to Consolidated Financial Statements) and a decrease in stock-based compensation expense related to restricted stock grants.); and, (5) decreased bonus expense of $936,000 primarily associated with the slight decrease in headcount noted above
and the decision of the Compensation Committee of our Board of Directors to eliminate bonuses for executives and reduce bonuses for certain key employees.

Amortization of acquired technology and customer intangible assets

Amortization of acquired technology and customer intangible assets represents the amortization of assets associated with our fiscal year 2008 business combination with Procuri and our fiscal year 2004 business combinations with FreeMarkets.
This expense amounted to $5.6 million, $14.3 million and $14.1 million for the years ended September 30, 2009, 2008 and 2007, respectively. The decrease in the year ended September 30, 2009 was primarily attributable to assets reaching the
end of their estimated useful lives. We anticipate amortization of acquired technology and customer intangible assets will decrease in the year ended September 30, 2010 compared to the year ended September 30, 2009 due to decreases in
costs resulting from our merger with FreeMarkets and our acquisition of Procuri as assets reach the end of their estimated useful lives.

Gross profit

Our gross profit as a percentage of revenues for the year
ended September 30, 2009 was 62% compared to 55% for the year ended September 30, 2008. The increase in gross profit was primarily due to the continued shift in our revenue mix. Subscription and maintenance revenues contributed 66% of
total revenues in the year ended September 30, 2009, as compared to 57% in the year ended September 30, 2008, while services and other revenues contributed 34% of total revenues in the year ended September 30, 2009, respectively as
compared to 43% in the year ended September 30, 2008.



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Our gross profit as a percentage of revenues for the year ended September 30, 2008 was
55% compared to 46% for the year ended September 30, 2007. The increase in gross profit was primarily due to the continued shift in our revenue mix, as the gross margin of software subscription and maintenance revenues is typically much higher
than the gross margin of services revenues. Subscription and maintenance revenues contributed 57% of total revenues in the year ended September 30, 2008, as compared to 47% in the year ended September 30, 2007, while services and other
revenues contributed 43% of total revenues in the year ended September 30, 2008, respectively as compared to 53% in the year ended September 30, 2007. The increase in gross profit as a percentage of revenues was also due to operational
improvements in consulting services in the year ended September 30, 2008.

Operating Expenses

Sales and marketing

Sales and marketing expenses include costs associated with our sales and marketing personnel and product marketing personnel and consist primarily of compensation and benefits, commissions and bonuses,
stock-based compensation costs, promotional and advertising expenses, travel and entertainment expenses related to these personnel and the provision for doubtful accounts. Sales and marketing expenses for the year ended September 30, 2009 were
$103.7 million, a 6% decrease from sales and marketing expenses of $110.8 million for the year ended September 30, 2008. This decrease of $7.1 million was primarily due to the following: (1) decreased sales commission expense of $3.0
million in the year ending September 30, 2009; (2) decreased stock-based compensation of $2.4 million primarily due to a decrease in restricted stock grants in the year ending September 30, 2009; (3) decreased overhead costs,
marketing expenses and travel expenses of $2.3 million, $1.6 million and $1.4 million, respectively, due to cost cutting efforts in the year ended September 30, 2009; (4) increased bonus expense of $3.5 million associated with our
financial results for the year ended September 30, 2009 and the decision by the Compensation Committee of our Board of Directors to eliminate bonuses for executives and reduce bonuses for certain key employees within sales and marketing in the
year ended September 30, 2008; and (5) increased provision for bad debt of $872,000 associated with a slight deterioration in the aging of accounts receivable in the year ended September 30, 2009. We anticipate that sales and
marketing expenses will remain relatively consistent as a percentage of revenues in the year ending September 30, 2010 compared to the year ended September 30, 2009.

Sales and marketing expenses for the year ended September 30, 2008 were $110.8 million, a 18% increase from sales and marketing
expenses of $93.9 million for the year ended September 30, 2007. This increase of $16.9 million was primarily due to the following: (1) increased compensation and benefits expense and overhead costs of $5.4 million and $3.3 million,
respectively, associated with a 17% increase in average sales and marketing headcount in supporting our transition to an on-demand model and the acquisition of Procuri in December 2007. Included within the increase in compensation and benefits
expense noted above is an increase in paid time off taken of $860,000 in the year ended September 30, 2008, resulting in a decrease in compensation and benefits expense. The increase in paid time off taken is attributed to a change in paid time
off policy during the year ended September 30, 2008; (2) increased stock-based compensation expense of $5.8 million primarily due to restricted stock grants in the year ended September 30, 2008; (3) increased sales commission
expense of $1.6 million primarily associated with the increase in revenues noted above; and (4) increased provision for bad debt of $773,000 associated with a slight deterioration in the aging of accounts receivable in the year ended
September 30, 2008. The above amounts were partially offset by decreased bonus expense of $1.2 million associated with the decision of the Compensation Committee of the Board of Directors of the Company to eliminate bonuses for executives and
reduce bonuses for certain key employees within sales and marketing.

Research and development

Research and development expenses include 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 include compensation and benefits, stock-based compensation costs,



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consulting costs and the cost of software development tools and equipment. Research and development expenses for the year ended September 30, 2009 were $43.5 million, a 17% decrease from
research and development expenses of $52.3 million for the year ended September 30, 2008. The decrease of $8.8 million was primarily due to the following: (1) decreased compensation and benefits of $5.9 million due to a decrease in average
research and development headcount and a shift of engineering roles to lower cost countries in the fourth quarter of fiscal year 2008; (2) decreased overhead expense of $1.9 million due to cost reduction efforts; (3) decreased stock-based
compensation expense of $1.4 primarily due to a decrease in restricted stock grants in the year ended September 30, 2009; and, (4) increased bonus expense of $1.3 million associated with our financial results for the year ended
September 30, 2009. Additionally, the Compensation Committee of our Board of Directors decided to eliminate bonuses for executives and reduce bonuses for certain key employees in the year ended September 30, 2008. We anticipate that
research and development expenses will remain relatively consistent as a percentage of revenues in the year ending September 30, 2010 compared to the year ended September 30, 2009.

Research and development expenses for the year ended September 30, 2008 were $52.3 million, a 2% increase from research and development
expenses of $51.2 million for the year ended September 30, 2007. The increase of $1.1 million was primarily attributable to increased stock-based compensation expense of $1.0 million primarily due to an increase in restricted stock grants in
the year ended September 30, 2008

General and administrative

General and administrative expenses include costs for executive, finance, human resources, information technology, legal and administrative
support functions, and primarily include compensation and benefits, stock-based compensation costs and professional services costs. General and administrative expenses for the year ended September 30, 2009 were $43.3 million, a 12% decrease
from general and administrative expenses of $48.9 million for the year ended September 30, 2008. This decrease of $5.6 million was primarily due to the following: (1) decreased legal expenses of $8.7 million primarily associated with
a reduction of expenditures for patent infringement matters; (2) decreased compensation and benefits and overhead costs of $1.5 million and $1.3 million, respectively due to a slight decrease in average general and administrative headcount in
the year ending September 30, 2009; (3) decreased stock-based compensation expense of $1.2 million primarily due to a decrease in restricted stock grants in the year ended September 30, 2009; (4) impairment of $4.3 million of
previously capitalized costs related to an ERP system for finance and human resources; and (5) increased bonus expense of $2.5 million based on our financial results in the year ended September 30, 2009. Additionally, the Compensation
Committee of our Board of Directors decided to eliminate bonuses for executives and reduce bonuses for certain key employees within general and administrative during fiscal year 2008. We anticipate that general and administrative expenses will
remain relatively consistent as a percentage of revenues in the year ending September 30, 2010 compared to the year ended September 30, 2009.

General and administrative expenses for the year ended September 30, 2008 were $48.9 million, a 23% increase from general and administrative expenses of $39.8 million for the year ended
September 30, 2007. This increase of $9.1 million was primarily due to the following: (1) increased legal expenses of $3.8 million primarily associated with patent infringement matters; (2) increased stock-based compensation expense
of $3.0 million primarily due to restricted stock grants in the year ended September 30, 2008; and (3) increased compensation and benefits and overhead costs of $2.4 million and $980,000, respectively, due to a slight increase in average
headcount related to the support of our on-demand solutions in fiscal year 2008 and the acquisition of Procuri in December 2007. These amounts were partially offset by a benefit of $772,000 related to property taxes on occupied space based on a
revised property tax assessment and notice of refund received from the County of Santa Clara in California in June 2008 related to fiscal years 2003 through 2006 and by a decrease in bonus expense of $512,000 associated with the decision of the
Compensation Committee of our Board of Directors to eliminate bonuses for executives and reduce bonuses for certain key employees within general and administrative.



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Other incomeSoftbank

During the years ended September 30, 2008 and 2007, we recorded $566,000 and $13.6 million, respectively, of income from the settlement
with Softbank entered into in October 2004. The $37.0 million of deferred income recorded upon the settlement with Softbank was recognized into income, starting in January 2005, over the remaining term of the three-year license that ended in October
2007. For further discussion, see Note 13 of Notes to Consolidated Financial Statements.

Insurance reimbursement

During the year ended September 30, 2009, we recorded $7.5 million of income related to an insurance reimbursement
for previously unreimbursed litigation costs. See LitigationGeneral in Note 8 of Notes to Consolidated Financial Statements.

Amortization of other intangible assets

Amortization of other intangible
assets was $755,000, $739,000 and $525,000 in the years ended September 30, 2009, 2008 and 2007, respectively. These amounts consisted of the amortization of trade name/trademark and non-competition agreement resulting from our merger with
FreeMarkets and our acquisition of Procuri. We anticipate amortization of other intangible assets will decrease in the year ended September 30, 2010 compared to the year ended September 30, 2009 as assets reach the end of their estimated
useful lives.

Restructuring and integration costs

We recorded a restructuring charge of $10.8 million in the year ended September 30, 2009. During the year, we revised our estimates for
sublease commencement dates and sublease rental rate projections to reflect continued soft market conditions in the Northern California real estate market, resulting in a charge of $6.8 million. The remaining charge of $3.9 million is related to
severance benefit costs in connection with workforce reductions in the current economic environment to better align our expenses with our revenues.

For the year ended September 30, 2008, we recorded a charge to operations of $10.1 million. During the year, we evaluated our office space in Sunnyvale, California, and ceased use of approximately
54,000 square feet of space in our corporate headquarters and recorded lease abandonment costs of $7.1 million and leasehold impairments of $1.5 million. We also recorded a charge during the year related to severance benefit costs of approximately
$2.7 million in connection with our acquisition of Procuri and to better align our expenses with our revenues and to enable our investment in certain growth initiatives. These amounts were partially offset by a benefit to operations of $549,000
primarily related to an agreement to sublease approximately 44,000 square feet of space at our Sunnyvale, California headquarters through January 2013. The remaining benefit in the year ended September 30, 2008 was for property taxes of
approximately $557,000 related to abandoned facilities in California based on a revised property tax assessment and notice of refund received in June 2008 related to fiscal years 2003 through 2006.

For the year ended September 30, 2007, we recorded a net benefit to operations of $4.2 million. 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 October 10, 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 $7.4 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 $4.2 million.



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Litigation provision

We recorded a $5.9 million provision related to the settlement of our patent infringement litigation with Sky Technologies LLC during the
year ended September 30, 2008.

Interest and other (expense) income, net

Interest and other (expense) income, net for the year ended September 30, 2009 was expense of $6.1 million, a decrease of $14.4 million
from income of $8.4 million for the year ended September 30, 2008. The decrease was primarily attributable to an increase in realized and unrealized foreign currency transaction losses of $9.7 million on accounts receivable billed from Ariba in
foreign currencies to customers headquartered in foreign countries and realized losses on foreign denominated cash balances maintained in the United States, primarily due to the U.S. dollar strengthening against the Euro, the British Pound, the
Australian dollar and the Canadian dollar in the year ended September 30, 2009. The decrease was also attributable to a decrease in interest income of $3.4 million due to a decline in the rate of return on investments and an
other-than-temporary impairment of $1.4 million related to a long-term investment in the year ended September 30, 2009.

Interest and other (expense) income, net for the year ended September 30, 2008 was income of $8.4 million, a decrease of $5.9 million from income of $14.3 million for the year ended September 30, 2007. The decrease was primarily
attributable to the following: (1) a decrease in interest income of $4.1 million due to an overall decrease in the rate of return on marketable investments and a decrease in average cash and marketable securities balances in fiscal year 2008;
and (2) a net realized gain of $2.2 million associated with the repatriation of cash from Ariba Korea, Ltd. and the substantial liquidation of the entity in the year ended September 30, 2007.

Provision for income taxes

We recorded income tax provisions of $1.2 million, $743,000 and $1.9 million for the years ended September 30, 2009, 2008 and 2007, respectively. The increase in the year ended September 30,
2009 and the decrease in the year ended September 30, 2008 was primarily attributable to a recovery of foreign income taxes in the year ended September 30, 2008 related to taxes paid in the year ended September 30, 2007.

As of September 30, 2009, we had net operating loss carryforwards for federal, state and foreign tax purposes of approximately $1.5
billion, $788.0 million and $4.9 million, respectively, before consideration of any annual limitations as described below. The federal, state and foreign net operating loss carryforwards expire in various years from fiscal year 2010 through fiscal
year 2029, from fiscal year 2010 through fiscal year 2029 and from fiscal year 2010 through fiscal year 2014, respectively. Utilization of our net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to
the ownership change limitations imposed by Internal Revenue Code Section 382 and similar state provisions. Such an annual limitation could result in the expiration of our federal and state net operating loss and tax credit carryforwards before
utilization.

As of September 30, 2009, we had research credit carryforwards for federal and state tax purposes of
approximately $39.0 million and $25.0 million, respectively. If not utilized, the federal research credit carryforwards will expire in various years from fiscal year 2010 through fiscal year 2024. The state research credit carryforwards will
continue indefinitely, except for approximately $44,000, which will expire in fiscal year 2019. We also had manufacturers credit carryforwards as of September 30, 2009 for state tax purposes of approximately $1.1 million, which will
expire in various years from fiscal year 2010 through fiscal year 2012.

Our net operating loss and tax credit carryforwards
include net operating loss and research credit carryforwards of approximately $270.2 million and $4.9 million, respectively, generated by FreeMarkets, which are subject to annual limitations which could reduce or defer the utilization of those
losses and credits.



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Liquidity and Capital Resources

As of September 30, 2009, we had $166.2 million in cash, cash equivalents and investments and $29.2 million in restricted cash, for
total cash, cash equivalents, investments and restricted cash of $195.4 million. Our working capital on September 30, 2009 was $1.0 million. As of September 30, 2008, we had $107.4 million in cash, cash equivalents and investments and
$29.6 million in restricted cash, for total cash, cash equivalents, investments and restricted cash of $137.0 million. Our working deficit on September 30, 2008 was $41.2 million. All significant cash, cash equivalents and investments are held
in accounts in the United States.

We hold a variety of interest-bearing ARS that represent investments in pools of assets,
including student loans, commercial paper and credit derivative products. These ARS investments are intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals, allowing investors
to either roll over their holdings or gain immediate liquidity by selling such interests at par. The continuing uncertainties in the credit markets have affected all of our holdings in ARS investments and auctions for our investments in these
securities have failed to settle on their respective settlement dates. Consequently, the investments are not currently liquid and we will not be able to access these funds until a future auction of these investments is successful or a buyer is found
outside of the auction process. Given the failures in the auction markets, as well as the lack of any correlation of these instruments to other observable market data, there are no longer observable inputs available as defined by Levels 1 and 2 of
the fair value hierarchy by which to value these securities. Therefore, these auction rate securities are classified within Level 3 and their valuation requires substantial judgment and estimation of factors that are not currently observable in the
market due to the lack of trading in the securities.

Contractual maturity dates for these ARS investments range from 2016 to
2047. The ARS backed by student loans are guaranteed by the U.S. government and have credit ratings of AAA. All of the ARS investments were in compliance with our investment policy at the time of acquisition and are investment grade quality, except
for one commercial paper and credit derivative product that maintains a split rating between investment and speculative grade.

Currently, we have no intent to sell these ARS investments prior to recovery nor are aware of any factors that would make such a sale of the ARS investments more likely than not. As of September 30, 2009 and 2008, we classified the
entire ARS investment balance as long-term investments on our consolidated balance sheet because of our inability to determine when our investments in ARS would settle.

Typically the fair value of ARS investments approximates par value due to the frequent resets through the auction process. While we continue to earn interest on our ARS investments at the contractual
rate, these investments are not currently trading and therefore do not currently have a readily determinable market value. Accordingly, the estimated fair value of ARS no longer approximates par value.

We have used a discounted cash flow model (DCF) to determine the estimated fair value of our investment in ARS as of
September 30, 2009. Significant estimates used in the DCF models were the credit quality of the instruments, the types of instruments and an illiquidity discount factor. The assumptions used in preparing the discounted cash flow model include
estimates for interest rates, timing and amount of cash flows and expected holding periods of the ARS. The discount factor used for the $18.3 million of student loan securities and $4.9 million of commercial paper and credit derivative products was
adjusted by 200 basis points (bps) for the student loan securities and between 350 bps and 650 bps for the commercial paper and credit derivative products, respectively, to reflect the then current market conditions for instruments with
similar credit quality at the date of valuation and the risk in the marketplace for these investments that has arisen due to the lack of an active market for these instruments. Based on this assessment of fair value, we determined there was a
decline in the fair value of its ARS investments of $5.5 million, of which $4.1 million was deemed temporary. As a result of the credit rating reduction to below investment grade related to one of its ARS, we recorded an other-than-temporary
impairment of $1.4 million in the year ended September 30, 2009. As a result of adopting



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changes issued by the Financial Accounting Standards Board (FASB) to fair value accounting and the recognition and presentation of other-than-temporary impairments, we evaluated the
previously recorded other-than-temporary impairment loss of $1.4 million. Based upon the analysis completed, we determined that the other-than-temporary loss of $1.4 million was principally related to the credit loss on the investment.

We review our impairments in accordance with the changes issued by the FASB to fair value accounting and the recognition and presentation
of other-than-temporary impairments, in order to determine the classification of the impairment as temporary or other-than-temporary. A temporary impairment charge results in an unrealized loss being recorded in the other
comprehensive income (loss) component of stockholders equity. Such an unrealized loss does not affect net income (loss) for the applicable accounting period. An other-than-temporary impairment charge is recorded as a realized loss in the
consolidated statement of operations. The differentiating factors between temporary and other-than-temporary impairment are primarily the length of the time and the extent to which the market value has been less than cost, the financial condition
and near-term prospects of the issuer and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for the recovery in market value. If the issuers of the ARS are unable to successfully close future
auctions or refinance their debt in the near term and/or the credit ratings of these instruments deteriorate, we may, in the future, conclude that an additional other-than-temporary impairment charge is required related to these investments. Such
other-than-temporary impairment may be greater than the $4.1 million currently accounted for as a temporary decline or may be greater than the $1.4 million other-than-temporary impairment recorded in the year ended September 30, 2009.

The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact
our valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and
quality of market credit and liquidity.

If the current market conditions deteriorate further, or the anticipated recovery in
market values does not occur, we may be required to record additional unrealized losses in other comprehensive income (loss) or to record all current and any future unrealized losses as a charge in our statement of operations in future quarters. We
continue to monitor the market for ARS transactions and consider their impact (if any) on the fair value of our investments.

Our investments are intended to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations and delivers an appropriate yield in relationship to our investment guidelines and
market conditions. We have modified our current investment strategy by limiting our investments in ARS to our current holdings and increasing our investments in more liquid investments.

The increase in total cash, cash equivalents, investments and restricted cash of $58.4 million and the increase in working capital of $42.2
million in the year ended September 30, 2009 was primarily attributable to a $7.5 million insurance reimbursement, an increase in cash collections from our customers in the year ended September 30, 2009 based on the 3 percent increase in
revenues in the current year, and restructuring and cost cutting initiatives in the year ended September 30, 2009.

Our
largest source of operating cash flows is cash collections from our customers related to our hosted on-demand software solutions and fees for product updates and support, as well as fees paid by suppliers for the Ariba Supplier Network. We also
generate cash inflows from services for implementation services, consulting services and license fees charged for the use of our software products under perpetual agreements. Our primary uses of cash from operating activities are for personnel
related expenditures as well as payments related to leased facilities.

Net cash provided by operating activities was $66.0
million for the year ended September 30, 2009, compared to net cash provided by operating activities of $21.6 million for the year ended September 30, 2008. Cash flows provided by operating activities increased $44.4 million primarily due
to an improvement in net



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income (loss) excluding non-cash charges, a $7.5 million insurance reimbursement in the year ended September 30, 2009, a net cash payment of $5.9 million related to a litigation settlement
associated with a patent infringement matter in the year ended September 30, 2008, an increase in cash collections from our customers in the year ended September 30, 2009 and a decrease in cash payments related to legal expenses of
approximately $5.7 million. These amounts were partially offset by an increase in prepaid expense due to timing of payments.

Net cash provided by operating activities was $21.6 million for the year ended September 30, 2008, compared to net cash provided by operating activities of $16.6 million for the year ended September 30, 2007. Cash flows provided
by operating activities increased $5.0 million primarily due an increase in cash flows from operating activities associated with the management of our accounts payable which resulted in a decrease of $6.9 million in prepaid expenses and an increase
from improved results of operations, excluding non-cash charges, partially offset by an increase of $4.6 million in cash payments for restructuring obligations, primarily associated with severance benefit costs in connection with our acquisition of
Procuri.

The changes in cash flows from investing activities primarily relate to acquisitions and the timing of purchases,
maturities and sales of our investments. Net cash used in investing activities was $23.0 million for the year ended September 30, 2009, compared to net cash provided by investing activities of $5.9 million for the year ended September 30,
2008. The decrease of $28.9 million was primarily attributable to a decrease in sales of investments, net of purchases of $85.0 million primarily due to cash management activities. This is partially offset by $55.6 million of cash paid as a result
of our acquisition of Procuri in the year ended September 30, 2008. Capital expenditures were relatively consistent in the years ended September 30, 2009 and 2008.

Net cash provided by investing activities was $5.9 million for the year ended September 30, 2008, compared to net cash used in
investing activities of $11.0 million for the year ended September 30, 2007. The increase of $16.9 million was primarily attributable to an increase in sales of investments, net of purchases of $73.6 million. This was partially offset by cash
paid of $55.6 million as a result of our acquisition of Procuri in the fiscal year ended September 30, 2008. Capital expenditures were relatively consistent in the years ended September 30, 2008 and 2007.

The changes in cash flows from financing activities primarily relate to the repurchase of common stock 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 held by those employees and the proceeds from the issuance of common stock is attributed to the employee
stock purchase plan and stock option exercises. Net cash provided by financing activities was $1.5 million for the year ended September 30, 2009, compared to net cash used in financing activities of $809,000 for the year ended
September 30, 2008. The increase in the year ended September 30, 2009 was primarily related to a decrease in the repurchase of common stock shares forfeited to Ariba by employees in satisfaction of statutory tax withholding obligations.

Net cash used in financing activities was $809,000 for the year ended September 30, 2008, compared to net cash provided
by financing activities of $3.0 million for the year ended September 30, 2007. The decrease in the year ended September 30, 2008 was primarily relate to an increase in the repurchase of common stock shares forfeited to Ariba by employees
in satisfaction of statutory tax withholding obligations.

As of September 30, 2009, we did not have any material
commitments for capital expenditures.

Contractual obligations

Our primary contractual obligations are under our operating leases and letters of credit, which are discussed below.

In March 2000, we entered into a facility lease agreement for 716,000 square feet in four office buildings and an amenities building in
Sunnyvale, California for our headquarters. The operating lease term commenced in 2001 and ends in January 2013. We occupy 150,000 square feet in this facility, and currently sublease over two



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buildings totaling 396,000 square feet to third parties. These subleases expire in January 2013. The remaining 170,000 square feet is available for sublease. Minimum monthly lease payments are
$3.3 million and escalate annually, with the total future minimum lease payments amounting to $145.4 million over the remaining lease term. As part of this lease agreement, we are required to issue standby letters of credit backed by cash
equivalents, totaling $28.8 million as of September 30, 2009, as a form of security through fiscal year 2013. Also, we are required by other lease agreements to hold an additional $401,000 of standby letters of credit, which are cash
collateralized. These instruments are issued by our banks in lieu of a cash security deposit required by landlords for domestic and international real estate leases. The total cash collateral of $29.2 million is classified as restricted cash on our
consolidated balance sheet as of September 30, 2009.

We also occupy 91,000 square feet of office space in Pittsburgh,
Pennsylvania under a lease that expires in December 2017. This location consists principally of our services organization and administrative activities.

We occupy approximately 26,000 square feet of office space in Atlanta, Georgia under a lease that expires in June, 2013. Our operations at this location consist principally of our sales and support
activities.

Future minimum lease payments and sublease income under noncancelable operating leases for the next five years
and thereafter are as follows as of September 30, 2009 (in thousands):



|                          |  |               |         |                           |   |         |                |  |   |        
|------------------------- |  | ------------- | ------- | ------------------------- | - | ------- | -------------- |  | - | -------
|Year Ending September 30, |  | LeasePayments |         | ContractualSubleaseIncome |   |         | NetObligations
|2010                      |  | $             | 48,209  |                           | $ | (12,389 | )              |  | $ | 35,820 
|2011                      |  |               | 48,456  |                           |   | (13,078 | )              |  |   | 35,378 
|2012                      |  |               | 50,362  |                           |   | (13,775 | )              |  |   | 36,587 
|2013                      |  |               | 19,681  |                           |   | (4,489  | )              |  |   | 15,192 
|2014                      |  |               | 3,198   |                           |   |        |                |  |   | 3,198  
|Thereafter                |  |               | 7,484   |                           |   |        |                |  |   | 7,484  
|                          |  |               |         |                           |   |         |                |  |   |        
|Total                     |  | $             | 177,390 |                           | $ | (43,731 | )              |  | $ | 133,659
|                          |  |               |         |                           |   |         |                |  |   |        

The above table represents our estimates of future payments under fixed contractual
obligations and commitments. Changes in our business needs, cancellation provisions and other factors may result in actual payments differing from these estimates. We cannot provide certainty regarding the specific timing and actual amounts of
payments.

Of the total operating lease commitments as of September 30, 2009 noted above, $59.8 million is for occupied
properties and $117.6 million is for abandoned properties, which are a component of the restructuring obligation.

Other than
the lease commitments and letters of credit discussed above, we do not have commercial commitments under lines of credit, standby repurchase obligations or other such debt arrangements. We do not have any material noncancelable purchase commitments
as of September 30, 2009.

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 will constitute a use of our cash resources. As a result, our



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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. Should we find it necessary to obtain
additional funds, we may not be able to obtain additional financing on favorable terms or at all. See Risk Factors.

Application of Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the United States (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, the assessment of recoverability of goodwill and other
intangible assets, restructuring obligations related to abandoned operating leases, the fair value of certain investments and contingencies related to the collectability of accounts receivable. These policies and our practices related to these
policies are described below and in Note 1 of Notes to Consolidated Financial Statements.

Revenue recognition

Substantially all of our revenues are derived from two sources: (i) providing software solutions on either a
multi-tenant or single tenant basis and technical support and product updates, otherwise known as subscription and maintenance; and (ii) providing services, including implementation services, consulting 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 basis; (ii) a maintenance arrangement, which is generally
priced as a percentage of the software license fees and provides for 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 generally 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 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 collectability is probable. If fees are not
fixed or determinable, revenue is recognized when fees are due and payable. If collectability is not considered probable at the inception of the arrangement, we do not recognize revenue until the fee is collected.



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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 is based on vendor-specific objective evidence (VSOE) of fair value, which is limited to the price when sold separately.

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 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 one element in that arrangement has fair value, we first
allocate revenue on the statement of operations to those elements for which evidence of fair value is available and the residual is allocated to those elements that do not have fair value.

In circumstances where we provide consulting services as part of a multi-element arrangement with software solutions, both the software
solution revenue and service revenue are recognized under the lesser of proportional performance method based on 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 are met. Deferred revenue is recognized as revenue upon delivery of the product, as services are rendered, or as other requirements 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.

Recoverability of goodwill

We test 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. We performed the annual assessment in the fourth quarter of fiscal years 2009, 2008 and 2007 and no indication of goodwill impairment was
noted. The balance of goodwill is $406.5 million as of September 30, 2009, and there can be no assurances that future goodwill impairments will not occur.

Impairment of long-lived assets

We evaluate long-lived assets, such as
property and equipment and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of the assets to the estimated undiscounted future cash flows expected to be generated from the use and ultimate disposition of the assets. If the carrying amount of the assets exceeds their
estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets.



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Lease abandonment costs

We initially recorded a significant restructuring charge in the third quarter of fiscal year 2001 upon abandoning certain operating leases as
part of a program to restructure our operations and related facilities. In the years ended September 30, 2006, 2005, 2004, 2003 and 2002, we revised our original estimates and expectations for our corporate headquarters and field offices
disposition efforts as a result of changed estimates of sublease rental projections.

During the year ended September 30,
2007, we recorded a net benefit to operations of $4.2 million. In June 2007, we entered into an amendment with Juniper, the successor in interest to 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 October 10, 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 $7.3 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 $4.1 million in the year ended September 30, 2007.

During the year ended September 30, 2008, we recorded a charge to operations of $10.1 million. During the year, we evaluated our space
in Sunnyvale, California headquarters, and ceased use of approximately 54,000 square feet and recorded lease abandonment costs of $7.1 million and leasehold impairments of $1.5 million. We also recorded a charge in the year ended September 30,
2008 related to severance benefit costs of approximately $2.7 million in connection with our acquisition of Procuri and to better align our expenses with our revenues and to enable our investment in certain growth initiatives. These amounts were
partially offset by a benefit to operations of $549,000 primarily related to an agreement with Efficient Frontier to sublease approximately 44,000 square feet of space at our Sunnyvale, California headquarters through January 2013. The
remaining benefit during the year was for property taxes of approximately $557,000 related to abandoned facilities in California based on a revised property tax assessment and notice of refund received in June 2008 related to fiscal years 2003
through 2006.

We recorded a restructuring charge of $10.8 million in the year ended September 30, 2009. During the year,
we revised our estimates for sublease commencement dates and sublease rental rate projections to reflect continued soft market conditions in the Northern California real estate market, resulting in a charge of $6.8 million. We also recorded a charge
in the year ended September 30, 2009 related to severance benefit costs of $3.9 million in connection with workforce reductions in the current economic environment to better align our expenses and our revenues.

Lease abandonment costs for the abandoned facilities were estimated to include remaining lease liabilities and brokerage fees offset by
estimated sublease income. Estimates related to sublease costs and income are based on assumptions regarding the period required to locate and contract with suitable subleasees and sublease rates using market trend information analyses provided by a
commercial real estate brokerage firm retained by us. We review these estimates each quarterly reporting period, and to the extent that our assumptions change, the ultimate restructuring expenses for these abandoned facilities could vary
significantly from current estimates. See Note 8 of Notes to Consolidated Financial Statements.

Our lease abandonment accrual
is net of $54.6 million of estimated sublease income. Actual sublease payments due under noncancelable subleases of excess facilities totaled $43.7 million as of September 30, 2009 and the remainder of anticipated sublease income represents
managements estimate of amounts to be received under future subleases. Actual future cash requirements and lease abandonment costs may differ materially from the accrual at September 30, 2009, particularly if actual sublease income is
significantly different from current estimates. These differences could have a material adverse effect on our operating results and cash position. For



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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 our Sunnyvale, California headquarters by approximately $1.2 million as of September 30, 2009.

Fair value of Auction Rate Securities

We hold a variety of
interest-bearing ARS that represent investments in pools of assets, including student loans, commercial paper and credit derivative products. As of September 30, 2009, we held $18.3 million in par value of student loan securities that failed to
settle in auctions commencing February 2008 and $4.9 million in par value of commercial paper and credit derivative products that failed to settle in auctions commencing August 2007. These ARS investments are intended to provide liquidity via an
auction process that resets the applicable interest rate at predetermined calendar intervals, allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. The recent uncertainties in the credit
markets have affected all of our holdings in ARS investments and auctions for our investments in these securities have failed to settle on their respective settlement dates. Consequently, the investments are not currently liquid and we will not be
able to access these funds until such time as either a future auction of these investments is successful or a buyer is found outside of the auction process. Given the failures in the auction markets, as well as the lack of any correlation of these
instruments to other observable market data, there are no longer observable inputs available as defined by Levels 1 and 2 of the fair value hierarchy by which to value these securities. Therefore, these auction rate securities are classified within
Level 3 and their valuation requires substantial judgment and estimation of factors that are not currently observable in the market due to the lack of trading in the securities.

Contractual maturity dates for these ARS investments range from 2016 to 2047. The ARS backed by student loans are guaranteed by the U.S.
government and have credit ratings of AAA. The ARS investments were in compliance with our investment policy at the time of acquisition and are investment grade quality, except for one commercial paper and credit derivative product that maintains a
split rating between investment and speculative grade.

Currently, we have no intent to sell these ARS investments prior to
recovery nor are aware of any factors that would make such a sale of the ARS investments more likely than not. As of September 30, 2009, we have classified the entire ARS investment balance as long-term investments on its consolidated balance
sheet because of its current inability to predict that these investments will be available for settlement within the next twelve months. We have also modified its current investment strategy and increased its investments in more liquid money market
instruments.

Historically, the fair value of ARS investments approximates par value due to the frequent resets through the
auction process. While we continues to earn interest on its ARS investments at the contractual rate, these investments are not currently trading and therefore do not currently have a readily determinable market value. Accordingly, the estimated fair
value of ARS no longer approximates par value.

We have used a discounted cash flow (DCF) model to determine the
estimated fair value of its investment in ARS as of September 30, 2009. Significant estimates used in the DCF models were the credit quality of the instruments, the types of instruments and an illiquidity discount factor. The assumptions used
in preparing the discounted cash flow model include estimates for interest rates, timing and amount of cash flows and expected holding periods of the ARS. The discount factor used for the $18.3 million of student loan securities and $4.9 million of
commercial paper and credit derivative products was adjusted by 200 basis points (bps) for the student loan securities and between 350 bps and 650 bps for the commercial paper and credit derivative products, respectively, to reflect the
then current market conditions for instruments with similar credit quality at the date of valuation and the risk in the marketplace for these investments that has arisen due to the lack of an active market for these instruments. Based on this
assessment of fair value, we determined there was a decline in the fair value of its ARS investments of $5.5 million, of which $4.1 million was deemed temporary. As a result of the credit rating reduction to below investment grade related to one of
its ARS, we recorded an other-than-temporary



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impairment of $1.4 million in the year ended September 30, 2009. As a result of adopting changes issued by the FASB to fair value accounting and the recognition and presentation of
other-than-temporary impairments that were effective for the third quarter of fiscal year 2009, we evaluated the recorded other-than-temporary impairment loss of $1.4 million. Based upon the analysis completed, we determined that the
other-than-temporary loss of $1.4 million was principally related to the credit loss on the investment. Additionally, we evaluated the factors related to other than credit loss, which were determined to be immaterial to the condensed consolidated
financial statements.

We review our impairments in accordance with the changes issued by the FASB to fair value accounting
and the recognition and presentation of other-than-temporary impairments, in order to determine the classification of the impairment as temporary or other-than-temporary. A temporary impairment charge results in an unrealized
loss being recorded in the other comprehensive income (loss) component of stockholders equity. Such an unrealized loss does not affect net loss for the applicable accounting period. An other-than-temporary impairment charge is recorded as
a realized loss in the consolidated statement of operations. The differentiating factors between temporary and other-than-temporary impairment are primarily the length of the time and the extent to which the market value has been less than cost, the
financial condition and near-term prospects of the issuer and our intent and ability to retain its investment for a period of time sufficient to allow for the recovery in market value to par. If the issuers of the ARS are unable to successfully
close future auctions or refinance their debt in the near term and/or the credit ratings of these instruments deteriorate, we may, in the near future, conclude that an additional other-than-temporary impairment charge is required related to these
investments. Such other-than-temporary impairment may be greater than the $4.1 million currently accounted for as a temporary decline or may be greater than the $1.4 million other-than-temporary impairment recorded in the year ended
September 30, 2009.

Allowance for doubtful accounts receivable

We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to provide for actual losses resulting from
collecting less than full payment on our receivables. A considerable amount of judgment is required when we assess the realizability of receivables, including assessing the probability of collection and the current creditworthiness of each customer.
If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts might be required. In cases where we are aware of circumstances that may
impair a specific customers ability to meet its financial obligations, we record a specific allowance against amounts due, and thereby reduce the net recognized receivable to the amount we reasonably believe will be collected. For the
remaining customers, we recognize allowances for doubtful accounts based on the length of time the aggregate receivables are outstanding, the current business environment and historical experience. Alternatively, if the financial condition of our
customers were to improve such that their ability to make payments was no longer considered impaired, we would reduce related estimated reserves with a credit to the provision for doubtful accounts.

New Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Consolidated Financial Statements.



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|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Foreign Currency Risk

We develop products primarily in the United States
and India and market our products primarily in the United States, Europe and Asia. As a result, our financial results have been and could in the future 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 any of the events described above were to
continue to occur, our net sales could be seriously impacted, since a large portion of our net sales are derived from international operations. For the years ended September 30, 2009, 2008 and 2007, approximately 30%, 31% and 29%, respectively,
of our total net sales 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. These 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.

The following table provides information about our foreign exchange forward contracts outstanding as of September 30, 2009 (in
thousands):



|                 |  |          |                 |                |     |                             |        |  |   |      |  
|---------------- |  | -------- | --------------- | -------------- | --- | --------------------------- | ------ |  | - | ---- | -
|                 |  | Buy/Sell |                 | Contract Value |     | UnrealizedGain (Loss)in USD |       
|                 |  |          | ForeignCurrency |                | USD |                            
|Foreign Currency |  |          |                 |                |     |                             |        |  |   |      |  
|Euro             |  | Sell     |                 | 7,000          |     | $                           | 9,748  |  | $ | (271 | )
|Singapore Dollar |  | Sell     |                 | 8,000          |     |                             | 5,511  |  |   | (167 | )
|Chinese Renminbi |  | Sell     |                 | 35,000         |     |                             | 5,123  |  |   | (11  | )
|Japanese Yen     |  | Buy      |                 | 250,000        |     |                             | 2,790  |  |   | (8   | )
|Swiss Franc      |  | Buy      |                 | 1,200          |     |                             | 1,106  |  |   | 53   |  
|Czech Koruna     |  | Buy      |                 | 16,500         |     |                             | 961    |  |   | 5    |  
|Brazilian Real   |  | Sell     |                 | 1,000          |     |                             | 527    |  |   | (28  | )
|                 |  |          |                 |                |     |                             |        |  |   |      |  
|Total            |  |          |                 |                |     | $                           | 25,766 |  | $ | (427 | )
|                 |  |          |                 |                |     |                             |        |  |   |      |  

The unrealized gain (loss) represents the difference between the contract value and
the market value of the contract based on market rates as of September 30, 2009.

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 $2.6 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.



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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.

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 EndingSeptember 30,2010 |         |   | Year EndingSeptember 30,2011 |   |       | Year EndingSeptember 30,2012 |  | Year EndingSeptember 30,2013 |   |  | Year EndingSeptember 30,2014 |        | Thereafter |  |   | Total | 
|Cash equivalents            |  | $                            | 114,638 |   |                              | $ |      |                              |  | $                            |  |  | $                            |       |            |  | $ |      |  | $ |       |   |  | $ | 114,638 |  
|Average interest rate       |  |                              | 0.31    | % |                              |   |      |                              |  |                              |  |  |                              |       |            |  |   |      |  |   |       |   |  |   | 0.31    | %
|Investments                 |  | $                            | 12,169  |   |                              | $ | 5,479 |                              |  | $                            |  |  | $                            |       |            |  | $ |      |  | $ | 17,676 |   |  | $ | 35,324  |  
|Average interest rate       |  |                              | 2.71    | % |                              |   | 1.43  | %                            |  |                              |  |  |                              |       |            |  |   |      |  |   | 1.21   | % |  |   | 1.76    | %
|Restricted cash             |  | $                            |        |   |                              | $ | 104   |                              |  | $                            |  |  | $                            | 29,137 |            |  | $ |      |  | $ |       |   |  | $ | 29,241  |  
|Average interest rate       |  |                              |        |   |                              |   | 0.52  | %                            |  |                              |  |  |                              | 0.52   | %          |  |   |      |  |   |       |   |  |   | 0.52    | %
|                            |  |                              |         |   |                              |   |       |                              |  |                              |   |  |                              |        |            |  |   |       |  |   |        |   |  |   |         |  
|Total investment securities |  | $                            | 126,807 |   |                              | $ | 5,583 |                              |  | $                            |  |  | $                            | 29,137 |            |  | $ |      |  | $ | 17,676 |   |  | $ | 179,203 |  
|                            |  |                              |         |   |                              |   |       |                              |  |                              |   |  |                              |        |            |  |   |       |  |   |        |   |  |   |         |  

The table above does not include uninvested cash of $16.2 million held as of
September 30, 2009. Total cash, cash equivalents, investments and restricted cash as of September 30, 2009 was $195.4 million.



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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The following consolidated financial statements, and the related notes thereto, of the Company and the Reports of Independent Registered Public Accounting Firms are filed as a part of this Form 10-K.



|                                                                                                                             |  |           
|---------------------------------------------------------------------------------------------------------------------------- |  | ----------
|                                                                                                                             |  | PageNumber
|Report of Independent Registered Public Accounting Firm                                                                      |  | 53        
|Consolidated Balance Sheets as of September 30, 2009 and 2008                                                                |  | 54        
|Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended September 
30, 2009, 2008 and 2007 |  | 55        
|Consolidated Statements of Stockholders Equity for the years ended September 
30, 2009, 2008 and 2007                       |  | 56        
|Consolidated Statements of Cash Flows for the years ended September 30, 2009, 2008 and
2007                                  |  | 57        
|Notes to Consolidated Financial Statements                                                                                   |  | 58        



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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Ariba, Inc.

We have audited the accompanying consolidated balance sheets of
Ariba, Inc. and subsidiaries as of September 30, 2009 and 2008, and the related consolidated statements of operations and comprehensive income (loss), stockholders equity, and cash flows for each of the three years in the period ended
September 30, 2009. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Ariba, Inc. and subsidiaries at September 30, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 2009,
in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States), Ariba, Inc.s internal control over financial reporting as of September 30, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 25, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

November 25, 2009



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ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)



|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                            |  | September 30,2009 |            |   | September 30,2008 |  
|ASSETS                                                                                                                                                      |  |                   |            |   |                   |   |            |  
|Current assets:                                                                                                                                             |  |                   |            |   |                   |   |            |  
|Cash and cash equivalents                                                                                                                                   |  | $                 | 130,881    |   |                   | $ | 86,804     |  
|Short-term investments                                                                                                                                      |  |                   | 12,169     |   |                   |   |           |  
|Accounts receivable, net of allowance for doubtful accounts of $2,691 and $1,938 as of September 30, 2009 and 2008, respectively                            |  |                   | 19,660     |   |                   |   | 28,968     |  
|Prepaid expenses and other current assets                                                                                                                   |  |                   | 11,235     |   |                   |   | 7,859      |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total current assets                                                                                                                                        |  |                   | 173,945    |   |                   |   | 123,631    |  
|Property and equipment, net                                                                                                                                 |  |                   | 14,418     |   |                   |   | 19,773     |  
|Long-term investments                                                                                                                                       |  |                   | 23,155     |   |                   |   | 20,525     |  
|Restricted cash                                                                                                                                             |  |                   | 29,241     |   |                   |   | 29,641     |  
|Goodwill                                                                                                                                                    |  |                   | 406,507    |   |                   |   | 406,507    |  
|Other intangible assets, net                                                                                                                                |  |                   | 17,660     |   |                   |   | 23,965     |  
|Other assets                                                                                                                                                |  |                   | 3,245      |   |                   |   | 3,419      |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total assets                                                                                                                                                |  | $                 | 668,171    |   |                   | $ | 627,461    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                        |  |                   |            |   |                   |   |            |  
|Current liabilities:                                                                                                                                        |  |                   |            |   |                   |   |            |  
|Accounts payable                                                                                                                                            |  | $                 | 7,758      |   |                   | $ | 12,202     |  
|Accrued compensation and related liabilities                                                                                                                |  |                   | 29,010     |   |                   |   | 21,480     |  
|Accrued liabilities                                                                                                                                         |  |                   | 17,010     |   |                   |   | 15,677     |  
|Restructuring obligations                                                                                                                                   |  |                   | 17,964     |   |                   |   | 19,925     |  
|Deferred revenue                                                                                                                                            |  |                   | 101,172    |   |                   |   | 95,519     |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total current liabilities                                                                                                                                   |  |                   | 172,914    |   |                   |   | 164,803    |  
|Deferred rent obligations                                                                                                                                   |  |                   | 14,539     |   |                   |   | 18,174     |  
|Restructuring obligations, less current portion                                                                                                             |  |                   | 31,098     |   |                   |   | 41,121     |  
|Deferred revenue, less current portion                                                                                                                      |  |                   | 9,288      |   |                   |   | 6,396      |  
|Other liabilities                                                                                                                                           |  |                   | 6,281      |   |                   |   | 5,949      |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total liabilities                                                                                                                                           |  |                   | 234,120    |   |                   |   | 236,443    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Commitments and contingencies                                                                                                                               |  |                   |            |   |                   |   |            |  
|                                                                                                                                                            |  |                  
|Stockholders equity:                                                                                                                                       |  |                   |            |   |                   |   |            |  
|Convertible preferred stock, $.002 par value; 20,000 shares authorized; no shares issued and outstanding                                                    |  |                   |           |   |                   |   |           |  
|Common stock, $.002 par value; 1,500,000 shares authorized; 89,628 and 86,928 shares issued and outstanding as of
September 30, 2009 and 2008, respectively |  |                   | 179        |   |                   |   | 174        |  
|Additional paid-in capital                                                                                                                                  |  |                   | 5,189,566  |   |                   |   | 5,154,137  |  
|Accumulated other comprehensive loss                                                                                                                        |  |                   | (3,688     | ) |                   |   | (3,094     | )
|Accumulated deficit                                                                                                                                         |  |                   | (4,752,006 | ) |                   |   | (4,760,199 | )
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total stockholders equity                                                                                                                                  |  |                   | 434,051    |   |                   |   | 391,018    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total liabilities and stockholders equity                                                                                                                  |  | $                 | 668,171    |   |                   | $ | 627,461    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  

See accompanying notes to consolidated financial statements.



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ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)



|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                              |  | Year Ended September 30, |        
|                                                                              |  | 2009                     |         |   | 2008 |   |         | 2007 | 
|Revenues:                                                                     |  |                          |         |   |      |   |         |      |  |   |         |  
|Subscription and maintenance                                                  |  | $                        | 222,206 |   |      | $ | 187,150 |      |  | $ | 142,309 |  
|Services and other                                                            |  |                          | 116,766 |   |      |   | 140,910 |      |  |   | 159,358 |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Total revenues                                                                |  |                          | 338,972 |   |      |   | 328,060 |      |  |   | 301,667 |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Cost of revenues:                                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Subscription and maintenance                                                  |  |                          | 47,907  |   |      |   | 40,088  |      |  |   | 32,709  |  
|Services and other                                                            |  |                          | 75,465  |   |      |   | 94,189  |      |  |   | 114,615 |  
|Amortization of acquired technology and customer intangible assets            |  |                          | 5,550   |   |      |   | 14,257  |      |  |   | 14,074  |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Total cost of revenues                                                        |  |                          | 128,922 |   |      |   | 148,534 |      |  |   | 161,398 |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Gross profit                                                                  |  |                          | 210,050 |   |      |   | 179,526 |      |  |   | 140,269 |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Operating expenses:                                                           |  |                          |         |   |      |   |         |      |  |   |         |  
|Sales and marketing                                                           |  |                          | 103,739 |   |      |   | 110,834 |      |  |   | 93,904  |  
|Research and development                                                      |  |                          | 43,483  |   |      |   | 52,270  |      |  |   | 51,159  |  
|General and administrative                                                    |  |                          | 43,289  |   |      |   | 48,919  |      |  |   | 39,780  |  
|Other incomeSoftbank                                                         |  |                          |        |   |      |   | (566    | )    |  |   | (13,564 | )
|Insurance reimbursement                                                       |  |                          | (7,527  | ) |      |   |        |      |  |   |        |  
|Amortization of other intangible assets                                       |  |                          | 755     |   |      |   | 739     |      |  |   | 525     |  
|Restructuring and integration costs (benefit)                                 |  |                          | 10,837  |   |      |   | 10,108  |      |  |   | (4,194  | )
|Litigation provision                                                          |  |                          |        |   |      |   | 5,900   |      |  |   |        |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Total operating expenses                                                      |  |                          | 194,576 |   |      |   | 228,204 |      |  |   | 167,610 |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Income (loss) from operations                                                 |  |                          | 15,474  |   |      |   | (48,678 | )    |  |   | (27,341 | )
|Interest and other (expense) income, net                                      |  |                          | (6,055  | ) |      |   | 8,359   |      |  |   | 14,301  |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income (loss) before income taxes                                         |  |                          | 9,419   |   |      |   | (40,319 | )    |  |   | (13,040 | )
|Provision for income taxes                                                    |  |                          | 1,226   |   |      |   | 743     |      |  |   | 1,937   |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                             |  | $                        | 8,193   |   |      | $ | (41,062 | )    |  | $ | (14,977 | )
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income (loss) per sharebasic and diluted                                 |  | $                        | 0.10    |   |      | $ | (0.53   | )    |  | $ | (0.21   | )
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Weighted average shares used in computing net income (loss) per sharebasic   |  |                          | 82,733  |   |      |   | 77,318  |      |  |   | 70,106  |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Weighted average shares used in computing net income (loss) per sharediluted |  |                          | 85,424  |   |      |   | 77,318  |      |  |   | 70,106  |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Comprehensive income (loss):                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                             |  | $                        | 8,193   |   |      | $ | (41,062 | )    |  | $ | (14,977 | )
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Unrealized loss on investments, net                                           |  |                          | (609    | ) |      |   | (3,005  | )    |  |   | (510    | )
|Foreign currency translation adjustment                                       |  |                          | 15      |   |      |   | (1,201  | )    |  |   | 772     |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Other comprehensive (loss) income                                             |  |                          | (594    | ) |      |   | (4,206  | )    |  |   | 262     |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Comprehensive income (loss)                                                   |  | $                        | 7,599   |   |      | $ | (45,268 | )    |  | $ | (14,715 | )
|                                                                              |  |                          |         |   |      |   |         |      |  |   |         |  

See accompanying notes to consolidated financial statements.



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ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(in thousands, except share amounts)



|                                                                 |  |              |   |  |                          |     |   |                                            |   |           |                    |  |   |                          |   |  |   |            |   |  |   |         |  
|---------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | --- | - | ------------------------------------------ | - | --------- | ------------------ |  | - | ------------------------ | - |  | - | ---------- | - |  | - | ------- | -
|                                                                 |  | Common Stock |   |  | AdditionalPaid-InCapital |     |   | AccumulatedOtherComprehensive(Loss) Income |   |           | AccumulatedDeficit |  |   | TotalStockholdersEquity |  
|                                                                 |  | Shares       |   |  | Amount                   |     |   |                                            |   |          
|Balances at October 1, 2006                                      |  | 75,410,640   |   |  | $                        | 151 |   |                                            | $ | 5,032,538 |                    |  | $ | 3,475                    |   |  | $ | (4,703,141 | ) |  | $ | 333,023 |  
|Exercise of stock options                                        |  | 506,201      |   |  |                          | 1   |   |                                            |   | 2,772     |                    |  |   |                         |   |  |   |           |   |  |   | 2,773   |  
|Issuance of common stock                                         |  | 925,788      |   |  |                          | 2   |   |                                            |   | 3,795     |                    |  |   |                         |   |  |   |           |   |  |   | 3,797   |  
|Issuance of restricted stock, net of cancellations               |  | 2,169,357    |   |  |                          | 4   |   |                                            |   | (4        | )                  |  |   |                         |   |  |   |           |   |  |   |        |  
|Exchange and retirement of employee-owned mature stock for taxes |  | (383,977     | ) |  |                          | (1  | ) |                                            |   | (3,557    | )                  |  |   |                         |   |  |   |           |   |  |   | (3,558  | )
|Amortization of stock-based compensation                         |  |             |   |  |                          |    |   |                                            |   | 32,449    |                    |  |   |                         |   |  |   |           |   |  |   | 32,449  |  
|Unrealized investment loss, net                                  |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | (510                     | ) |  |   |           |   |  |   | (510    | )
|Foreign currency translation adjustment                          |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | 772                      |   |  |   |           |   |  |   | 772     |  
|Realized gain on translation adjustments                         |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | (2,625                   | ) |  |   |           |   |  |   | (2,625  | )
|Net loss                                                         |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   |                         |   |  |   | (14,977    | ) |  |   | (14,977 | )
|                                                                 |  |              |   |  |                          |     |   |                                            |   |           |                    |  |   |                          |   |  |   |            |   |  |   |         |  
|Balances at September 30, 2007                                   |  | 78,628,009   |   |  |                          | 157 |   |                                            |   | 5,067,993 |                    |  |   | 1,112                    |   |  |   | (4,718,118 | ) |  |   | 351,144 |  
|FIN 48 adjustment                                                |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   |                         |   |  |   | (1,019     | ) |  |   | (1,019  | )
|Exercise of stock options                                        |  | 385,011      |   |  |                          | 1   |   |                                            |   | 2,271     |                    |  |   |                         |   |  |   |           |   |  |   | 2,272   |  
|Issuance of common stock                                         |  | 626,336      |   |  |                          | 1   |   |                                            |   | 4,121     |                    |  |   |                         |   |  |   |           |   |  |   | 4,122   |  
|Issuance of common stock related to the Procuri acquisition      |  | 4,060,164    |   |  |                          | 8   |   |                                            |   | 46,103    |                    |  |   |                         |   |  |   |           |   |  |   | 46,111  |  
|Issuance of restricted stock, net of cancellations               |  | 3,779,206    |   |  |                          | 8   |   |                                            |   | (8        | )                  |  |   |                         |   |  |   |           |   |  |   |        |  
|Exchange and retirement of employee-owned mature stock for taxes |  | (551,046     | ) |  |                          | (1  | ) |                                            |   | (7,202    | )                  |  |   |                         |   |  |   |           |   |  |   | (7,203  | )
|Amortization of stock-based compensation                         |  |             |   |  |                          |    |   |                                            |   | 40,859    |                    |  |   |                         |   |  |   |           |   |  |   | 40,859  |  
|Unrealized investment loss, net                                  |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | (3,005                   | ) |  |   |           |   |  |   | (3,005  | )
|Foreign currency translation adjustment                          |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | (1,201                   | ) |  |   |           |   |  |   | (1,201  | )
|Net loss                                                         |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   |                         |   |  |   | (41,062    | ) |  |   | (41,062 | )
|                                                                 |  |              |   |  |                          |     |   |                                            |   |           |                    |  |   |                          |   |  |   |            |   |  |   |         |  
|Balances at September 30, 2008                                   |  | 86,927,680   |   |  |                          | 174 |   |                                            |   | 5,154,137 |                    |  |   | (3,094                   | ) |  |   | (4,760,199 | ) |  |   | 391,018 |  
|Exercise of stock options                                        |  | 172,396      |   |  |                          |    |   |                                            |   | 925       |                    |  |   |                         |   |  |   |           |   |  |   | 925     |  
|Issuance of common stock                                         |  | 773,770      |   |  |                          | 2   |   |                                            |   | 3,187     |                    |  |   |                         |   |  |   |           |   |  |   | 3,189   |  
|Issuance of restricted stock, net of cancellations               |  | 2,063,525    |   |  |                          | 4   |   |                                            |   | (4        | )                  |  |   |                         |   |  |   |           |   |  |   |        |  
|Exchange and retirement of employee-owned mature stock for taxes |  | (309,094     | ) |  |                          | (1  | ) |                                            |   | (2,620    | )                  |  |   |                         |   |  |   |           |   |  |   | (2,621  | )
|Amortization of stock-based compensation                         |  |             |   |  |                          |    |   |                                            |   | 33,941    |                    |  |   |                         |   |  |   |           |   |  |   | 33,941  |  
|Realized investment loss, net                                    |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | 1,414                    |   |  |   |           |   |  |   | 1,414   |  
|Unrealized investment loss, net                                  |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | (2,023                   | ) |  |   |           |   |  |   | (2,023  | )
|Foreign currency translation adjustment                          |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   | 15                       |   |  |   |           |   |  |   | 15      |  
|Net income                                                       |  |             |   |  |                          |    |   |                                            |   |          |                    |  |   |                         |   |  |   | 8,193      |   |  |   | 8,193   |  
|                                                                 |  |              |   |  |                          |     |   |                                            |   |           |                    |  |   |                          |   |  |   |            |   |  |   |         |  
|Balances at September 30, 2009                                   |  | 89,628,277   |   |  | $                        | 179 |   |                                            | $ | 5,189,566 |                    |  | $ | (3,688                   | ) |  | $ | (4,752,006 | ) |  | $ | 434,051 |  
|                                                                 |  |              |   |  |                          |     |   |                                            |   |           |                    |  |   |                          |   |  |   |            |   |  |   |         |  

See accompanying notes to consolidated financial statements.



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ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                                         |  | Year Ended September 30, |        
|                                                                                         |  | 2009                     |         |   | 2008 |   |         | 2007 | 
|Operating activities:                                                                    |  |                          |         |   |      |   |         |      |  |   |          |  
|Net income (loss)                                                                        |  | $                        | 8,193   |   |      | $ | (41,062 | )    |  | $ | (14,977  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                          |         |   |      |   |         |      |  |   |          |  
|Provisions for (recovery of) doubtful accounts                                           |  |                          | 1,378   |   |      |   | 506     |      |  |   | (267     | )
|Depreciation and amortization                                                            |  |                          | 13,966  |   |      |   | 22,899  |      |  |   | 21,609   |  
|Stock-based compensation                                                                 |  |                          | 33,941  |   |      |   | 40,859  |      |  |   | 32,449   |  
|Restructuring                                                                            |  |                          | 10,837  |   |      |   | 10,108  |      |  |   | (4,194   | )
|Other-than-temporary impairment of long-term investments                                 |  |                          | 1,414   |   |      |   |        |      |  |   |         |  
|Impairment of property and equipment                                                     |  |                          | 4,277   |   |      |   |        |      |  |   |         |  
|Realized gainscurrency translation adjustment                                           |  |                          |        |   |      |   |        |      |  |   | (2,625   | )
|Changes in operating assets and liabilities:                                             |  |                          |         |   |      |   |         |      |  |   |          |  
|Accounts receivable                                                                      |  |                          | 7,930   |   |      |   | 3,609   |      |  |   | 2,801    |  
|Prepaid expenses and other assets                                                        |  |                          | (3,094  | ) |      |   | 5,948   |      |  |   | (945     | )
|Accounts payable                                                                         |  |                          | (4,485  | ) |      |   | 1,225   |      |  |   | 1,019    |  
|Accrued compensation and related liabilities                                             |  |                          | 7,486   |   |      |   | (3,687  | )    |  |   | (502     | )
|Accrued liabilities                                                                      |  |                          | (1,910  | ) |      |   | (7,914  | )    |  |   | (3,554   | )
|Deferred revenue                                                                         |  |                          | 8,857   |   |      |   | 13,258  |      |  |   | 18,351   |  
|Deferred incomeSoftbank                                                                 |  |                          |        |   |      |   | (566    | )    |  |   | (13,564  | )
|Restructuring obligations                                                                |  |                          | (22,821 | ) |      |   | (23,592 | )    |  |   | (19,028  | )
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Net cash provided by operating activities                                                |  |                          | 65,969  |   |      |   | 21,591  |      |  |   | 16,573   |  
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Investing activities:                                                                    |  |                          |         |   |      |   |         |      |  |   |          |  
|Cash paid for acquisitions, net of cash acquired                                         |  |                          |        |   |      |   | (55,638 | )    |  |   |         |  
|Purchases of property and equipment                                                      |  |                          | (6,583  | ) |      |   | (7,657  | )    |  |   | (7,410   | )
|Proceeds from maturities and sales of investments                                        |  |                          | 15,950  |   |      |   | 97,953  |      |  |   | 145,725  |  
|Purchases of investments                                                                 |  |                          | (32,772 | ) |      |   | (29,768 | )    |  |   | (151,181 | )
|Allocation from restricted cash, net                                                     |  |                          | 400     |   |      |   | 1,022   |      |  |   | 1,830    |  
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Net cash (used in) provided by investing activities                                      |  |                          | (23,005 | ) |      |   | 5,912   |      |  |   | (11,036  | )
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Financing activities:                                                                    |  |                          |         |   |      |   |         |      |  |   |          |  
|Proceeds from issuance of common stock                                                   |  |                          | 4,114   |   |      |   | 6,394   |      |  |   | 6,570    |  
|Repurchase of common stock                                                               |  |                          | (2,621  | ) |      |   | (7,203  | )    |  |   | (3,558   | )
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Net cash provided by (used in) financing activities                                      |  |                          | 1,493   |   |      |   | (809    | )    |  |   | 3,012    |  
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                             |  |                          | (380    | ) |      |   | (1,201  | )    |  |   | 765      |  
|Net increase in cash and cash equivalents                                                |  |                          | 44,077  |   |      |   | 25,493  |      |  |   | 9,314    |  
|Cash and cash equivalents at beginning of year                                           |  |                          | 86,804  |   |      |   | 61,311  |      |  |   | 51,997   |  
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Cash and cash equivalents at end of year                                                 |  | $                        | 130,881 |   |      | $ | 86,804  |      |  | $ | 61,311   |  
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  
|Supplemental disclosures of cash flow information:                                       |  |                          |         |   |      |   |         |      |  |   |          |  
|Net cash paid for income taxes                                                           |  | $                        | 1,579   |   |      | $ | 1,816   |      |  | $ | 2,461    |  
|                                                                                         |  |                          |         |   |      |   |         |      |  |   |          |  

See accompanying notes to consolidated financial statements.



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ARIBA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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), is the leading provider of on-demand spend management solutions. The Companys mission is to transform the way companies of all sizes, industries, and geographies operate by delivering software, service, and network
solutions that enable them to holistically source, contract, procure, pay, manage, and analyze their spend and supplier relationships. Delivered on-demand, the Companys enterprise-class offerings empower companies to achieve greater control of
their spend and drive continuous improvements in financial and supply chain performance. Ariba Spend Management solutions are easy to use, cost effective and quick to deploy and integrate with enterprise resource planning (ERP) and other
software systems. More than 1,000 companies, including more than half of the companies on the Fortune 500 list published in April 2009, use Ariba solutions to manage their spend from sourcing and orders through invoicing and payment. The Company was
incorporated in Delaware in September 1996.

Basis of presentation

The consolidated financial statements include the accounts of the Company. All significant intercompany accounts and transactions have been
eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
(GAAP) 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, the fair value of investments and collectability of accounts receivable.

Cash, cash equivalents and restricted cash

The Company considers all
highly liquid investments with maturity dates of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents consist of money market funds, commercial paper, government/federal notes and bonds and certificates of deposit.
Restricted cash consists primarily of amounts held in deposits that are required as collateral under the Companys facilities operating lease agreements.

Fair value

Effective October 1, 2008, the Company adopted changes
issued by the Financial Accounting Standards Board (FASB) to fair value accounting. This guidance defines fair value as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction
between market participants at the measurement date and establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that
reflect the Companys assumptions about the assumptions market participants would use in



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pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as
follows:

Level 1Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the
measurement date. Examples of the assets carried at Level 1 fair value generally are equities listed in active markets and investments in publicly traded mutual funds with quoted market prices.

Level 2Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability
through correlation with market data at the measurement date and for the duration of the asset/liabilitys anticipated life.

Level 3Inputs reflect managements best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk
inherent in the inputs to the model.

The availability of observable inputs can vary and is affected by a wide variety of
factors, including, for example, the type of a security, whether the security is new and not yet established in the marketplace, and other characteristics particular to a transaction. To the extent that valuation is based on models or inputs that
are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.
When observable prices are not available, the Company either uses implied pricing from similar instruments or valuation models based on net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or
other risk factors. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Companys own
assumptions are set to reflect those it believes market participants would use in pricing the asset or liability at the measurement date. See Note 5 for fair value related to the Companys cash equivalents, short-term investments, long-term
investments and restricted cash.

Concentration of credit risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable
securities, short-term investments, long-term investments and trade accounts receivable. The Company maintains its cash, cash equivalents, short-term investments and long-term 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 both domestic and 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 years ended September 30, 2009, 2008 and 2007. No customer accounted for more than 10% of net accounts receivable as of
September 30, 2009 and 2008.

Allowance for doubtful accounts

The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company is aware of
circumstances that may impair a specific customers ability to meet its financial obligations, the Company records a specific allowance against amounts due, and thereby reduces the net recognized receivable to the amount the Company reasonably
believes will be collected. For the remaining customers, the Company recognizes allowances for doubtful accounts based on the length of time the aggregate receivables are outstanding, the current business environment and historical experience.



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Derivative financial instruments and foreign currency management

The Company considers the functional currency of its foreign subsidiaries to be the local currency, and accordingly, the foreign
subsidiaries financial statements are translated into U.S. dollars using exchange rates in effect at period end for assets and liabilities and average exchange rates during each reporting period for the results of operations. Adjustments
resulting from translations of foreign subsidiary financial statements are reported in accumulated other comprehensive income. Gains or losses on foreign currency transactions are recognized as interest and other income (expense), net. The Company
recognized losses of approximately $6.7 million for the year ended September 30, 2009. The Company recognized gains of approximately $2.9 million and $2.2 million for the years ended September 30, 2008 and 2007, respectively.

On January 1, 2009, the Company adopted changes issued by the FASB to accounting for derivatives and hedging. This updated guidance had
no financial impact on the Companys consolidated financial statements and only required additional financial statement disclosures. The Company has applied these changes on a prospective basis. Accordingly, disclosures related to interim
periods prior to the date of adoption have not been presented.

The Company transacts business in various foreign currencies
and has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Under this program, the Companys strategy is to have increases or
decreases in foreign currency exposures offset by gains or losses on the foreign currency forward contracts to mitigate the risks and volatility associated with foreign currency transaction gains or losses. The Companys foreign currency
forward contracts generally settle within 90 days. The Company does not use these forward contracts for trading purposes. The Company does not designate these forward contracts as hedging instruments. Accordingly, the Company records the fair
value of these contracts as of the end of the reporting period to the consolidated balance sheet with changes in fair value recorded in the consolidated statement of operations. The balance sheet classification for the fair values of these forward
contracts is to prepaid expenses and other current assets for unrealized gains and to other current liabilities for unrealized losses. The statement of operations classification for the fair values of these forward contracts is to interest and other
income (expense), net, for both realized and unrealized gains and losses.

As of September 30, 2009, the notional amounts
of the forward contracts held to sell and purchase U.S. dollars in exchange for other major international currencies were $4.9 million and $20.9 million, respectively, and the unrealized loss on these contracts was $427,000. The notional
principal amounts for derivative instruments provided one measure of the transaction volume outstanding as of September 30, 2009, and do not represent the amount of the Companys exposure to credit or market loss. The Company has
determined that the gross exposure for both market and credit risk are deemed immaterial.

The fair value of the foreign
currency forward contracts not designated as hedges in the condensed consolidated balance sheet were $58,000 included in prepaid expense and other current assets and $485,000 included in other current liabilities as of September 30, 2009. The
effects of the foreign currency forward contracts not designated as hedges on net income was a loss of $881,000 for the year ended September 30, 2009 included in interest and other (expense) income, net on the consolidated statement of
operations.

In January 2005, the Company hedged a portion of the net assets of Ariba Korea, Ltd. (Ariba Korea)
using foreign currency forward contracts (Korean Won) to offset the translation and economic exposures related to anticipated cash flows from this subsidiary. The Korean Won hedge was entered into to minimize 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 periods prior to the cash being repatriated. In the year ended September 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.



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Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are computed using the straight-line
method over the shorter of the estimated useful lives of the assets, generally two to five years based on asset classification, or the lease term, if applicable. Gains and losses on disposals are included in results of operations at amounts equal to
the difference between the net book value of the disposed assets and the proceeds received upon disposal. Costs for replacements and improvements are capitalized, while the costs of maintenance and repairs are charged against earnings as incurred.

Impairment of long-lived assets

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the estimated undiscounted future cash flows expected to be generated from the use and
ultimate disposition of the assets. If the carrying amount of the assets exceed its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of would be reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the
appropriate asset and liability sections of the consolidated balance sheet.

Goodwill and other intangible assets

Purchased other intangible assets with finite lives are amortized over the estimated economic lives of the assets,
generally ranging from one to five years, and reviewed for impairment. Goodwill and purchased other intangible assets determined to have indefinite useful lives are not amortized but are reviewed for impairment annually and more frequently if events
and circumstances indicate the assets may be impaired and the carrying value may not be recoverable. The Company has no identifiable intangible assets with indefinite lives as of September 30, 2009.

Factors the Company considers that could trigger an impairment review of goodwill 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 the Companys overall business, significant negative industry or economic trends,
and decreases in the Companys market capitalization below the recorded amount of the Companys net assets for a sustained period. The Companys stock price is highly volatile and has experienced significant declines since January
2004. The Company performed the annual assessment in the fourth quarter of fiscal years 2009, 2008 and 2007 and no indication of impairment was noted. The balance of goodwill is $406.5 million as of September 30, 2009, and there can be no
assurances that future goodwill impairments will not occur.

Revenue recognition

Substantially all of the Companys revenues are derived from two sources: (i) providing software solutions on either a multi-tenant
or single tenant basis and 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 basis;
(ii) a maintenance arrangement, which is generally priced as a percentage of the software license fees and provides for 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.



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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 and all other criteria are met as defined below. 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 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 is based on vendor-specific objective evidence (VSOE) of fair value, which is limited to the price when sold
separately.

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.

When revenue associated with multiple element arrangements is recognized and more than one element in that 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 and the residual is allocated to those elements that do not have fair value.

In circumstances where the Company provides consulting services as part of a multi-element arrangement with software solutions, both the
software solution revenue and service revenue are recognized under the lesser of proportional performance method based on 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 recognizable and license revenue deferred until all requirements are met. Deferred revenue is recognized as revenue upon delivery of the Companys product, as services are rendered, or as other
requirements 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.

Software development costs

Software development costs are expensed as incurred until technological feasibility, defined as a working prototype, has been established, at which time such costs are capitalized until the product is
available for general release to customers. To date, the Companys software has been available for general release shortly after the establishment of technological feasibility and, accordingly, capitalized development costs have not been
material.



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The Company follows the guidance set forth by the FASB to accounting for the development of
its on-demand application service. This guidance requires companies to capitalize qualifying computer software costs which are incurred during the application development stage and to amortize such costs over the softwares estimated useful
life. Due to the current economic downturn, restructuring actions taken in the year ended September 30, 2009 and a review of all discretionary spending and projects, the Company deferred its ERP system implementation for finance and human
resources to an uncertain date. The Company evaluated the capitalized software costs of this project for impairment. In the year ended September 30, 2009, the Company recorded an impairment charge of $3.3 million related to capitalized software
implementation costs and $1.0 million related to perpetual software license costs due to the deferral of the project to an uncertain date.

Advertising expense

Advertising costs are expensed as incurred and totaled
$770,000, $606,000 and $743,000 during the years ended September 30, 2009, 2008 and 2007, respectively.

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.

The Company amortizes the fair value of awards on an accelerated basis. The guidance 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.

The Company did not grant stock options in the years ended September 30, 2009, 2008 and 2007. During the year ended September 30,
2007, the Company accelerated approximately 259,000 unvested stock options, which resulted in approximately $1.0 million of compensation cost. During the years ended September 30, 2009, 2008 and 2007, the Company recorded $545,000, $677,000 and
$2.4 million, respectively, of stock-based compensation expense associated with employee and director stock options and employee stock purchase plan programs.

During the years ended September 30, 2009, 2008 and 2007, the Company granted 1.5 million, 2.7 million and 1.9 million shares, respectively, of restricted common stock to directors,
executive officers and certain employees with a fair value of $14.6 million, $31.3 million and $17.5 million, respectively. These amounts are being amortized over the vesting period of the individual restricted common stock grants, which are one to
three years.

During the year ended September 30, 2009, the Company also granted restricted common stock or restricted
stock units to executive officers and certain key employees, whose vesting and the number of shares are contingent upon meeting a 2009 performance milestone related to subscription software revenues for the year ended September 30, 2009, a 2010
performance milestone established by the Compensation Committee of the Board of Directors in October 2009, as well as a service requirement. The number of shares that vest upon meeting the performance milestone for the year ended September 30,
2009 was up to 870,000 shares with a fair value of $7.5 million, based on the current fair value of the Companys shares at the grant date. The number of shares awarded based upon attainment against the performance milestone was 848,250 shares,
and compensation expense, of $7.3 million, is being recorded based upon the fair value calculated based on the closing price on the date of grant over the vesting period of one year.

During the year ended September 30, 2008, the Company also granted up to 2.1 million shares of restricted common stock or
restricted stock units to executive officers and certain key employees with a fair value of $24.4 million, whose vesting and the number of shares were contingent upon meeting a performance milestone related



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to subscription software revenues for the year ended September 30, 2008 and upon subsequent service periods. The shares vest one-third upon the achievement of the performance milestone,
one-third upon service on the first anniversary of achievement of the performance milestone and one-third upon service on the second anniversary of achievement of the performance milestone. The number of shares awarded based on attainment against
the performance milestone was 2.1 million shares, and compensation expense was recorded based upon the fair value calculated based on the closing price on the date of grant over the vesting period of three years.

During the year ended September 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 and the number of shares were contingent upon meeting a performance milestone related to subscription software revenues and a subsequent service period and was amortized over the
performance and service period. The fair value of each restricted share granted was calculated based on the closing stock price on the date of grant.

During the years ended September 30, 2009, 2008 and 2007, the Company recorded $30.0 million, $37.4 million and $27.5 million, respectively, of stock-based compensation expense associated with
restricted stock grants. As of September 30, 2009, there was $19.4 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.

The Company also made a contribution to the Ariba, Inc. Employees 401(k) Savings Plan (the 401(k) Plan) in the form of common stock with a value of $3.4 million, $2.7 million and $2.5 million in the years ended
September 30, 2009, 2008 and 2007, respectively.

Total stock-based compensation of $33.9 million, $40.9 million and
$32.4 million was recorded in the years ended September 30, 2009, 2008 and 2007, respectively, to various cost and operating expense categories as follows (in thousands):



|                                              |  |                          |        |      |   |        |  |   |       
|--------------------------------------------- |  | ------------------------ | ------ | ---- | - | ------ |  | - | ------
|                                              |  | Year Ended September 30,
|                                              |  | 2009                     |        | 2008 |   | 2007  
|Cost of revenuessubscription and maintenance |  | $                        | 2,405  |      | $ | 2,262  |  | $ | 2,023 
|Cost of revenuesservices and other           |  |                          | 3,715  |      |   | 5,758  |  |   | 7,169 
|Sales and marketing                           |  |                          | 13,511 |      |   | 15,915 |  |   | 10,102
|Research and development                      |  |                          | 4,825  |      |   | 6,226  |  |   | 5,199 
|General and administrative                    |  |                          | 9,485  |      |   | 10,698 |  |   | 7,956 
|                                              |  |                          |        |      |   |        |  |   |       
|Total                                         |  | $                        | 33,941 |      | $ | 40,859 |  | $ | 32,449
|                                              |  |                          |        |      |   |        |  |   |       

Income taxes

Income taxes are computed using an asset and liability approach, which requires the recognition of taxes payable or refundable for the
current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Companys consolidated financial statements or tax returns. The measurement of current and deferred tax assets and
liabilities is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The Company has recorded a valuation allowance to reduce its deferred tax assets to the amount of future tax benefit
that is more likely than not to be realized.

On October 1, 2007, the Company adopted changes issued by the FASB to
accounting for uncertainty in income taxes. The guidance contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining
if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits,



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the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more
than 50% likely of being realized upon effective settlement.

Net income (loss) per share

Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common
shares outstanding during the period, excluding restricted common stock subject to forfeiture. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares,
including restricted common stock subject to forfeiture and potential common shares outstanding during the period if their effect is dilutive. Potential common shares are comprised of incremental common shares issuable upon the exercise of stock
options and employee stock purchase plans shares.

Comprehensive income (loss)

Comprehensive income (loss) includes all changes in equity (net assets) during a period from non-owner sources, including unrealized gains
and losses on marketable securities and cash flow hedges and changes in the cumulative translation adjustment.

Recently
Adopted Accounting Pronouncements

On October 1, 2008, the Company adopted changes issued by the FASB to fair value
accounting and reporting as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least and annual basis. The guidance gives the Company the irrevocable
option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis with the difference between the carrying value before election of the fair value option and the fair
value recorded upon election as an adjustment to beginning retained earnings.

On January 1, 2009, the Company adopted
changes issued by the FASB to disclosures about derivative instruments and hedging activities. These changes require an enhanced disclosure about an entitys derivative and hedging activities, including tabular disclosures of the effects of
such instruments and related hedged items on our financial position, financial performance, and cash flows. See Derivative Financial Instruments in Note 1Description of Business and Summary of Significant Accounting Policies.

On April 1, 2009, the Company adopted changes issued by the FASB to fair value measurement and presentation. The
guidance was intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities, clarifies the objective and method of fair value measurement even when there has been a
significant decrease in market activity for the asset being measured, and establish a new model for measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write-down through earnings
versus other comprehensive income. See Auction Rate Securities in Note 5Fair Value.

On April 1, 2009, the
Company adopted changes issued by the FASB to disclosure of subsequent events. These changes require the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date (that is, whether that date
represents the date the financial statements were issued or were available to be issued). For SEC registrants, this date will continue to be the date on which financial statements are filed with the SEC. The Company has evaluated subsequent events
through November 25, 2009, which is the date of the Form 10-K filing.

On July 1, 2009, the Company adopted changes
issued by the FASB to authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by
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preparation for financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities
laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting
guidance is referenced, the adoption of these changes had no impact on the Companys consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued changes to accounting for
business combinations. The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for
pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition-related transaction costs and the
recognition of changes in the acquirers income tax valuation allowance. These changes are effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will adopt this standard on
October 1, 2009. The adoption is not expected to have an impact on the Companys consolidated financial statements.

In December 2007, the FASB issued changes to accounting for noncontrolling interests in consolidated financial statements. The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements,
including the requirements to classify noncontrolling interests as a component of consolidated stockholders equity and the elimination of minority interest accounting in results of operations with earnings attributable to
noncontrolling interests reported as part of consolidated earnings. Additionally, these changes revise the accounting for both increases and decrease in a parents controlling ownership interest and are effective for fiscal years beginning
after December 15, 2008, with early adoption prohibited. The Company will adopt this standard on October 1, 2009. The adoption is not expected to have an impact on the Companys consolidated financial statements.

In April 2008, the FASB issued changes in determining the useful life of intangible assets. The standard changes amend the factors that
should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent is to improve the consistency between the useful life of a recognized intangible asset and the period
of expected cash flows used to measure the fair value of the asset. These changes are effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. The Company will adopt this standard on October 1, 2009.
The adoption is not expected to have an impact on the Companys consolidated financial statements.

In June 2009, the
FASB issued authoritative guidance on the consolidation of variable interest entities. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and
additional disclosures for variable interests. The Company will adopt this standard on October 1, 2011. The adoption is not expected to have an impact on the Companys consolidated financial statements.

In August 2009, the FASB issued changes to measuring liabilities at fair value. The standard changes provide clarification that in
circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value of such liability using one or more of the techniques prescribed by the update. The Company
will adopt these changes in the first quarter of fiscal year 2010. The Company is currently evaluating the impact of its pending adoption on the Companys consolidated financial statements.



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In September 2009, the FASB issued changes to accounting for multiple-deliverable revenue
arrangements, and arrangements that include software elements. These changes require entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The
amendments eliminate the residual method of revenue allocation and require revenue to be allocated among the various deliverables in a multi-element transaction using the relative selling price method. These changes remove tangible products
from the scope of software revenue guidance and provide guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. These changes should be
applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating the impact of its pending
adoption on the Companys consolidated financial statements.

Note 2Business Combination

On December 17, 2007, the Company acquired Procuri, Inc. (Procuri), a privately held company headquartered in Atlanta,
Georgia, to expand its on-demand supply management solutions. The Company has included the financial results of Procuri in its consolidated financial results effective December 17, 2007. The total purchase price for Procuri was
$103.2 million, which consisted of $55.6 million in cash paid to acquire the outstanding common stock of Procuri and to settle Procuris outstanding debt, $46.1 million of the Companys common stock (based on the issuance of
4.1 million shares of Ariba common stock) and $1.5 million for transaction costs. For the purposes of the purchase price calculation, the deemed fair value of the Ariba common stock issued in the merger was $11.36 per share, which is equal
to Aribas average closing price per share as reported on the NASDAQ Global Market for each trading day during the period beginning two days before the acquisition date and ending on the acquisition date of December 17, 2007. There is an
indemnification obligation of $7.0 million by the stockholders of Procuri that shall expire 30 months after the closing of the merger with respect to certain intellectual property and tax representations.

The acquisition was accounted for using the purchase method of accounting, and accordingly the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values on the acquisition date. Since December 17, 2007, the results of operations of Procuri have been included in the Companys consolidated statements of operations. The
following is a summary of the final allocation of purchase price (in thousands):



|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Allocation of total purchase price:          |  |   |         |  
|Cash and cash equivalents                    |  | $ | 1,426   |  
|Restricted cash                              |  |   | 643     |  
|Accounts receivable, net                     |  |   | 3,953   |  
|Prepaid expenses and other current assets    |  |   | 2,607   |  
|Property and equipment, net                  |  |   | 1,250   |  
|                                             |  |   |         |  
|Total tangible assets acquired               |  |   | 9,879   |  
|                                             | 
|Accounts payable                             |  |   | 95      |  
|Accrued compensation and related liabilities |  |   | 975     |  
|Accrued liabilities                          |  |   | 7,023   |  
|Deferred revenue                             |  |   | 4,630   |  
|Restructuring obligations                    |  |   | 2,888   |  
|                                             |  |   |         |  
|Total liabilities assumed                    |  |   | 15,611  |  
|                                             | 
|Net tangible liabilities assumed             |  |   | (5,732  | )
|Goodwill                                     |  |   | 80,406  |  
|Identified intangible assets                 |  |   | 28,500  |  
|                                             |  |   |         |  
|Total purchase price allocation              |  | $ | 103,174 |  
|                                             |  |   |         |  



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Restructuring obligations include $2.1 million in employee severance costs, primarily
consisting of research and development and corporate infrastructure personnel, and $795,000 in lease abandonment costs arising from the acquisition. See Note 8 for additional information on restructuring accruals.

None of the goodwill resulting from the acquisition of Procuri is expected to be deductible for tax purposes. Identified intangible assets
associated with the acquisition of Procuri will be amortized to cost of revenues and operating expense based upon the nature of the asset ratably over the estimated period of benefit of up to six years as detailed in the table below. The estimated
period of benefit is determined based upon the estimated period of positive cash flows being generated by the asset. Identifiable intangible assets consist of:



|                                                     |  |                          |        |                             |   |                                           |   |                                       |  |                  
|---------------------------------------------------- |  | ------------------------ | ------ | --------------------------- | - | ----------------------------------------- | - | ------------------------------------- |  | -----------------
|Identified Intangible Assets                         |  | Fair Value(in thousands) |        | EstimatedUseful Life(years) |   | EstimatedAnnualAmortization(in thousands) |   | Statements ofOperationsClassification
|Existing technology                                  |  | $                        | 2,900  |                             | 2 |                                           | $ | 1,450                                 |  | Cost of revenue  
|Customer contracts and related customer relationship |  |                          | 24,600 |                             | 6 |                                           | $ | 4,100                                 |  | Cost of revenue  
|Trade name / trademarks                              |  |                          | 400    |                             | 2 |                                           | $ | 200                                   |  | Operating expense
|Non-competition agreements                           |  |                          | 600    |                             | 2 |                                           | $ | 300                                   |  | Operating expense
|                                                     |  |                          |        |                             |   |                                           |   |                                       |  |                  
|                                                     |  | $                        | 28,500 |                             |   |                                           |   |                                       |  |                  
|                                                     |  |                          |        |                             |   |                                           |   |                                       |  |                  

The following unaudited pro forma financial information is presented to reflect the
results of operations for the year ended September 30, 2008 and 2007 as if the acquisition of Procuri had occurred on October 1, 2006. These pro forma results have been prepared for comparative purposes only and do not purport to be
indicative of what operating results would have been had the acquisition actually taken place on October 1, 2006 and may not be indicative of future operating results (in thousands, except per share amounts):



|                                          |  |                                    |         |   |      |   |         |  
|----------------------------------------- |  | ---------------------------------- | ------- | - | ---- | - | ------- | -
|                                          |  | Year EndedSeptember 30,(unaudited) |        
|                                          |  | 2008                               |         |   | 2007 |  
|Revenues                                  |  | $                                  | 332,082 |   |      | $ | 318,167 |  
|Net loss                                  |  | $                                  | (45,785 | ) |      | $ | (39,119 | )
|Net loss per sharebasic and diluted      |  | $                                  | (0.57   | ) |      | $ | (0.53   | )
|Weighted average sharesbasic and diluted |  |                                    | 80,718  |   |      |   | 74,166  |  

Note 3Balance Sheet Components

The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company is aware of
circumstances that may impair a specific customers ability to meet its financial obligations, the Company records a specific allowance against amounts due, and thereby reduces the net recognized receivable to the amount the Company reasonably
believes will be collected. For the remaining customers, the Company recognizes allowances for doubtful accounts based on the length of time the aggregate receivables are outstanding, the current business environment and historical experience. The
provision for doubtful accounts is included in sales and marketing expense in the Companys consolidated statements of operations.



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Changes in the allowance for doubtful accounts for the years ended September 30, 2009,
2008 and 2007 are as follows (in thousands):



|                                |  |                              |       |           |                           |       |                        |  |   |      |   |  |   |      
|------------------------------- |  | ---------------------------- | ----- | --------- | ------------------------- | ----- | ---------------------- |  | - | ---- | - |  | - | -----
|Classification                  |  | Balance atBeginning ofPeriod |       | Additions |                           |       | Balance atEnd ofPeriod
|                                |  | Expense/(Recovery)           |       |           | Deductions/Write-offs (a) |       |                       
|Year ended September 30, 2009   |  |                              |       |           |                           |       |                        |  |   |      |   |  |   |      
|Allowance for doubtful accounts |  | $                            | 1,938 |           | $                         | 1,378 |                        |  | $ | (625 | ) |  | $ | 2,691
|Year ended September 30, 2008   |  |                              |       |           |                           |       |                        |  |   |      |   |  |   |      
|Allowance for doubtful accounts |  | $                            | 1,973 |           | $                         | 506   |                        |  | $ | (541 | ) |  | $ | 1,938
|Year ended September 30, 2007   |  |                              |       |           |                           |       |                        |  |   |      |   |  |   |      
|Allowance for doubtful accounts |  | $                            | 3,011 |           | $                         | (267  | )                      |  | $ | (771 | ) |  | $ | 1,973



|(a) | Amounts written off as uncollectible or recovered by payment.
|--- | -------------------------------------------------------------

Property and equipment and their related useful lives consisted of the following as of September 30, 2009 and 2008 (in thousands):



|                                                               |  |               |         |   |      |   |         |  
|-------------------------------------------------------------- |  | ------------- | ------- | - | ---- | - | ------- | -
|                                                               |  | September 30, |        
|                                                               |  | 2009          |         |   | 2008 |  
|Computer equipment and software (2 to 3 years)                 |  | $             | 37,277  |   |      | $ | 63,348  |  
|Office equipment (2 years)                                     |  |               | 2,242   |   |      |   | 6,685   |  
|Furniture and fixtures (5 years)                               |  |               | 17,212  |   |      |   | 17,347  |  
|Leasehold improvements (lesser of lease term or economic life) |  |               | 20,983  |   |      |   | 21,763  |  
|                                                               |  |               |         |   |      |   |         |  
|                                                               |  |               | 77,714  |   |      |   | 109,143 |  
|Less accumulated depreciation and amortization                 |  |               | (63,296 | ) |      |   | (89,370 | )
|                                                               |  |               |         |   |      |   |         |  
|Total property and equipment, net                              |  | $             | 14,418  |   |      | $ | 19,773  |  
|                                                               |  |               |         |   |      |   |         |  

Depreciation and amortization expense of property and equipment totaled $7.7 million,
$7.9 million and $7.0 million for the years ended September 30, 2009, 2008 and 2007, respectively. As discussed in Note 1, the Company recorded an impairment charge of $3.3 million related to capitalized software implementation costs and $1.0
million related to perpetual software license costs due to the deferral of the project to an uncertain date in the fiscal year ended September 30, 2009. In addition, the Company wrote-off assets with a cost basis of $33.7 million and a net book
value of zero.

Accrued liabilities consisted of the following as of September 30, 2009 and 2008 (in thousands):



|                          |  |               |        |      |   |       
|------------------------- |  | ------------- | ------ | ---- | - | ------
|                          |  | September 30,
|                          |  | 2009          |        | 2008
|Accrued taxes             |  | $             | 6,146  |      | $ | 6,258 
|Other accrued liabilities |  |               | 10,864 |      |   | 9,419 
|                          |  |               |        |      |   |       
|Accrued liabilities       |  | $             | 17,010 |      | $ | 15,677
|                          |  |               |        |      |   |       



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Note 4Investments

The following is a summary of cash equivalents and available-for-sale securities as of September 30, 2009 and 2008 (in thousands):



|                                                |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|----------------------------------------------- |  | ------------------ | ------- | -------------------- | - | --------------------- |  | - | --------- | - |  | - | -------
|                                                |  | September 30, 2009
|                                                |  | AmortizedCost      |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|Money market funds                              |  | $                  | 86,811  |                      | $ |                      |  | $ |          |   |  | $ | 86,811 
|Certificates of deposit and other bank deposits |  |                    | 27,827  |                      |   |                      |  |   |          |   |  |   | 27,827 
|Non-U.S. government securities                  |  |                    | 16,617  |                      |   |                      |  |   |          |   |  |   | 16,617 
|U.S. government and agency securities           |  |                    | 1,031   |                      |   |                      |  |   |          |   |  |   | 1,031  
|Auction rate securities                         |  |                    | 21,786  |                      |   |                      |  |   | (4,110    | ) |  |   | 17,676 
|                                                |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|                                                |  | $                  | 154,072 |                      | $ |                      |  | $ | (4,110    | ) |  | $ | 149,962
|                                                |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|Included in cash and cash equivalents           |  | $                  | 114,638 |                      | $ |                      |  | $ |          |   |  | $ | 114,638
|Included in short-term investments              |  |                    | 12,169  |                      |   |                      |  |   |          |   |  |   | 12,169 
|Included in long-term investments               |  |                    | 27,265  |                      |   |                      |  |   | (4,110    | ) |  |   | 23,155 
|                                                |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|                                                |  | $                  | 154,072 |                      | $ |                      |  | $ | (4,110    | ) |  | $ | 149,962
|                                                |  |                    |         |                      |   |                       |  |   |           |   |  |   |        



|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------------- |  | ------------------ | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                                      |  | September 30, 2008
|                                      |  | AmortizedCost      |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|Money market funds                    |  | $                  | 70,890 |                      | $ |                      |  | $ |          |   |  | $ | 70,890
|Corporate notes and bonds             |  |                    | 24,040 |                      |   |                      |  |   | (3,515    | ) |  |   | 20,525
|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       
|                                      |  | $                  | 94,930 |                      | $ |                      |  | $ | (3,515    | ) |  | $ | 91,415
|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       
|Included in cash and cash equivalents |  | $                  | 70,890 |                      | $ |                      |  | $ |          |   |  | $ | 70,890
|Included in long-term investments     |  |                    | 24,040 |                      |   |                      |  |   | (3,515    | ) |  |   | 20,525
|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       
|                                      |  | $                  | 94,930 |                      | $ |                      |  | $ | (3,515    | ) |  | $ | 91,415
|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       

The following is a summary of the Companys available-for-sale securities based
on contractual maturities (in thousands):



|                                        |  |               |        |      |   |       
|--------------------------------------- |  | ------------- | ------ | ---- | - | ------
|                                        |  | September 30,
|                                        |  | 2009          |        | 2008
|Due in one year or less                 |  | $             | 12,169 |      | $ |      
|Due after one year through two years    |  |               | 5,479  |      |   |      
|Due after two years through three years |  |               |       |      |   |      
|Due after three years                   |  |               | 17,676 |      |   | 20,525
|                                        |  |               |        |      |   |       
|                                        |  | $             | 35,324 |      | $ | 20,525
|                                        |  |               |        |      |   |       

The long-term investments as of September 30, 2009 and 2008, respectively, due
after three years are auction rate securities (ARS). The Company had $4.1 million and $3.5 million of gross unrealized losses on auction rate securities as of September 30, 2009 and 2008, respectively. As a result of the credit
rating reduction to below investment grade related to one of its ARS, the Company recorded an other-than-temporary impairment of $1.4 million in the year ended September 30, 2009 (see Note 5 of Notes to Consolidated Financial Statements).



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Note 5Fair Value

As of September 30, 2009, the fair value measurements of the Companys cash equivalents, short-term investments, long-term investments and restricted cash consisted of the following and which
are categorized in the table below based upon the fair value hierarchy (in thousands):



|                                                        |  |         |         |         |   |         |  |       |        |  |   |        
|------------------------------------------------------- |  | ------- | ------- | ------- | - | ------- |  | ----- | ------ |  | - | -------
|                                                        |  | Level 1 |         | Level 2 |   | Level 3 |  | Total
|Money market funds                                      |  | $       | 86,811  |         | $ |        |  | $     |       |  | $ | 86,811 
|Certificates of deposit and other bank deposits         |  |         | 57,068  |         |   |        |  |       |       |  |   | 57,068 
|Non-U.S. government securities                          |  |         | 16,617  |         |   |        |  |       |       |  |   | 16,617 
|U.S. government and agency securities                   |  |         | 1,031   |         |   |        |  |       |       |  |   | 1,031  
|Auction rate securities                                 |  |         |        |         |   |        |  |       | 17,676 |  |   | 17,676 
|                                                        |  |         |         |         |   |         |  |       |        |  |   |        
|Total cash equivalents, investments and restricted cash |  | $       | 161,527 |         | $ |        |  | $     | 17,676 |  | $ | 179,203
|                                                        |  |         |         |         |   |         |  |       |        |  |   |        

The table below presents reconciliations for market securities measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) for the year ended September 30, 2009 (in thousands):



|                                           |  |                              |        |  
|------------------------------------------ |  | ---------------------------- | ------ | -
|                                           |  | Year EndedSeptember 30, 2009 |       
|Beginning balance as of October 1, 2008    |  | $                            |       |  
|Transfer in                                |  |                              | 20,525 |  
|Realized losses                            |  |                              | (1,414 | )
|Unrealized losses                          |  |                              | (609   | )
|Redemptions                                |  |                              | (826   | )
|                                           |  |                              |        |  
|Ending fair value as of September 30, 2009 |  | $                            | 17,676 |  
|                                           |  |                              |        |  

Auction Rate Securities

The Company holds a variety of interest-bearing ARS that represent investments in pools of assets, including student loans, commercial paper
and credit derivative products. As of September 30, 2009, the Company held $18.3 million in par value of student loan securities that failed to settle in auctions commencing February 2008 and $4.9 million in par value of commercial paper and
credit derivative products that failed to settle in auctions commencing August 2007. These ARS investments are intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals,
allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. The recent uncertainties in the credit markets have affected all of the Companys holdings in ARS investments and auctions for
our investments in these securities have failed to settle on their respective settlement dates. Consequently, the investments are not currently liquid and the Company will not be able to access these funds until such time as either a future auction
of these investments is successful or a buyer is found outside of the auction process. Given the failures in the auction markets, as well as the lack of any correlation of these instruments to other observable market data, there are no longer
observable inputs available as defined by Levels 1 and 2 of the fair value hierarchy by which to value these securities. Therefore, these auction rate securities are classified within Level 3 and their valuation requires substantial judgment and
estimation of factors that are not currently observable in the market due to the lack of trading in the securities.

Contractual maturity dates for these ARS investments range from 2016 to 2047. The ARS backed by student loans are guaranteed by the U.S. government and have credit ratings of AAA. The ARS investments were in compliance with the
Companys investment policy at the time of acquisition and are investment grade quality, except for one commercial paper and credit derivative product that maintains a split rating between investment and speculative grade.



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Currently, we have no intent to sell these ARS investments prior to recovery nor are aware
of any factors that would make such a sale of the ARS investments more likely than not. As of September 30, 2009, the Company has classified the entire ARS investment balance as long-term investments on its consolidated balance sheet because of
its current inability to predict that these investments will be available for settlement within the next twelve months. The Company has also modified its current investment strategy and increased its investments in more liquid money market
instruments.

Historically, the fair value of ARS investments approximates par value due to the frequent resets through the
auction process. While the Company continues to earn interest on its ARS investments at the contractual rate, these investments are not currently trading and therefore do not currently have a readily determinable market value. Accordingly, the
estimated fair value of ARS no longer approximates par value.

The Company has used a discounted cash flow (DCF)
model to determine the estimated fair value of its investment in ARS as of September 30, 2009. Significant estimates used in the DCF models were the credit quality of the instruments, the types of instruments and an illiquidity discount factor.
The assumptions used in preparing the discounted cash flow model include estimates for interest rates, timing and amount of cash flows and expected holding periods of the ARS. The discount factor used for the $18.3 million of student loan securities
and $4.9 million of commercial paper and credit derivative products was adjusted by 200 basis points (bps) for the student loan securities and between 350 bps and 650 bps for the commercial paper and credit derivative products,
respectively, to reflect the then current market conditions for instruments with similar credit quality at the date of valuation and the risk in the marketplace for these investments that has arisen due to the lack of an active market for these
instruments. Based on this assessment of fair value, the Company determined there was a decline in the fair value of its ARS investments of $5.5 million, of which $4.1 million was deemed temporary. As a result of the credit rating reduction to below
investment grade related to one of its ARS, the Company recorded an other-than-temporary impairment of $1.4 million in the year ended September 30, 2009. As a result of adopting changes issued by the FASB to fair value accounting and the
recognition and presentation of other-than-temporary impairments, the Company evaluated the previously recorded other-than-temporary impairment loss of $1.4 million. Based upon the analysis completed, the Company determined that the
other-than-temporary loss of $1.4 million was principally related to the credit loss on the investment. Additionally, the Company evaluated the factors related to other than credit loss, which were determined to be immaterial to the condensed
consolidated financial statements.

The Company reviews its impairments in accordance with the changes issued by the FASB to
fair value accounting and the recognition and presentation of other-than-temporary impairments, in order to determine the classification of the impairment as temporary or other-than-temporary. A temporary impairment charge
results in an unrealized loss being recorded in the other comprehensive income (loss) component of stockholders equity. Such an unrealized loss does not affect net income (loss) for the applicable accounting period. An
other-than-temporary impairment charge is recorded as a realized loss in the consolidated statement of operations. The differentiating factors between temporary and other-than-temporary impairment are primarily the length of the time and the extent
to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and the Companys intent and ability to retain its investment for a period of time sufficient to allow for the recovery in market
value to par. If the issuers of the ARS are unable to successfully close future auctions or refinance their debt in the near term and/or the credit ratings of these instruments deteriorate, the Company may, in the near future, conclude that an
additional other-than-temporary impairment charge is required related to these investments. Such other-than-temporary impairment may be greater than the $4.1 million currently accounted for as a temporary decline or may be greater than the $1.4
million other-than-temporary impairment recorded in the year ended September 30, 2009.



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Note 6Goodwill and Other Intangible Assets

The table below reflects changes or activity in the balances related to goodwill for the two years ended September 30, 2009 (in
thousands):



|                                          |  |                   |        
|----------------------------------------- |  | ----------------- | -------
|                                          |  | Netcarryingamount
|Goodwill balance as of October 1, 2007    |  | $                 | 326,101
|Goodwill related to Procuri               |  |                   | 80,406 
|                                          |  |                   |        
|Goodwill balance as of September 30, 2008 |  |                   | 406,507
|Goodwill adjustments                      |  |                   |       
|                                          |  |                   |        
|Goodwill balance as of September 30, 2009 |  | $                 | 406,507
|                                          |  |                   |        

For the year ended September 30, 2007, the Company recorded an $80.4 million
increase to goodwill due to the purchase price allocation related to the Procuri acquisition. See Note 2 of Notes to Consolidated Financial Statements.

For purposes of the Companys annual goodwill impairment tests, the goodwill balance as of September 30, 2009 and 2008 has been allocated by management between the three reporting units. The
goodwill balance as of September 30, 2009 and 2008 was $342.4 million, $64.1 million and zero for North America; Europe, Middle-East and Africa (EMEA); and Asia-Pacific (APAC), respectively.

The table below reflects changes or activity in the balances related to other intangible assets for the years ended September 30, 2009
and 2008 (in thousands):



|                                             |  |             |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|-------------------------------------------- |  | ----------- |  | ------------------- | ------ | ----------------------- | - | ------- | ----------------- |  | ------------------- | ------ | ----------------------- | - | ------ | ----------------- | - | ------- | - |  | - | ------
|                                             |  |             |  | September 30, 2009  |        | September 30, 2008     
|                                             |  | Useful Life |  | Grosscarryingamount |        | Accumulatedamortization |   |         | Netcarryingamount |  | Grosscarryingamount |        | Accumulatedamortization |   |        | Netcarryingamount
|Other Intangible Assets                      |  |             |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Existing software technology                 |  | 24 months   |  | $                   | 13,300 |                         | $ | (12,998 | )                 |  | $                   | 302    |                         | $ | 13,300 |                   | $ | (11,548 | ) |  | $ | 1,752 
|Contracts and related customer relationships |  | 72 months   |  |                     | 80,881 |                         |   | (63,627 | )                 |  |                     | 17,254 |                         |   | 80,881 |                   |   | (59,527 | ) |  |   | 21,354
|Trade names/trademarks                       |  | 24 months   |  |                     | 2,200  |                         |   | (2,158  | )                 |  |                     | 42     |                         |   | 2,200  |                   |   | (1,703  | ) |  |   | 497   
|Non-competition agreements                   |  | 24 months   |  |                     | 600    |                         |   | (538    | )                 |  |                     | 62     |                         |   | 600    |                   |   | (238    | ) |  |   | 362   
|                                             |  |             |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Total                                        |  |             |  | $                   | 96,981 |                         | $ | (79,321 | )                 |  | $                   | 17,660 |                         | $ | 96,981 |                   | $ | (73,016 | ) |  | $ | 23,965
|                                             |  |             |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       

Amortization of other intangible assets for the year ended September 30, 2009
totaled $6.3 million. Of the total, amortization of $5.6 million related to contracts and related customer relationship and existing software technology was recorded as cost of revenues in the year ended September 30, 2008. Amortization of
$755,000 related to trade name/trademark and non-competition agreements was recorded as operating expense in the year ended September 30, 2009.

Amortization of other intangible assets for the year ended September 30, 2008 totaled $15.0 million. Of the total, amortization of $14.3 million related to contracts and related customer relationship
and existing software technology was recorded as cost of revenues in the year ended September 30, 2007. Amortization of $739,000 related to trade name/trademark and non-competition agreements was recorded as operating expense in the year ended
September 30, 2008.



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Amortization of other intangible assets for the year ended September 30, 2007 totaled
$14.6 million. Of the total, amortization of $14.1 million related to contracts and related customer relationship and existing software technology was recorded as cost of revenues in the year ended September 30, 2007. Amortization of $525,000
related to trade name/trademark was recorded as operating expense in the year ended September 30, 2007.

The Company
anticipates amortization of existing other intangible assets to total $4.5 million in fiscal year 2010, $4.1 million in fiscal year 2011, $4.1 million in fiscal year 2012, $4.1 million in fiscal year 2013 and $854,000 in fiscal year 2014.

Note 7Income Taxes

The provision for income taxes for the years ended September 30, 2009, 2008 and 2007 was comprised of the following (in thousands):



|        |  |         |       |          |   |      |       |  |   |      
|------- |  | ------- | ----- | -------- | - | ---- | ----- |  | - | -----
|        |  | Current |       | Deferred |   |      | Total
|2009:   |  |         |       |          |   |      |       |  |   |      
|Federal |  | $       |      |          | $ |     |       |  | $ |     
|State   |  |         | 42    |          |   |     |       |  |   | 42   
|Foreign |  |         | 1,198 |          |   | (14  | )     |  |   | 1,184
|        |  |         |       |          |   |      |       |  |   |      
|Total   |  | $       | 1,240 |          | $ | (14  | )     |  | $ | 1,226
|        |  |         |       |          |   |      |       |  |   |      
|2008:   |  |         |       |          |   |      |       |  |   |      
|Federal |  | $       |      |          | $ |     |       |  | $ |     
|State   |  |         | 211   |          |   |     |       |  |   | 211  
|Foreign |  |         | 1,245 |          |   | (713 | )     |  |   | 532  
|        |  |         |       |          |   |      |       |  |   |      
|Total   |  | $       | 1,456 |          | $ | (713 | )     |  | $ | 743  
|        |  |         |       |          |   |      |       |  |   |      
|2007:   |  |         |       |          |   |      |       |  |   |      
|Federal |  | $       |      |          | $ |     |       |  | $ |     
|State   |  |         |      |          |   |     |       |  |   |     
|Foreign |  |         | 1,937 |          |   |     |       |  |   | 1,937
|        |  |         |       |          |   |      |       |  |   |      
|Total   |  | $       | 1,937 |          | $ |     |       |  | $ | 1,937
|        |  |         |       |          |   |      |       |  |   |      

The Companys income (loss) before income taxes for the years ended
September 30, 2009, 2008 and 2007 consisted of the following components (in thousands):



|                                            |  |      |       |      |   |         |      |  |   |         |  
|------------------------------------------- |  | ---- | ----- | ---- | - | ------- | ---- |  | - | ------- | -
|                                            |  | 2009 |       | 2008 |   |         | 2007 | 
|Domestic                                    |  | $    | 6,818 |      | $ | (45,932 | )    |  | $ | (16,021 | )
|Foreign                                     |  |      | 2,601 |      |   | 5,613   |      |  |   | 2,981   |  
|                                            |  |      |       |      |   |         |      |  |   |         |  
|Total net income (loss) before income taxes |  | $    | 9,419 |      | $ | (40,319 | )    |  | $ | (13,040 | )
|                                            |  |      |       |      |   |         |      |  |   |         |  

The reconciliation between the amount computed by applying the U.S. federal statutory
tax rate of 35% to the net income (loss) before income taxes and actual income tax expense for the years ended September 30, 2009, 2008 and 2007 is as follows (in thousands):



|                                                       |  |      |        |   |      |   |         |      |  |   |        |  
|------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                       |  | 2009 |        |   | 2008 |   |         | 2007 | 
|Computed tax benefit                                   |  | $    | 3,297  |   |      | $ | (14,112 | )    |  | $ | (4,564 | )
|State taxes, net of federal benefit                    |  |      | 427    |   |      |   | (2,362  | )    |  |   | (801   | )
|Nondeductible expenses and other permanent differences |  |      | 805    |   |      |   | 1,816   |      |  |   | 487    |  
|Foreign taxes                                          |  |      | 274    |   |      |   | (1,433  | )    |  |   | 659    |  
|Provision to return adjustments                        |  |      | 4,337  |   |      |   |        |      |  |   | (6,462 | )
|Other                                                  |  |      | 161    |   |      |   | 199     |      |  |   | 124    |  
|Change in valuation allowance                          |  |      | (8,075 | ) |      |   | 16,635  |      |  |   | 12,494 |  
|                                                       |  |      |        |   |      |   |         |      |  |   |        |  
|Total                                                  |  | $    | 1,226  |   |      | $ | 743     |      |  | $ | 1,937  |  
|                                                       |  |      |        |   |      |   |         |      |  |   |        |  



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The tax effects of temporary differences that give rise to significant portions of net
deferred tax assets as of September 30, 2009 and 2008 are as follows (in thousands):



|                                                |  |      |          |   |      |   |          |  
|----------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                |  | 2009 |          |   | 2008 |  
|Deferred Tax Assets                             |  |      |          |   |      |   |          |  
|Accruals and allowances                         |  | $    | 69,375   |   |      | $ | 78,274   |  
|Capitalized research and experimentation costs  |  |      | 92,269   |   |      |   | 102,097  |  
|Depreciation and amortization                   |  |      | 98,015   |   |      |   | 111,656  |  
|Credit carryforwards                            |  |      | 65,259   |   |      |   | 65,134   |  
|Net operating loss and other carryforwards      |  |      | 573,460  |   |      |   | 551,823  |  
|                                                |  |      |          |   |      |   |          |  
|Deferred tax assets                             |  |      | 898,378  |   |      |   | 908,984  |  
|Valuation allowance                             |  |      | (890,643 | ) |      |   | (898,718 | )
|                                                |  |      |          |   |      |   |          |  
|Deferred tax assets, net of valuation allowance |  |      | 7,735    |   |      |   | 10,266   |  
|Deferred Tax Liabilities                        |  |      |          |   |      |   |          |  
|Acquired intangibles                            |  |      | (7,008   | ) |      |   | (9,553   | )
|                                                |  |      |          |   |      |   |          |  
|Net deferred tax assets                         |  | $    | 727      |   |      | $ | 713      |  
|                                                |  |      |          |   |      |   |          |  
|Recorded As:                                    |  |      |          |   |      |   |          |  
|Current deferred tax asset                      |  | $    | 39,200   |   |      | $ | 40,569   |  
|Valuation allowance                             |  |      | (38,692  | ) |      |   | (40,085  | )
|                                                |  |      |          |   |      |   |          |  
|Net current deferred tax asset                  |  |      | 508      |   |      |   | 484      |  
|                                                |  |      |          |   |      |   |          |  
|Non-current deferred tax asset                  |  |      | 859,180  |   |      |   | 868,415  |  
|Valuation allowance                             |  |      | (851,953 | ) |      |   | (858,633 | )
|                                                |  |      |          |   |      |   |          |  
|Net non-current deferred tax asset              |  |      | 7,227    |   |      |   | 9,782    |  
|Current deferred tax liability                  |  |      |         |   |      |   |         |  
|Non-current deferred tax liability              |  |      | (7,008   | ) |      |   | (9,553   | )
|                                                |  |      |          |   |      |   |          |  
|Net deferred tax assets                         |  | $    | 727      |   |      | $ | 713      |  
|                                                |  |      |          |   |      |   |          |  

The Company has provided a valuation allowance due to the uncertainty of generating
future profits that would allow for the realization of such deferred tax assets. The net decrease in the total valuation allowance for the year ended September 30, 2009 was $8.1 million. The net increase in the total valuation allowance for the
year ended September 30, 2008 was $1.7 million. Utilization of the Companys net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations imposed by Internal
Revenue Code Sections 382 and 383 and similar state provisions. Such an annual limitation could result in the expiration of the Companys federal and state net operating loss and tax credit carryforwards before utilization.

As of September 30, 2009, the Company had net operating loss carryforwards for federal, state and foreign tax purposes of approximately
$1.5 billion, $788.0 million and $4.9 million, respectively, before consideration of any annual limitation as described above. These federal, state and foreign net operating loss carryforwards expire in various years from fiscal year 2010 through
fiscal year 2029, from fiscal year 2010 through fiscal year 2029 and from fiscal year 2010 through fiscal year 2014, respectively. As of September 30, 2009, the Company had research credit carryforwards for federal and state tax purposes of
approximately $39.0 million and $25.0 million, respectively. If not utilized, the federal research credit carryforwards will expire in various years from fiscal year 2010 through fiscal year 2024. The state research credit carryforwards will
continue indefinitely, except for approximately $44,000 which will expire in fiscal year 2019. The Company also had manufacturers credit carryforwards as of September 30, 2009 for state tax purposes of approximately $1.1 million, which
will expire in various years from fiscal year 2010 through fiscal year 2012. The Companys net operating loss and tax credit carryforwards include net operating loss and research credit carryforwards of approximately $270.2 million and $4.9
million, respectively, generated by FreeMarkets, which are subject to annual limitations which could reduce or defer the utilization of those losses and credits.



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The undistributed earnings of the foreign subsidiaries are approximately $22.3 million as of
September 30, 2009. The Company has decided to permanently reinvest those earnings and accordingly has not provided for any taxes thereon.

On October 1, 2007, the Company adopted changes issued by the FASB to accounting for income taxes. These changes contain a two-step approach to recognizing and measuring uncertain tax positions. The
first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position
will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon effective settlement.

The adoption of these changes resulted in an increase to the Companys retained deficit of $1.0 million. The Company
also reclassified approximately $6.0 million of uncertain tax liabilities to long-term as of October 1, 2007.

The
aggregate changes in the balances of the Companys gross unrecognized tax benefits were as follows (in thousands):



|                                                                                   |  |                              |       |   |                              |   |       |  
|---------------------------------------------------------------------------------- |  | ---------------------------- | ----- | - | ---------------------------- | - | ----- | -
|                                                                                   |  | Year EndedSeptember 30, 2009 |       |   | Year EndedSeptember 30, 2008 |  
|Gross unrecognized tax benefits as of October 1                                    |  | $                            | 4,475 |   |                              | $ | 4,442 |  
|Increases related to tax positions from prior fiscal years, including acquisitions |  |                              |      |   |                              |   |      |  
|Decreases related to tax positions from prior fiscal years                         |  |                              |      |   |                              |   |      |  
|Increases related to tax positions taken during the fiscal year                    |  |                              | 215   |   |                              |   | 122   |  
|Lapses of statutes of limitations                                                  |  |                              | (384  | ) |                              |   | (267  | )
|Changes in unrecognized tax benefits due to foreign currency translation           |  |                              | 412   |   |                              |   | 178   |  
|                                                                                   |  |                              |       |   |                              |   |       |  
|Total gross unrecognized tax benefits as of September 30                           |  | $                            | 4,718 |   |                              | $ | 4,475 |  
|                                                                                   |  |                              |       |   |                              |   |       |  

The Company does not anticipate any significant changes to the unrecognized tax
benefits in the next twelve months.

As of September 30, 2009, approximately $4.7 million of unrecognized benefits
would affect the Companys effective tax rate if realized. The Company released interest and penalties related to lapses of statute of limitations of uncertain tax positions in the Companys provision for income taxes line of the
Companys consolidated statements of operations of $69,000 during fiscal year 2009. The gross amount of interest and penalties accrued as of September 30, 2009 was $1.6 million.

The Company has numerous tax audits in progress globally which could affect its unrecognized tax benefits. At this time, the Company cannot
reasonably predict the outcomes of those audits or the impacts on its unrecognized tax benefits. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to the Companys tax audits. However, there
can be no assurances as to the possible outcomes. The Companys U.S. federal income tax return is open to examination for the fiscal year ended September 30, 2006 and forward. Globally, the Companys income tax returns are open
to examination among various jurisdictions ranging from fiscal year ended September 30, 2003 forward.



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Note 8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 150,000 square feet in this facility. The Company currently subleases two buildings, totaling 396,000 square feet, to third parties. These subleases expire in
January 2013. The remaining 170,000 square feet is available for sublease. Minimum monthly lease payments are approximately $3.3 million and escalate annually, with the total future minimum lease payments amounting to $145.4 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 $28.8 million as of September 30, 2009, as a form of security through fiscal year 2013. Also,
the Company is required by other lease agreements to hold an additional $401,000 of standby letters of credit, which are cash collateralized. These instruments are issued by its banks in lieu of a cash security deposit required by landlords for
domestic and international real estate leases. The total cash collateral of $29.2 million is classified as restricted cash on the Companys consolidated balance sheet as of September 30, 2009.

The Company also occupies 91,000 square feet of office space in Pittsburgh, Pennsylvania under a lease that expires in December 2017. This
location consists principally of the Companys services organization and administrative activities.

The Company occupy
approximately 26,000 square feet of office space in Atlanta, Georgia under a lease that expires in June, 2013. Operations at this location consist principally of our sales and support activities.

The Company leases certain equipment, software and its facilities under various noncancelable operating and immaterial capital leases with
various expiration dates through 2017. Gross operating rental expense was approximately $24.2 million, $24.8 million and $30.9 million for the years ended September 30, 2009, 2008 and 2007, respectively. Gross operating rental expense was
reduced by sublease income of $10.5 million, $8.7 million and $14.4 million for the years ended September 30, 2009, 2008 and 2007, respectively.

Future minimum lease payments and sublease income under noncancelable operating leases for the next five years and thereafter are as follows as of September 30, 2009 (in thousands):



|                          |  |               |         |                           |   |       
|------------------------- |  | ------------- | ------- | ------------------------- | - | ------
|Year Ending September 30, |  | LeasePayments |         | ContractualSubleaseIncome
|2010                      |  | $             | 48,209  |                           | $ | 12,389
|2011                      |  |               | 48,456  |                           |   | 13,078
|2012                      |  |               | 50,362  |                           |   | 13,775
|2013                      |  |               | 19,681  |                           |   | 4,489 
|2014                      |  |               | 3,198   |                           |   |      
|Thereafter                |  |               | 7,484   |                           |   |      
|                          |  |               |         |                           |   |       
|Total                     |  | $             | 177,390 |                           | $ | 43,731
|                          |  |               |         |                           |   |       

Of the total operating lease commitments as of September 30, 2009 noted above,
$59.8 million is for occupied properties and $117.6 million is for abandoned properties, which are a component of the restructuring obligation.

Restructuring and integration costs

The Company recorded a charge
(benefit) to operations for restructuring and integration costs of $10.8 million, $10.1 million and $(4.2) million for the years ended September 30, 2009, 2008 and 2007, respectively. See disclosure below for a detailed discussion of these
amounts.



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The following table details accrued restructuring and integration obligations and related
activity for the three years ended September 30, 2009 (in thousands):



|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|---------------------------------------------------------- |  | -------------------- | ------ | - | --------------------- | - | ------- | -------------------- |  | - | ------------------------------------- | - |  | - | ------- | -
|                                                           |  | Severanceandbenefits |        |   | Leaseabandonmentcosts |   |         | Leaseholdimpairments |  |   | Totalrestructuringandintegrationcosts |  
|Accrued restructuring obligations as of October 1, 2007    |  | $                    |       |   |                       | $ | 71,171  |                      |  | $ |                                      |   |  | $ | 71,171  |  
|Cash paid                                                  |  |                      | (4,147 | ) |                       |   | (19,445 | )                    |  |   |                                      |   |  |   | (23,592 | )
|Total charge to operating expense                          |  |                      | 2,714  |   |                       |   | 5,933   |                      |  |   | 1,461                                 |   |  |   | 10,108  |  
|Assets impairment applied to asset balances                |  |                      |       |   |                       |   |        |                      |  |   | (1,461                                | ) |  |   | (1,461  | )
|Purchase accounting adjustment                             |  |                      | 2,093  |   |                       |   | 794     |                      |  |   |                                      |   |  |   | 2,887   |  
|Reclassification from deferred rent obligations            |  |                      |       |   |                       |   | 1,933   |                      |  |   |                                      |   |  |   | 1,933   |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Accrued restructuring obligations as of September 30, 2008 |  |                      | 660    |   |                       |   | 60,386  |                      |  |   |                                      |   |  |   | 61,046  |  
|Cash paid                                                  |  |                      | (4,554 | ) |                       |   | (18,179 | )                    |  |   |                                      |   |  |   | (22,733 | )
|Total charge to operating expense                          |  |                      | 3,936  |   |                       |   | 6,813   |                      |  |   | 88                                    |   |  |   | 10,837  |  
|Assets impairment applied to asset balances                |  |                      |       |   |                       |   |        |                      |  |   | (88                                   | ) |  |   | (88     | )
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Accrued restructuring obligations as of September 30, 2009 |  | $                    | 42     |   |                       | $ | 49,020  |                      |  | $ |                                      |   |  |   | 49,062  |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Less: current portion                                      |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   | 17,964  |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Accrued restructuring obligations, less current portion    |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  | $ | 31,098  |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  

Severance and benefits costs

Severance and benefits costs primarily include involuntary termination and health benefits, outplacement costs and payroll taxes for
terminated personnel. The Company recorded a charge of $3.9 million for the year ended September 30, 2009 related to severance benefit costs in connection with workforce reductions in the current economic environment to better align its
expenses with its revenues. The Company recorded a charge of $2.7 million for the year ended September 30, 2008 related to severance benefit costs in connection with a workforce reduction initiative associated with the integration of Procuri,
to better align its expenses with its revenues and to enable the Company to invest in certain growth initiatives. In addition, the Company assumed liabilities related to the severance of former Procuri employees of $2.1 million.

Lease abandonment and leasehold impairment costs

Lease abandonment costs incurred to date relate primarily to the abandonment of leased facilities in Mountain View and Sunnyvale, California and Pittsburgh, Pennsylvania. Total lease abandonment costs
include lease liabilities offset by estimated sublease income, and were based on market trend information analyses. As of September 30, 2009, $49.0 million of lease abandonment costs remain accrued and are expected to be paid by fiscal year
2013. In the year ended September 30, 2009, the Company revised its estimates for sublease commencement dates and sublease rental rate projections to reflect continued soft market conditions in the Northern California real estate market,
resulting in a charge of $6.8 million.

In the year ended September 30, 2008, the Company evaluated its office space in
Sunnyvale, California, and ceased use of approximately 54,000 square feet of space in its corporate headquarters. The Company recorded lease abandonment costs of $7.1 million and leasehold impairments of $1.5 million.

In June 2008, the Company entered into an agreement to sublease approximately 44,000 square feet of space at the Companys Sunnyvale,
California headquarters through January 2013. The impact of the execution of the sublease agreement with Efficient Frontier was a benefit to operations of approximately $549,000 in the year ended September 30, 2008.



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Also, in June 2008, based on a revised property tax assessment and notice of refund received
from the County of Santa Clara in California related to fiscal years 2003 through 2006, the Company recorded a benefit to the Consolidated Statement of Operations of approximately $1.3 million. Of the total adjustment, $557,000 related to abandoned
space and was recorded as a benefit to operations.

In March 2008, the Company entered into an amendment with Motorola, Inc.
(Motorola) to the sublease dated as of August 24, 2004 between the Company and Motorola. Pursuant to the amendment, Motorola agreed to renew its sublease of approximately 88,000 square feet of space at the Companys Sunnyvale,
California headquarters through January 2013. Also in March 2008, the Company revised its estimates for sublease 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 Motorola was a benefit to operations of approximately $1.7 million and the impact of the revised estimated sublease commencement dates was a charge to operations of $1.7 million, resulting in
a net benefit to operations of $18,000 in the year ended September 30, 2008.

Also during the year ended
September 30, 2008, in conjunction with the acquisition of Procuri, the Company recorded an adjustment of $794,000 to the restructuring obligation.This restructuring cost was considered part of the preliminary purchase accounting for
Procuri.

The Companys lease abandonment accrual is net of $54.6 million of estimated sublease income. Actual sublease
payments due under noncancelable subleases of excess facilities totaled $43.7 million as of September 30, 2009, 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 September 30, 2009, 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 $1.2 million as of September 30, 2009.

Other arrangements

Other than the obligations identified above, the Company does not have commercial commitments under lines of credit, 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
September 30, 2009.

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), certain of the two companies former officers and directors, and the underwriters who handled the IPOs. These consolidated complaints were then further consolidated, along with similar complaints filed
against over 300 other issuers in connection with their initial public offerings, before a single judge for case management purposes. After many years of litigation and appeals related to the sufficiency of the pleadings and class
certification, the parties have agreed to a settlement of the entire litigation, which was approved by the Court on October 5, 2009. Under the settlement, neither the Company nor FreeMarkets will be required to make any payment. Notices of
appeals have been filed by various objectors of the Courts order. As of September 30, 2009, no amount is accrued as a loss is not considered probable or estimable.



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General

Defending against various 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, be subject to an injunction that could seriously harm its
business and results of operations.

During the year ended September 30, 2009, the Company recorded $7.5 million of
income related to an insurance reimbursement for previously unreimbursed litigation costs.

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.

As of September 30, 2009, 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.

Note 9Segment Information

The Company has three geographic operating segments: North America, EMEA and APAC. The segments are determined in accordance with how management views and evaluates the Companys business and based on the aggregation criteria. 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 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 in order to realize economies of scale and to use resources efficiently. These expenses include information technology services, facilities and other infrastructure costs
and are generally allocated based upon headcount.



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Financial information for each reportable segment was as follows for the years ended
September 30, 2009, 2008 and 2007 (in thousands):



|                   |  |                          |         |      |   |         |  |   |        
|------------------ |  | ------------------------ | ------- | ---- | - | ------- |  | - | -------
|                   |  | Year Ended September 30,
|                   |  | 2009                     |         | 2008 |   | 2007   
|Revenue            |  |                          |         |      |   |         |  |   |        
|North America     |  | $                        | 208,325 |      | $ | 193,004 |  | $ | 186,222
|EMEA              |  |                          | 79,569  |      |   | 77,094  |  |   | 63,963 
|APAC              |  |                          | 20,716  |      |   | 25,837  |  |   | 23,527 
|Corporate revenue |  |                          | 30,362  |      |   | 32,125  |  |   | 27,955 
|                   |  |                          |         |      |   |         |  |   |        
|Total revenue      |  | $                        | 338,972 |      | $ | 328,060 |  | $ | 301,667
|                   |  |                          |         |      |   |         |  |   |        

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 and
expense reimbursement.



|                                  |  |                          |         |      |   |         |  |   |       
|--------------------------------- |  | ------------------------ | ------- | ---- | - | ------- |  | - | ------
|                                  |  | Year Ended September 30,
|                                  |  | 2009                     |         | 2008 |   | 2007   
|                                  |  | (in thousands)          
|Contribution margin               |  |                          |         |      |   |         |  |   |       
|North America                    |  | $                        | 100,766 |      | $ | 83,411  |  | $ | 73,559
|EMEA                             |  |                          | 32,500  |      |   | 24,159  |  |   | 16,988
|APAC                             |  |                          | 4,903   |      |   | 3,033   |  |   | 2,612 
|                                  |  |                          |         |      |   |         |  |   |       
|Total segment contribution margin |  | $                        | 138,169 |      | $ | 110,603 |  | $ | 93,159
|                                  |  |                          |         |      |   |         |  |   |       

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, insurance reimbursement, other incomeSoftbank, restructuring and integration costs (benefit), litigation
provision, interest and other income (expense), net and provision for income taxes.

The reconciliation of segment information
to the Companys net income (loss) before income taxes is as follows for the years ended September 30, 2009, 2008 and 2007 (in thousands):



|                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                  |  | Year Ended September 30, |         
|                                                                                                  |  | 2009                     |          |   | 2008 |   |          | 2007 | 
|Segment contribution margin                                                                       |  | $                        | 138,169  |   |      | $ | 110,603  |      |  | $ | 93,159   |  
|Corporate revenue                                                                                 |  |                          | 30,362   |   |      |   | 32,125   |      |  |   | 27,955   |  
|Corporate costs, such as research and development, corporate general and administrative and other |  |                          | (143,442 | ) |      |   | (160,968 | )    |  |   | (151,614 | )
|Amortization of acquired technology and customer intangible assets                                |  |                          | (5,550   | ) |      |   | (14,257  | )    |  |   | (14,074  | )
|Insurance reimbursement                                                                           |  |                          | 7,527    |   |      |   |         |      |  |   |         |  
|Other incomeSoftbank                                                                             |  |                          |         |   |      |   | 566      |      |  |   | 13,564   |  
|Amortization of other intangibles                                                                 |  |                          | (755     | ) |      |   | (739     | )    |  |   | (525     | )
|Restructuring and integration costs (benefit)                                                     |  |                          | (10,837  | ) |      |   | (10,108  | )    |  |   | 4,194    |  
|Litigation provision                                                                              |  |                          |         |   |      |   | (5,900   | )    |  |   |         |  
|Interest and other (expense) income, net                                                          |  |                          | (6,055   | ) |      |   | 8,359    |      |  |   | 14,301   |  
|                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Income (loss) before income taxes                                                                 |  | $                        | 9,419    |   |      | $ | (40,319  | )    |  | $ | (13,040  | )
|                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  



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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):



|                            |  |                          |         |      |   |         |  |   |        
|--------------------------- |  | ------------------------ | ------- | ---- | - | ------- |  | - | -------
|                            |  | Year Ended September 30,
|                            |  | 2009                     |         | 2008 |   | 2007   
|Subscription revenues       |  | $                        | 151,195 |      | $ | 112,287 |  | $ | 67,632 
|Maintenance revenues        |  |                          | 71,011  |      |   | 74,863  |  |   | 74,677 
|Services and other revenues |  |                          | 116,766 |      |   | 140,910 |  |   | 159,358
|                            |  |                          |         |      |   |         |  |   |        
|Total                       |  | $                        | 338,972 |      | $ | 328,060 |  | $ | 301,667
|                            |  |                          |         |      |   |         |  |   |        

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



|                   |  |               |        |      |   |       
|------------------ |  | ------------- | ------ | ---- | - | ------
|                   |  | September 30,
|                   |  | 2009          |        | 2008
|Long-Lived Assets: |  |               |        |      |   |       
|United States      |  | $             | 12,976 |      | $ | 18,042
|International      |  |               | 1,442  |      |   | 1,731 
|                   |  |               |        |      |   |       
|Total              |  | $             | 14,418 |      | $ | 19,773
|                   |  |               |        |      |   |       

Note 10Stockholders Equity

1999 Equity Incentive Plan

The Companys Board of Directors approved the 1999 Equity Incentive Plan (the Incentive Plan) on April 20, 1999. The Incentive Plan was amended on October 4, 2001 and on
March 11, 2009. Any shares not issued under the Companys 1996 Stock Plan (the 1996 Stock Plan) and any shares repurchased pursuant to the 1996 Stock Plan will also be available for grant under the Incentive Plan. The number of
shares reserved under the Incentive Plan automatically increased on January 1 of each year until 2005 by the lesser of 3.3 million shares or 5% of the total number of shares of common stock outstanding on that date and was increased by
5.3 million shares on March 11, 2009. Under the Incentive Plan, eligible employees, outside directors and consultants may be granted stock options, stock appreciation rights, restricted shares or stock units. The exercise price for
incentive stock options and nonstatutory options may not be less than 100% and 85%, respectively, of the fair value of common stock at the option grant date. As of September 30, 2009, 8.7 million shares are available for grant under the
Incentive Plan (including shares transferred from the 1996 Stock Plan since September 22, 1999). As of September 30, 2009, there were 381,000 shares outstanding in connection with options granted under the Incentive Plan, including shares
transferred from the 1996 Stock Plan since September 22, 1999.

Employee Stock Purchase Plan

The Companys Board of Directors adopted the Employee Stock Purchase Plan (the Purchase Plan) on April 20, 1999. The
Purchase Plan was amended on August 1, 2006 and on March 11, 2009. Under the Purchase Plan, eligible employees may purchase common stock in an amount not to exceed 1,000 shares per period. The purchase price per share equals 85% of the
common stocks fair value at the end of the defined purchase period. As of September 30, 2009, there have been 5.5 million shares issued under the Purchase Plan and 1.6 million shares are available for future issuance.

The Company has, in connection with the acquisitions of TradingDynamics, Inc. (TradingDynamics), Tradex, Inc.
(Tradex), SupplierMarket.com, Inc. (SupplierMarket) and FreeMarkets, assumed the stock option plans of each acquired company.



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FreeMarkets Stock Plans

On July 1, 2004, the Company assumed the FreeMarkets, Inc. Second Amended and Restated Stock Incentive Plan and Broad Based Equity
Incentive Plan (the FreeMarkets Plans). The FreeMarkets Plans were not approved by the Companys stockholders. On October 11, 2007, the Compensation Committee of the Board of Directors of the Company amended and restated the
Second Amended and Restated Stock Incentive Plan. This Third Amended and Restated Stock Incentive Plan provides for the grant of stock units representing the equivalent of shares of Aribas common stock, the grant of incentive stock options to
employees at prices not less than 100% of the fair market value of the common stock on the date of grant and for the grant of nonstatutory stock options to employees, consultants, advisers and outside directors at a price determined by the Board of
Directors. The Broad Based Equity Incentive Plan provides for the grant of nonstatutory stock options to employees (other than officers), consultants and advisers at a price determined by the Board of Directors. Options expire not later than ten
years from the date of grant. As of September 30, 2009, there were 122,000 shares outstanding in connection with options granted under the FreeMarkets Plans.

A summary of the activity related to the Companys restricted common stock is presented below for the years ended September 30, 2009:



|                                |  |                 |   |  |                                      |      
|------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                |  | Number ofShares |   |  | Weighted-AverageGrant DateFair Value
|Nonvested at October 1, 2006    |  | 7,543,632       |   |  | $                                    | 7.98 
|Granted                         |  | 2,912,029       |   |  |                                      | 8.60 
|Vested                          |  | (3,316,409      | ) |  |                                      | 8.03 
|Forfeited                       |  | (742,672        | ) |  |                                      | 7.23 
|                                |  |                 |   |  |                                      |      
|Nonvested at September 30, 2007 |  | 6,396,580       |   |  | $                                    | 8.33 
|Granted                         |  | 4,761,116       |   |  |                                      | 11.70
|Vested                          |  | (3,541,293      | ) |  |                                      | 8.10 
|Forfeited                       |  | (981,910        | ) |  |                                      | 10.67
|                                |  |                 |   |  |                                      |      
|Nonvested at September 30, 2008 |  | 6,634,493       |   |  | $                                    | 10.47
|Granted                         |  | 2,387,997       |   |  |                                      | 9.18 
|Vested                          |  | (3,452,430      | ) |  |                                      | 10.41
|Forfeited                       |  | (324,472        | ) |  |                                      | 10.65
|                                |  |                 |   |  |                                      |      
|Nonvested at September 30, 2009 |  | 5,245,588       |   |  | $                                    | 9.90 
|                                |  |                 |   |  |                                      |      

The fair value of stock awards vested was $29.2 million, $46.0 million and $29.8
million for the years ended September 30, 2009, 2008 and 2007, respectively.



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A summary of the activity related to the Companys stock options is presented below for
the years ended September 30, 2009:



|                                  |  |                  |   |  |                               |      
|--------------------------------- |  | ---------------- | - |  | ----------------------------- | -----
|                                  |  | Number ofOptions |   |  | Weighted-AverageExercisePrice
|Outstanding at October 1, 2006    |  | 1,946,852        |   |  | $                             | 11.95
|Exercised                         |  | (506,201         | ) |  |                               | 5.48 
|Forfeited                         |  | (167,366         | ) |  |                               | 25.38
|                                  |  |                  |   |  |                               |      
|Outstanding at September 30, 2007 |  | 1,273,285        |   |  | $                             | 12.76
|Exercised                         |  | (386,343         | ) |  |                               | 5.85 
|Forfeited                         |  | (71,991          | ) |  |                               | 23.96
|                                  |  |                  |   |  |                               |      
|Outstanding at September 30, 2008 |  | 814,951          |   |  | $                             | 15.00
|Exercised                         |  | (172,396         | ) |  |                               | 5.36 
|Forfeited                         |  | (58,900          | ) |  |                               | 23.32
|                                  |  |                  |   |  |                               |      
|Outstanding at September 30, 2009 |  | 583,655          |   |  | $                             | 16.95
|                                  |  |                  |   |  |                               |      
|Exercisable at September 30, 2009 |  | 583,655          |   |  | $                             | 16.95
|                                  |  |                  |   |  |                               |      

The aggregate intrinsic value of options outstanding and exercisable as of
September 30, 2009 was $964,000. 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 fourth quarter of fiscal 2009 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 September 30, 2009. This amount changes based on the fair market value of
the Companys stock. Total intrinsic value of options exercised for the years ended September 30, 2009, 2008 and 2007 was $532,000, $2.8 million and $1.8 million, respectively.

The following table summarizes information about stock options outstanding as of September 30, 2009:



|                         |  |                                     |  |                                                  |  |                               |      
|------------------------ |  | ----------------------------------- |  | ------------------------------------------------ |  | ----------------------------- | -----
|                         |  | Options Outstanding and Exercisable
|Range of Exercise Prices |  | Number ofOptions                    |  | Weighted-AverageRemainingContractualLife (years) |  | Weighted-AverageExercisePrice
|$  0.01$    7.37        |  | 113,200                             |  | 5.74                                             |  | $                             | 4.70 
|$  7.39$  11.87         |  | 113,412                             |  | 4.50                                             |  | $                             | 9.50 
|$11.96$  12.06          |  | 164,102                             |  | 4.31                                             |  | $                             | 12.00
|$12.07$  16.58          |  | 92,685                              |  | 4.36                                             |  | $                             | 12.27
|$16.62$733.50           |  | 100,256                             |  | 2.75                                             |  | $                             | 53.82
|                         |  |                                     |  |                                                  |  |                               |      
|$  0.01$733.50          |  | 583,655                             |  | 4.36                                             |  | $                             | 16.95
|                         |  |                                     |  |                                                  |  |                               |      

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of September 30, 2009 and 2008 are as follows (in thousands):



|                                         |  |                   |        |   |                   |   |        |  
|---------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                         |  | September 30,2009 |        |   | September 30,2008 |  
|Foreign currency translation adjustments |  | $                 | 436    |   |                   | $ | 421    |  
|Unrealized loss on securities, net       |  |                   | (4,124 | ) |                   |   | (3,515 | )
|                                         |  |                   |        |   |                   |   |        |  
|Accumulated other comprehensive loss     |  | $                 | (3,688 | ) |                   | $ | (3,094 | )
|                                         |  |                   |        |   |                   |   |        |  



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In January 2005, the Company hedged anticipated cash flows from 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 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 previously reported in stockholders equity. In the year ended September 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 year ended September 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 11Net Income (Loss) Per Share

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



|                                                           |  |                          |        |      |   |         |      |  |   |         |  
|---------------------------------------------------------- |  | ------------------------ | ------ | ---- | - | ------- | ---- |  | - | ------- | -
|                                                           |  | Year Ended September 30, |       
|                                                           |  | 2009                     |        | 2008 |   |         | 2007 | 
|Net income (loss)                                          |  | $                        | 8,193  |      | $ | (41,062 | )    |  | $ | (14,977 | )
|                                                           |  |                          |        |      |   |         |      |  |   |         |  
|Weighted-average common sharesbasic                       |  |                          | 82,733 |      |   | 77,318  |      |  |   | 70,106  |  
|Less: Weighted-average common shares subject to repurchase |  |                          | 2,691  |      |   |        |      |  |   |        |  
|                                                           |  |                          |        |      |   |         |      |  |   |         |  
|Weighted-average common sharesdiluted                     |  |                          | 85,424 |      |   | 77,318  |      |  |   | 70,106  |  
|                                                           |  |                          |        |      |   |         |      |  |   |         |  
|Net income (loss) per common sharebasic                   |  | $                        | 0.10   |      | $ | (0.53   | )    |  | $ | (0.21   | )
|                                                           |  |                          |        |      |   |         |      |  |   |         |  
|Net income (loss) per common sharediluted                 |  | $                        | 0.10   |      | $ | (0.53   | )    |  | $ | (0.21   | )
|                                                           |  |                          |        |      |   |         |      |  |   |         |  

Diluted income per share is computed by dividing income by the weighted-average
number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive
securities include outstanding options, shares to be purchased under the employee stock purchase plan and unvested restricted common stock. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by
application of the treasury share method. For the years ended September 30, 2008 and 2007, the Company excluded approximately 4.9 million and 4.6 million of potential common shares, respectively, issuable upon exercise of
outstanding stock options and upon vesting of outstanding restricted common stock because they had an antidilutive effect due to net losses recorded in each of those periods.

The Company has concluded that the unvested restricted common stock subject to performance milestones will only be included in basic
earnings per share when the underlying shares are issuable to the respective employees. However, if all necessary conditions have not been satisfied by the end of the reporting period, the number of the unvested restricted common stock included in
diluted earnings per share shall be based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period and if the result would be dilutive.

Note 12401(k) Savings Plan

Company employees in the United States can participate in the 401(k) Plan. Participants can generally contribute up to 100% of their eligible compensation annually as defined by the plan document, subject to the section 402(g) limit as
defined by the IRS. The Company made a discretionary contribution in the form of common stock with a value of $3.4 million, $2.7 million and $2.5 million in the years ended September 30, 2009, 2008 and 2007, respectively.



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Note 13Other IncomeSoftbank

In September 2003, the Company commenced an arbitration proceeding against Softbank, Inc. (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 had been
recognized ratably as Other incomeSoftbank over the three-year software license term ended in October 2007. The Company recorded other income of $566,000 and $13.6 million in the years ended September 30, 2008 and 2007,
respectively.

Note 14Selected Quarterly Financial Data (unaudited)



|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|----------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------ | -
|                                                                              |  | Fiscal Year 2009For the Quarter Ended    |       
|                                                                              |  | Sept. 30,2009                            |        |   | June 30,2009 |   |        | March 31,2009 |  |   | Dec. 31,2008 |  
|                                                                              |  | (In thousands, except per share amounts) |       
|Revenues:                                                                     |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Subscription and maintenance                                                  |  | $                                        | 57,858 |   |              | $ | 55,411 |               |  | $ | 54,856       |   |  | $ | 54,081 |  
|Services and other                                                            |  |                                          | 26,460 |   |              |   | 28,463 |               |  |   | 29,837       |   |  |   | 32,006 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Total revenues                                                                |  |                                          | 84,318 |   |              |   | 83,874 |               |  |   | 84,693       |   |  |   | 86,087 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Cost of revenues:                                                             |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Subscription and maintenance                                                  |  |                                          | 12,269 |   |              |   | 12,158 |               |  |   | 11,832       |   |  |   | 11,648 |  
|Services and other                                                            |  |                                          | 18,592 |   |              |   | 18,551 |               |  |   | 18,524       |   |  |   | 19,798 |  
|Amortization of acquired technology and customer intangible assets            |  |                                          | 1,387  |   |              |   | 1,388  |               |  |   | 1,387        |   |  |   | 1,388  |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Total cost of revenues                                                        |  |                                          | 32,248 |   |              |   | 32,097 |               |  |   | 31,743       |   |  |   | 32,834 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Gross profit                                                                  |  |                                          | 52,070 |   |              |   | 51,777 |               |  |   | 52,950       |   |  |   | 53,253 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Operating expenses:                                                           |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Sales and marketing                                                           |  |                                          | 24,720 |   |              |   | 25,515 |               |  |   | 25,927       |   |  |   | 27,577 |  
|Research and development                                                      |  |                                          | 11,341 |   |              |   | 10,787 |               |  |   | 10,451       |   |  |   | 10,904 |  
|General and administrative                                                    |  |                                          | 10,173 |   |              |   | 9,301  |               |  |   | 12,212       |   |  |   | 11,603 |  
|Insurance reimbursement                                                       |  |                                          |       |   |              |   |       |               |  |   |             |   |  |   | (7,527 | )
|Amortization of other intangible assets                                       |  |                                          | 125    |   |              |   | 210    |               |  |   | 210          |   |  |   | 210    |  
|Restructuring and integration costs                                           |  |                                          |       |   |              |   | 1,438  |               |  |   | 7,698        |   |  |   | 1,701  |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Total operating expenses                                                      |  |                                          | 46,359 |   |              |   | 47,251 |               |  |   | 56,498       |   |  |   | 44,468 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Income (loss) from operations                                                 |  |                                          | 5,711  |   |              |   | 4,526  |               |  |   | (3,548       | ) |  |   | 8,785  |  
|Interest and other expense, net                                               |  |                                          | (35    | ) |              |   | (265   | )             |  |   | (739         | ) |  |   | (5,016 | )
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net income (loss) before income taxes                                         |  |                                          | 5,676  |   |              |   | 4,261  |               |  |   | (4,287       | ) |  |   | 3,769  |  
|Provision for income taxes                                                    |  |                                          | 68     |   |              |   | 367    |               |  |   | 449          |   |  |   | 342    |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net income (loss)                                                             |  | $                                        | 5,608  |   |              | $ | 3,894  |               |  | $ | (4,736       | ) |  | $ | 3,427  |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net income (loss) per sharebasic                                             |  | $                                        | 0.07   |   |              | $ | 0.05   |               |  | $ | (0.06        | ) |  | $ | 0.04   |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net income (loss) per sharediluted                                           |  | $                                        | 0.06   |   |              | $ | 0.05   |               |  | $ | (0.06        | ) |  | $ | 0.04   |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Weighted average shares used in computing net income (loss) per sharebasic   |  |                                          | 84,124 |   |              |   | 83,444 |               |  |   | 82,416       |   |  |   | 80,947 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Weighted average shares used in computing net income (loss) per sharediluted |  |                                          | 87,561 |   |              |   | 85,447 |               |  |   | 82,416       |   |  |   | 84,044 |  
|                                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  



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|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ---------------------------------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                               |  | Fiscal Year 2008For the Quarter Ended    |       
|                                                                               |  | Sept. 30,2008                            |        |   | June 30,2008 |   |        | March 31,2008 |  |   | Dec. 31,2007 |  
|                                                                               |  | (In thousands, except per share amounts) |       
|Revenues:                                                                      |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Subscription and maintenance                                                   |  | $                                        | 51,048 |   |              | $ | 49,278 |               |  | $ | 46,798       |   |  | $ | 40,026  |  
|Services and other                                                             |  |                                          | 34,484 |   |              |   | 35,738 |               |  |   | 33,740       |   |  |   | 36,948  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Total revenues                                                                 |  |                                          | 85,532 |   |              |   | 85,016 |               |  |   | 80,538       |   |  |   | 76,974  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Cost of revenues:                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Subscription and maintenance                                                   |  |                                          | 10,665 |   |              |   | 10,101 |               |  |   | 10,454       |   |  |   | 8,868   |  
|Services and other                                                             |  |                                          | 21,865 |   |              |   | 23,689 |               |  |   | 24,029       |   |  |   | 24,606  |  
|Amortization of acquired technology and customer intangible assets             |  |                                          | 1,388  |   |              |   | 4,675  |               |  |   | 4,685        |   |  |   | 3,509   |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Total cost of revenues                                                         |  |                                          | 33,918 |   |              |   | 38,465 |               |  |   | 39,168       |   |  |   | 36,983  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Gross profit                                                                   |  |                                          | 51,614 |   |              |   | 46,551 |               |  |   | 41,370       |   |  |   | 39,991  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Operating expenses:                                                            |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Sales and marketing                                                            |  |                                          | 27,608 |   |              |   | 28,682 |               |  |   | 29,432       |   |  |   | 25,112  |  
|Research and development                                                       |  |                                          | 11,392 |   |              |   | 13,617 |               |  |   | 13,944       |   |  |   | 13,317  |  
|General and administrative                                                     |  |                                          | 11,909 |   |              |   | 11,702 |               |  |   | 11,806       |   |  |   | 13,502  |  
|Other incomeSoftbank                                                          |  |                                          |       |   |              |   |       |               |  |   |             |   |  |   | (566    | )
|Amortization of other intangible assets                                        |  |                                          | 210    |   |              |   | 210    |               |  |   | 210          |   |  |   | 109     |  
|Restructuring and integration costs (benefit)                                  |  |                                          | 6,274  |   |              |   | (694   | )             |  |   | 690          |   |  |   | 3,838   |  
|Litigation provision                                                           |  |                                          |       |   |              |   |       |               |  |   |             |   |  |   | 5,900   |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Total operating expenses                                                       |  |                                          | 57,393 |   |              |   | 53,517 |               |  |   | 56,082       |   |  |   | 61,212  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Loss from operations                                                           |  |                                          | (5,779 | ) |              |   | (6,966 | )             |  |   | (14,712      | ) |  |   | (21,221 | )
|Interest and other (expense) income, net                                       |  |                                          | (201   | ) |              |   | 2,353  |               |  |   | 2,863        |   |  |   | 3,344   |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Net loss before income taxes                                                   |  |                                          | (5,980 | ) |              |   | (4,613 | )             |  |   | (11,849      | ) |  |   | (17,877 | )
|Provision for (benefit from) income taxes                                      |  |                                          | 77     |   |              |   | (326   | )             |  |   | 549          |   |  |   | 443     |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Net loss                                                                       |  | $                                        | (6,057 | ) |              | $ | (4,287 | )             |  | $ | (12,398      | ) |  | $ | (18,320 | )
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Net loss per sharebasic and diluted                                           |  | $                                        | (0.08  | ) |              | $ | (0.05  | )             |  | $ | (0.16        | ) |  | $ | (0.25   | )
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|Weighted average shares used in computing net loss per sharebasic and diluted |  |                                          | 79,835 |   |              |   | 78,585 |               |  |   | 77,648       |   |  |   | 73,204  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  



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|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

Not applicable.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, we carried out
an evaluation under the supervision and with the participation of our Disclosure Committee and our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures are procedures that are designed to ensure that information required to be
disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls and procedures are also designed to ensure that such
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of them and
their effect on the information generated for use in this Form 10-K. In the course of the controls evaluation, we reviewed any data errors or control problems that we had identified and sought to confirm that appropriate corrective actions,
including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including our Chief Executive Officer and Chief Financial Officer, concerning the effectiveness
of the disclosure controls can be reported in our periodic reports on Form 10-K and Form 10-Q. Many of the components of our disclosure controls and procedures are also evaluated on an ongoing basis by both our internal audit and finance
organizations. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and to modify them as necessary. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Managements
Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2009 based on the guidelines established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Our internal control over financial reporting includes policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes in accordance with United States generally accepted accounting principles.

Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of September 30, 2009. We have reviewed the results of managements assessment with our Audit
Committee. Ernst & Young LLP, an independent registered public accounting firm, has issued their report, included on page 76 of this Form 10-K, regarding the Companys internal controls over financial reporting.



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Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal control over financial reporting during the most recently completed fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

Management Certifications

The certifications of our Chief Executive Officer and Chief Financial Officer
required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this Annual Report on Form 10-K. The disclosures set forth in this Item 9A contain information concerning (i) the evaluation of our
disclosure controls and procedures referred to in paragraph 4 of the certifications, and (ii) material weaknesses in the design or operation of our internal control over financial reporting referred to in paragraph 5 of the certifications.
Those certifications should be read in conjunction with this Item 9A for a more complete understanding of the matters covered by the certifications.

Inherent Limitations on Effectiveness of Controls

Our management,
including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors 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 a 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 a 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 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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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Ariba, Inc.

We have audited Ariba Inc.s internal control over financial reporting as of September 30,
2009 based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Ariba, Inc.s management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed 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. A companys internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, Ariba, Inc. maintained, in all material respects, effective
internal control over financial reporting as of September 30, 2009, based on the COSO criteria.

We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ariba, Inc. and subsidiaries at September 30, 2009 and 2008 and the related consolidated statements of operations
and comprehensive income (loss), stockholders equity, and cash flows for each of the three years in the period ended September 30, 2009 and our report dated November 25, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

November 25, 2009



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|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Not
applicable.



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information concerning our executive officers required by this Item is incorporated by reference herein to the section entitled Executive Officers of the Registrant in Part I, Item 1
of this Form 10-K. The information concerning our directors, compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, code of ethics and corporate governance required by this Item are incorporated herein by reference to
information contained in sections of the Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2009 (the 2010 Proxy Statement)
entitled Proposal No. 1Election of Directors, Corporate Governance and Section 16(a) Beneficial Ownership Reporting Compliance.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

See the information set forth in the section entitled Executive Compensation and Related Information in the 2010 Proxy Statement, which is incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

See the information set forth in Part I, Item 5 of this Form 10-K and the section entitled Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters in the 2010 Proxy Statement, which is incorporated herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

See the information set forth in the section entitled Related Person Disclosure and Corporate Governance in the 2010
Proxy Statement, which is incorporated herein by reference.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

See the information set forth in the section entitled Ratification of Appointment of Independent Registered Public Accounting Firm in the 2010 Proxy Statement, which is incorporated herein by
reference.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



|(a) | 1.    FINANCIAL STATEMENTS
|--- | --------------------------

See Item 8 of this Form 10-K.



| | 2.    FINANCIAL STATEMENT SCHEDULES
| | -----------------------------------

Schedules have been omitted since they are either not required, not applicable, or the information has otherwise been included.



| | 3.    EXHIBITS
| | --------------

The exhibits listed below in the accompanying Exhibit Index are filed as part of, or incorporated by reference into, this Form 10-K.



|            |  |                                                                                                                                                                                                                                                                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                        
|2.1         |  | Agreement and Plan of Merger and Reorganization, dated September 20, 2007 by and among the Registrant, Axe Acquisition Corporation, Procuri, Inc. and Insight Venture Partners,
LLC, as Stockholders Representative (which is incorporated herein by reference to Exhibit 2.1 to the Registrants Form 10-K dated November 15, 2007).                                             
|            | 
|2.2         |  | Amendment No. 1 to the Agreement and Plan of Merger and Reorganization, dated September 20, 2007, by and among the Registrant, Axe Acquisition Corporation, Procuri, Inc. and Insight
Venture Partners, LLC, as Stockholders Representative (which is incorporated herein by reference to Exhibit 2.2 to the Registrants Form 10-K/A dated November 26, 2007).                   
|            | 
|2.3         |  | Amendment No. 2 to the Agreement and Plan of Merger and Reorganization, dated September 20, 2007, by and among the Registrant, Axe Acquisition Corporation, Procuri, Inc. and Insight
Venture Partners, LLC, as Stockholders Representative (which is incorporated herein by reference to Exhibit 2.3 of the Registrants Form 10-K for the fiscal year ended September 30, 2008).
|            | 
|3.1         |  | Amended and Restated Certificate of Incorporation of the Registrant including all amendments to date (which is incorporated herein by reference to Exhibit 3.1 to the
Registrants Form 10-K dated December 29, 2000).                                                                                                                                                             
|            | 
|3.2         |  | Amended and Restated Bylaws of the Registrant (which are incorporated herein by reference to Exhibit 3.2 to the Registrants Form 8-K filed on March 16, 2009).                                                                                                                                                                                                                    
|            | 
|4.2         |  | Specimen Certificate of the Registrants common stock (which is incorporated herein by reference to Exhibit 4.2 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                                          
|            | 
|10.1        |  | Form of Indemnification Agreement entered into between the Registrant and its directors and executive officers (which is incorporated herein by reference to Exhibit 10.1 to the
Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                
|            | 
|10.2       |  | 1999 Equity Incentive Plan, as amended and restated effective January 15, 2009 (which is incorporated herein by reference to Appendix A to the Registrants Schedule 14A dated
January 23, 2009).                                                                                                                                                                                  
|            | 
|10.3       |  | Employee Stock Purchase Plan, as amended and restated effective February 1, 2009 (which is incorporated herein by reference to Appendix B to the Registrants Schedule 14A dated
January 23, 2009).                                                                                                                                                                                
|            | 
|10.4       |  | Third Amended and Restated Stock Incentive Plan of FreeMarkets, Inc. (which is incorporated herein by reference to Exhibit 10.10 to the Registrants Form 10-K dated November
15, 2007).                                                                                                                                                                                           



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|            |  |                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                  
|10.5       |  | 2001 Broad Based Equity Incentive Plan of FreeMarkets, Inc. (which is incorporated herein by reference to Exhibit 10.12 to FreeMarkets Form 10-K dated March 14, 2003).                                                                                                                     
|            | 
|10.6        |  | Lease Agreement, dated March 15, 2000, by and between Moffett Park Drive LLC and the Registrant (which is incorporated herein by reference to Exhibit 10.10 to the
Registrants Form 10-Q dated May 15, 2000).                                                                               
|            | 
|10.7        |  | First Amendment to Lease, dated as of January 12, 2001, by and between Moffett Park Drive LLC and the Registrant.                                                                                                                                                                            
|            | 
|10.8        |  | Second Amendment to Lease, dated as of October 31, 2002, by and between Moffett Park Drive LLC and the Registrant.                                                                                                                                                                           
|            | 
|10.9        |  | Third Amendment to Lease, dated as of October 25, 2004, by and between Moffett Park Drive LLC and the Registrant (which is incorporated herein by reference to Exhibit 10.7 to
the Registrants Form 10-Q dated February 9, 2005).                                                           
|            | 
|10.10       |  | Fourth Amendment to Lease, dated as of July 6, 2007, by and between Moffett Park Drive LLC and the Registrant.                                                                                                                                                                               
|            | 
|10.11       |  | Letter, dated as of September 11, 2000, by and between Moffett Park Drive LLC and the Registrant re: Moffett Park Drive LLC/Ariba/Tenant Improvements.                                                                                                                                       
|            | 
|10.12       |  | Lease Agreement, dated October 21, 1998, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to Exhibit
10.3(a) to FreeMarkets Registration Statement on Form S-1 dated September 8, 1999).                           
|            | 
|10.13       |  | First Amendment to Lease, dated March 30, 1999, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to
Exhibit 10.3(b) to FreeMarkets Registration Statement on Form S-1 dated September 8, 1999).                    
|            | 
|10.14       |  | Second Amendment to Lease, dated September 1999, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to Exhibit
10.3(c) to FreeMarkets Amendment No. 1 to Registration Statement on Form S-1 dated November 11, 1999).
|            | 
|10.15       |  | Third Amendment to Lease, dated March 2000, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to Exhibit
10.2(d) to FreeMarkets Form 10-K dated March 14, 2003).                                                    
|            | 
|10.16       |  | Fourth Amendment to Lease, dated July 10, 2002, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership.                                                                                                                                                              
|            | 
|10.17       |  | Fifth Amendment to Lease, dated October 31, 2004, by and between Ariba, Inc. and One Oliver Associates Limited Partnership.                                                                                                                                                                  
|            | 
|10.18       |  | Sixth Amendment to Lease by and between One Oliver Associates L.P. and the Registrant, effective as of January 1, 2007 (which is incorporated herein by reference to Exhibit
10.38 to the Registrants Form 8-K dated February 20, 2007).                                                    
|            | 
|10.19       |  | Sublease, dated October 18, 2002, by and between Netscreen Technologies, Inc. and the Registrant (which is incorporated herein by reference to Exhibit 10.35 to the
Registrants Form 10-Q dated April 10, 2003).                                                                            
|            | 
|10.20       |  | First Amendment to Sublease, dated as of June 15, 2007, by and between Juniper Networks, Inc. and the Registrant (which is incorporated herein by reference to Exhibit 10.45 to
the Registrants Form 10-Q dated August 8, 2007).                                                            
|            | 
|10.21       |  | Letter Agreement, dated April 9, 2008, by and between Juniper Networks, Inc. and the Registrant.                                                                                                                                                                                             
|            | 
|10.22       |  | Letter Agreement, dated November 9, 2007, by and between Juniper Networks, Inc. and the Registrant.                                                                                                                                                                                          



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|            |  |                                                                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                    
|10.23       |  | Consent to Sublease, dated as of October 25, 2004, by and between Moffett Park Drive LLC, Motorola, Inc. and the Registrant (which is incorporated herein by reference to
Exhibit 10.8 to the Registrants Form 10-Q dated February 9, 2005).                                  
|            | 
|10.24       |  | Second Amendment to and Restatement of Sublease, dated as of October 21, 2004, by and between Motorola, Inc. and the Registrant (which is incorporated herein by reference to
Exhibit 10.11 to the Registrants Form 10-Q dated February 9, 2005).                             
|            | 
|10.25       |  | Third Amendment of Sublease, dated as of March 31, 2008, by and between Motorola, Inc. and the Registrant.                                                                                                                                                                     
|            | 
|10.26       |  | Settlement and License Agreement, effective as of January 19, 2008, by and between Sky Technologies, LLC, Ariba, Inc. and Procuri, Inc. (which is incorporated herein by
reference to Exhibit 10.40 to Ariba, Inc.s Form 8-K dated January 24, 2008).                         
|            | 
|10.27      |  | Offer Letter, dated November 22, 2000, by and between the Registrant and Robert M. Calderoni (which is incorporated herein by reference to Exhibit 10.17 to Registrants
Form 10-Q dated February 14, 2001).                                                                   
|            | 
|10.28      |  | Amendment to Offer Letter, dated July 18, 2001, by and between Registrant and Robert M. Calderoni (which is incorporated herein by reference to Exhibit 10.18 to the
Registrants Form 10-K/A dated December 31, 2001).                                                        
|            | 
|10.29      |  | Offer Letter, dated April 10, 2002, by and between the Registrant and Kevin Costello (which is incorporated herein by reference to Exhibit 10.29 to the Registrants Form
10-Q dated August 14, 2002).                                                                         
|            | 
|10.30      |  | Ariba, Inc.Compensation Program for Non-Employee Directors (which is incorporated herein by reference to Exhibit 10.52 to Ariba, Inc.s Form 10-Q dated May 7,
2008).                                                                                                         
|            | 
|10.31      |  | Employment Agreement, dated July 21, 2008, by and between the Registrant and Ahmed Rubaie (which is incorporated herein by reference to Exhibit 10.53 to Ariba, Inc.s Form 10-Q
dated August 6, 2008).                                                                        
|            | 
|10.32      |  | Amendment to Employment Agreement, dated July 21, 2008, by and between the Registrant and Ahmed Rubaie (which is incorporated herein by reference to Exhibit 10.1 to Ariba,
Inc.s Form 8-K dated October 16, 2008).                                                           
|            | 
|10.33     |  | Amended and Restated Severance Agreement, dated August 25, 2008, by and between the Registrant and Robert M. Calderoni (which is incorporated herein by reference to Exhibit 10.39 to
the Registrants Form 10-K dated November 18, 2008).                                     
|            | 
|10.34     |  | Amended and Restated Severance Agreement, dated September 5, 2008, by and between the Registrant and Kevin Costello (which is incorporated herein by reference to Exhibit 10.40 to
the Registrants Form 10-K dated November 18, 2008).                                        
|            | 
|10.35     |  | Amended and Restated Employment Agreement, dated August 15, 2008, by and between the Registrant and Kent Parker (which is incorporated herein by reference to Exhibit 10.41 to the
Registrants Form 10-K dated November 18, 2008).                                            
|            | 
|10.36      |  | Ariba Bonus PlanExecutive Officers, adopted on December 22, 2008 (which is incorporated herein by reference to Exhibit 10.42 to Ariba, Inc.s Form 10-Q dated February 6,
2009).                                                                                              
|            | 
|10.37     |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Ahmed Rubaie (which is
incorporated herein by reference to Exhibit 10.43 to Ariba, Inc.s Form 10-Q dated February 6, 2009).
|            | 
|10.38     |  | Ariba, Inc.: 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Kent Parker (which is
incorporated herein by reference to Exhibit 10.44 to Ariba, Inc.s Form 10-Q dated February 6, 2009).



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|            |  |                                                                                                                                                                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                        
|10.39     |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Kevin Costello (which is
incorporated herein by reference to Exhibit 10.45 to Ariba, Inc.s Form 10-Q dated February 6, 2009).  
|            | 
|10.40     |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Robert Calderoni (which is
incorporated herein by reference to Exhibit 10.46 to Ariba, Inc.s Form 10-Q dated February 6, 2009).
|            | 
|14.1        |  | Code of Business Conduct (which is incorporated herein by reference to Exhibit 14.1 to the Registrants Form 10-K dated December 1, 2006).                                                                                                                                         
|            | 
|21.1        |  | Subsidiaries.                                                                                                                                                                                                                                                                      
|            | 
|23.1        |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.                                                                                                                                                                                                       
|            | 
|24.1        |  | Power of Attorney (incorporated by reference to the signature page of this Form 10-K).                                                                                                                                                                                             
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                             
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                             
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                     



| | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------

| | A request for confidential treatment has been filed with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form
10-K to be signed on its behalf by the undersigned thereunto duly authorized on November 25, 2009.



ARIBA, INC.By:

/s/    AHMED
RUBAIEAhmed RubaieExecutive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert M. Calderoni and Ahmed
Rubaie, and each of them, his true and lawful attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with Exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:



|                                                       |  |                                                                                                   |  |                  
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------- |  | -----------------
|Signature                                              |  | Title                                                                                             |  | Date             
|                                                       |  |                                                                                                  
|/s/    ROBERT M.
CALDERONI Robert M. Calderoni         |  | Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)      |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    AHMED
RUBAIE Ahmed Rubaie                       |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    HARRIET
EDELMAN Harriet Edelman                 |  | Director                                                                                          |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    ROBERT D.
JOHNSON Robert D. Johnson             |  | Director                                                                                          |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    RICHARD A.
KASHNOW Richard Kashnow              |  | Director                                                                                          |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    ROBERT E. KNOWLING,
JR. Robert E. Knowling, Jr. |  | Director                                                                                          |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    THOMAS F.
MONAHAN Thomas F. Monahan             |  | Director                                                                                          |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    KARL E.
NEWKIRK Karl E. Newkirk                 |  | Director                                                                                          |  | November 25, 2009
|                                                       |  |                                                                                                  
|/s/    RICHARD F.
WALLMAN Richard F. Wallman           |  | Director                                                                                          |  | November 25, 2009



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EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                        
|2.1         |  | Agreement and Plan of Merger and Reorganization, dated September 20, 2007 by and among the Registrant, Axe Acquisition Corporation, Procuri, Inc. and Insight Venture Partners,
LLC, as Stockholders Representative (which is incorporated herein by reference to Exhibit 2.1 to the Registrants Form 10-K dated November 15, 2007).                                             
|            | 
|2.2         |  | Amendment No. 1 to the Agreement and Plan of Merger and Reorganization, dated September 20, 2007, by and among the Registrant, Axe Acquisition Corporation, Procuri, Inc. and Insight
Venture Partners, LLC, as Stockholders Representative (which is incorporated herein by reference to Exhibit 2.2 to the Registrants Form 10-K/A dated November 26, 2007).                   
|            | 
|2.3         |  | Amendment No. 2 to the Agreement and Plan of Merger and Reorganization, dated September 20, 2007, by and among the Registrant, Axe Acquisition Corporation, Procuri, Inc. and Insight
Venture Partners, LLC, as Stockholders Representative (which is incorporated herein by reference to Exhibit 2.3 of the Registrants Form 10-K for the fiscal year ended September 30, 2008).
|            | 
|3.1         |  | Amended and Restated Certificate of Incorporation of the Registrant including all amendments to date (which is incorporated herein by reference to Exhibit 3.1 to the
Registrants Form 10-K dated December 29, 2000).                                                                                                                                                             
|            | 
|3.2         |  | Amended and Restated Bylaws of the Registrant (which are incorporated herein by reference to Exhibit 3.2 to the Registrants Form 8-K filed on March 16, 2009).                                                                                                                                                                                                                    
|            | 
|4.2         |  | Specimen Certificate of the Registrants common stock (which is incorporated herein by reference to Exhibit 4.2 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                                          
|            | 
|10.1        |  | Form of Indemnification Agreement entered into between the Registrant and its directors and executive officers (which is incorporated herein by reference to Exhibit 10.1 to the
Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                
|            | 
|10.2       |  | 1999 Equity Incentive Plan, as amended and restated effective January 15, 2009 (which is incorporated herein by reference to Appendix A to the Registrants Schedule 14A dated
January 23, 2009).                                                                                                                                                                                  
|            | 
|10.3       |  | Employee Stock Purchase Plan, as amended and restated effective February 1, 2009 (which is incorporated herein by reference to Appendix B to the Registrants Schedule 14A dated
January 23, 2009).                                                                                                                                                                                
|            | 
|10.4       |  | Third Amended and Restated Stock Incentive Plan of FreeMarkets, Inc. (which is incorporated herein by reference to Exhibit 10.10 to the Registrants Form 10-K dated November
15, 2007).                                                                                                                                                                                           
|            | 
|10.5       |  | 2001 Broad Based Equity Incentive Plan of FreeMarkets, Inc. (which is incorporated herein by reference to Exhibit 10.12 to FreeMarkets Form 10-K dated March 14, 2003).                                                                                                                                                                                                           
|            | 
|10.6        |  | Lease Agreement, dated March 15, 2000, by and between Moffett Park Drive LLC and the Registrant (which is incorporated herein by reference to Exhibit 10.10 to the
Registrants Form 10-Q dated May 15, 2000).                                                                                                                                                                     
|            | 
|10.7        |  | First Amendment to Lease, dated as of January 12, 2001, by and between Moffett Park Drive LLC and the Registrant.                                                                                                                                                                                                                                                                  
|            | 
|10.8        |  | Second Amendment to Lease, dated as of October 31, 2002, by and between Moffett Park Drive LLC and the Registrant.                                                                                                                                                                                                                                                                 
|            | 
|10.9        |  | Third Amendment to Lease, dated as of October 25, 2004, by and between Moffett Park Drive LLC and the Registrant (which is incorporated herein by reference to Exhibit 10.7 to
the Registrants Form 10-Q dated February 9, 2005).                                                                                                                                                 



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|            |  |                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                  
|10.10       |  | Fourth Amendment to Lease, dated as of July 6, 2007, by and between Moffett Park Drive LLC and the Registrant.                                                                                                                                                                               
|            | 
|10.11       |  | Letter, dated as of September 11, 2000, by and between Moffett Park Drive LLC and the Registrant re: Moffett Park Drive LLC/Ariba/Tenant Improvements.                                                                                                                                       
|            | 
|10.12       |  | Lease Agreement, dated October 21, 1998, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to Exhibit
10.3(a) to FreeMarkets Registration Statement on Form S-1 dated September 8, 1999).                           
|            | 
|10.13       |  | First Amendment to Lease, dated March 30, 1999, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to
Exhibit 10.3(b) to FreeMarkets Registration Statement on Form S-1 dated September 8, 1999).                    
|            | 
|10.14       |  | Second Amendment to Lease, dated September 1999, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to Exhibit
10.3(c) to FreeMarkets Amendment No. 1 to Registration Statement on Form S-1 dated November 11, 1999).
|            | 
|10.15       |  | Third Amendment to Lease, dated March 2000, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership (which is incorporated herein by reference to Exhibit
10.2(d) to FreeMarkets Form 10-K dated March 14, 2003).                                                    
|            | 
|10.16       |  | Fourth Amendment to Lease, dated July 10, 2002, by and between FreeMarkets, Inc. and One Oliver Associates Limited Partnership.                                                                                                                                                              
|            | 
|10.17       |  | Fifth Amendment to Lease, dated October 31, 2004, by and between Ariba, Inc. and One Oliver Associates Limited Partnership.                                                                                                                                                                  
|            | 
|10.18       |  | Sixth Amendment to Lease by and between One Oliver Associates L.P. and the Registrant, effective as of January 1, 2007 (which is incorporated herein by reference to Exhibit
10.38 to the Registrants Form 8-K dated February 20, 2007).                                                    
|            | 
|10.19       |  | Sublease, dated October 18, 2002, by and between Netscreen Technologies, Inc. and the Registrant (which is incorporated herein by reference to Exhibit 10.35 to the
Registrants Form 10-Q dated April 10, 2003).                                                                            
|            | 
|10.20       |  | First Amendment to Sublease, dated as of June 15, 2007, by and between Juniper Networks, Inc. and the Registrant (which is incorporated herein by reference to Exhibit 10.45 to
the Registrants Form 10-Q dated August 8, 2007).                                                            
|            | 
|10.21       |  | Letter Agreement, dated April 9, 2008, by and between Juniper Networks, Inc. and the Registrant.                                                                                                                                                                                             
|            | 
|10.22       |  | Letter Agreement, dated November 9, 2007, by and between Juniper Networks, Inc. and the Registrant.                                                                                                                                                                                          
|            | 
|10.23       |  | Consent to Sublease, dated as of October 25, 2004, by and between Moffett Park Drive LLC, Motorola, Inc. and the Registrant (which is incorporated herein by reference to
Exhibit 10.8 to the Registrants Form 10-Q dated February 9, 2005).                                                
|            | 
|10.24       |  | Second Amendment to and Restatement of Sublease, dated as of October 21, 2004, by and between Motorola, Inc. and the Registrant (which is incorporated herein by reference to
Exhibit 10.11 to the Registrants Form 10-Q dated February 9, 2005).                                           
|            | 
|10.25       |  | Third Amendment of Sublease, dated as of March 31, 2008, by and between Motorola, Inc. and the Registrant.                                                                                                                                                                                   
|            | 
|10.26       |  | Settlement and License Agreement, effective as of January 19, 2008, by and between Sky Technologies, LLC, Ariba, Inc. and Procuri, Inc. (which is incorporated herein by
reference to Exhibit 10.40 to Ariba, Inc.s Form 8-K dated January 24, 2008).                                       



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|            |  |                                                                                                                                                                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                        
|10.27      |  | Offer Letter, dated November 22, 2000, by and between the Registrant and Robert M. Calderoni (which is incorporated herein by reference to Exhibit 10.17 to Registrants
Form 10-Q dated February 14, 2001).                                                                       
|10.28      |  | Amendment to Offer Letter, dated July 18, 2001, by and between Registrant and Robert M. Calderoni (which is incorporated herein by reference to Exhibit 10.18 to the
Registrants Form 10-K/A dated December 31, 2001).                                                            
|            | 
|10.29      |  | Offer Letter, dated April 10, 2002, by and between the Registrant and Kevin Costello (which is incorporated herein by reference to Exhibit 10.29 to the Registrants Form
10-Q dated August 14, 2002).                                                                             
|            | 
|10.30      |  | Ariba, Inc.Compensation Program for Non-Employee Directors (which is incorporated herein by reference to Exhibit 10.52 to Ariba, Inc.s Form 10-Q dated May 7,
2008).                                                                                                             
|            | 
|10.31      |  | Employment Agreement, dated July 21, 2008, by and between the Registrant and Ahmed Rubaie (which is incorporated herein by reference to Exhibit 10.53 to Ariba, Inc.s Form 10-Q
dated August 6, 2008).                                                                            
|            | 
|10.32      |  | Amendment to Employment Agreement, dated July 21, 2008, by and between the Registrant and Ahmed Rubaie (which is incorporated herein by reference to Exhibit 10.1 to Ariba,
Inc.s Form 8-K dated October 16, 2008).                                                               
|            | 
|10.33     |  | Amended and Restated Severance Agreement, dated August 25, 2008, by and between the Registrant and Robert M. Calderoni (which is incorporated herein by reference to Exhibit 10.39 to
the Registrants Form 10-K dated November 18, 2008).                                         
|            | 
|10.34     |  | Amended and Restated Severance Agreement, dated September 5, 2008, by and between the Registrant and Kevin Costello (which is incorporated herein by reference to Exhibit 10.40 to
the Registrants Form 10-K dated November 18, 2008).                                            
|            | 
|10.35     |  | Amended and Restated Employment Agreement, dated August 15, 2008, by and between the Registrant and Kent Parker (which is incorporated herein by reference to Exhibit 10.41 to the
Registrants Form 10-K dated November 18, 2008).                                                
|            | 
|10.36      |  | Ariba Bonus PlanExecutive Officers, adopted on December 22, 2008 (which is incorporated herein by reference to Exhibit 10.42 to Ariba, Inc.s Form 10-Q dated February 6,
2009).                                                                                                  
|            | 
|10.37     |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Ahmed Rubaie (which is
incorporated herein by reference to Exhibit 10.43 to Ariba, Inc.s Form 10-Q dated February 6, 2009).    
|            | 
|10.38     |  | Ariba, Inc.: 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Kent Parker (which is
incorporated herein by reference to Exhibit 10.44 to Ariba, Inc.s Form 10-Q dated February 6, 2009).    
|            | 
|10.39     |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Kevin Costello (which is
incorporated herein by reference to Exhibit 10.45 to Ariba, Inc.s Form 10-Q dated February 6, 2009).  
|            | 
|10.40     |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2009 Performance Stock Units), by and between Ariba, Inc. and Robert Calderoni (which is
incorporated herein by reference to Exhibit 10.46 to Ariba, Inc.s Form 10-Q dated February 6, 2009).
|            | 
|14.1        |  | Code of Business Conduct (which is incorporated herein by reference to Exhibit 14.1 to the Registrants Form 10-K dated December 1, 2006).                                                                                                                                         
|            | 
|21.1        |  | Subsidiaries.                                                                                                                                                                                                                                                                      



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|            |  |                                                                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                   
|            | 
|23.1        |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.                                                                                                  
|            | 
|24.1        |  | Power of Attorney (incorporated by reference to the signature page of this Form 10-K).                                                                                        
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.        
|31.2        |  | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.        
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.



| | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------

| | A request for confidential treatment has been filed with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4