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, 2008

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 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.  x

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, 2008 the last business day of the registrants most recently completed second fiscal quarter (based on the closing price of $9.66 on the Nasdaq Global Market as of that
date) was approximately $835.9 million.

As of October 31, 2008, there were 86,964,203 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 2009 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, 2008

TABLE OF CONTENTS



|           |  |                                                                                                              |  |        
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | -------
|Item       |  |                                                                                                              |  | PageNo.
|           |  |                                                                                                             
|           |  | PART I                                                                                                       |  |        
|           |  |                                                                                                             
|1.         |  | Business                                                                                                     |  | 4      
|1A.        |  | Risk Factors                                                                                                 |  | 14     
|1B.        |  | Unresolved Staff Comments                                                                                    |  | 23     
|2.         |  | Properties                                                                                                   |  | 23     
|3.         |  | Legal Proceedings                                                                                            |  | 24     
|4.         |  | Submission of Matters to a Vote of Security Holders                                                          |  | 25     
|           |  |                                                                                                             
|           |  | PART II                                                                                                      |  |        
|           |  |                                                                                                             
|5.         |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 26     
|6.         |  | Selected Financial Data                                                                                      |  | 28     
|7.         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 30     
|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                         |  | 89     
|9A.        |  | Controls and Procedures                                                                                      |  | 89     
|9B.        |  | Other Information                                                                                            |  | 92     
|           |  |                                                                                                             
|           |  | PART III                                                                                                     |  |        
|           |  |                                                                                                             
|10.        |  | Directors, Executive Officers and Corporate Governance                                                       |  | 93     
|11.        |  | Executive Compensation                                                                                       |  | 93     
|12.        |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 93     
|13.        |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 93     
|14.        |  | Principal Accountant Fees and Services                                                                       |  | 93     
|           |  |                                                                                                             
|           |  | PART IV                                                                                                      |  |        
|           |  |                                                                                                             
|15.        |  | Exhibits and Financial Statement Schedules                                                                   |  | 94     
|           | 
|SIGNATURES |  | 98                                                                                                          



2



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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 2008, 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 2009
and 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 Visibility 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4



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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 Visibility Solution offerings:

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

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.



5



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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 Management 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 and 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).

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,



6



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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 and 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 180,000 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.

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



7



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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 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. This sourcing expertise and support is also available as a remote, on-demand service via our Best Practice Center (BPC) and our Category Playbooks.



8



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Employees

As of September 30, 2008, we had a total of 1,740 employees, including 345 in research and development, 371 in sales and marketing, 830 in professional services, customer support and training, and 194 in administration, finance, legal,
human resources and information technology. Of these employees, 1,017 were located in the United States and 723 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, Japan and the Asia Pacific region. The direct sales force consists of sales professionals, application specialists and supporting personnel. As of September 30, 2008, we had 185 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 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;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | 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 exceptional 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.



9



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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. Over the past few years, we have introduced several new
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 to developing new functionality, we have also been re-architecting our applications to be more easily deployed via an on-demand model. During fiscal years 2006, 2007 and 2008, we released, and continuing in fiscal year 2009
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 $52.3 million, $51.2 million and $50.1 million during the fiscal years ended September 30, 2008, 2007 and 2006, respectively. We also recorded amortization of acquired
technology as part of cost of revenues of $1.1 million, $885,000 and $2.6 million during the fiscal years ended September 30, 2008, 2007 and 2006, 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 21 countries. All of our international operations are conducted through wholly-owned subsidiaries. Revenues from our international operations were $102.9 million, $87.5 million and $90.3 million for the fiscal
years ended September 30, 2008, 2007 and 2006, respectively.

We operate in three geographic operating segments: North America;
Europe, Middle East and Africa (EMEA); and Asia-Pacific (APAC). See Note 8 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.

Competition

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



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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. They may 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.

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. 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



11



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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 34 U.S. patents issued and 59 U.S. patent applications pending. We also have seven foreign patents issued and ten foreign patent
applications pending. It is possible that the patents that we have applied for, if issued, or our potential future patents may be successfully challenged or that no patents will be issued from our pending patent applications. 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. For example, in the year ended September 30, 2008, we agreed to settle with Sky Technologies LLC (Sky) for $7.9
million related to two lawsuits alleging that certain products of Ariba and Procuri, Inc. (Procuri), which we acquired in December 2007, infringed patents held by Sky. It is possible that in the future other 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. See Legal Proceedings and Note 7 of Notes to Consolidated Financial Statements.

Available Information

Our Internet address is www.ariba.com. There we make available, free of charge, our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission
(SEC). Our SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part of this or any other report we file with or furnish to the SEC.



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EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and their ages as of October 31, 2008 are as follows:



|                    |  |     |  |                                                     
|------------------- |  | --- |  | ----------------------------------------------------
|Name                |  | Age |  | Position(s)                                         
|Robert M. Calderoni |  | 48  |  | Chairman and Chief Executive Officer                
|Ahmed Rubaie        |  | 42  |  | Executive Vice President and Chief Financial Officer
|Kevin Costello      |  | 46  |  | President                                           
|Kent Parker         |  | 47  |  | Chief Operating 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.

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.

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.



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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.

We Compete in New and Rapidly Evolving Markets, and Our Spend Management Solutions Are At a Relatively Early Stage of Development. These Factors Make Evaluation of Our Future Prospects Difficult.

Spend management software applications and services are at a relatively early stage of development. For example, in September 2001, we introduced the
majority of our initial Ariba Spend Management solutions and after our merger with FreeMarkets in 2004, we introduced several new products and services integrating functionality acquired in the merger. We also introduced on-demand versions of a
number of our software products throughout fiscal year 2006, fiscal year 2007 and fiscal year 2008 and we plan to introduce additional on-demand versions of our products in the future. The markets in which we compete are characterized by rapid
technological change, evolving customer needs and frequent introductions of new products and services. As we adjust to evolving customer requirements and competitive pressures, we may be required to further reposition our product and service
offerings and introduce new products and services. We may not be successful in developing and marketing such product and service offerings, or we may experience difficulties that could delay or prevent the development and marketing of such product
and service offerings, which could have a material adverse effect on our business, financial condition or results of operations.

Deteriorating Economic Conditions May Adversely Impact Our Business.

Our business may be adversely affected by the ongoing
credit crises and deteriorating worldwide economic conditions. Although our spend management solutions help companies reduce the costs of their goods and services and may therefore be perceived as even more strategic during adverse economic
conditions, a weakening global economy, or decline in confidence in the economy, could adversely impact our business in a number of important respects. These include (i) reduced bookings and revenues, as a result of longer sales cycles,
reduced, deferred or cancelled customer purchases and lower average selling prices; (ii) increased operating losses and reduced cash flows from operations; (iii) greater than anticipated uncollectible accounts receivables and increased
allowances for doubtful accounts receivable; (iv) impairment in the value of our financial and non-financial assets resulting in non-cash impairment charges; and (vi) reduced cash inflows and increased restructuring charges to the extent
that actual sublease income from abandoned facilities is lower than currently estimated income.

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



14



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| |  |  | 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 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.

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, 2008, 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:



| |  |  | adverse economic conditions;
| | - |  | ----------------------------



| |  |  | the failure of our standalone spend management solutions business to mature as a separate market category;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | declines in average selling prices of our products and services resulting from adverse economic conditions, competition or the introduction of newer products that
generally have lower list prices than our more established products 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
| | - |  | ----------------------------------------------------------------------------------



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



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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.

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



| |  |  | the level of expenditures relating to ongoing legal proceedings;
| | - |  | ----------------------------------------------------------------



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



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



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We Are Currently Implementing a New Enterprise Resource Planning System, and Problems With the Design
or Implementation of This System Could Interfere With Our Business and Operations.

We have commenced a project to implement a global
enterprise resource planning (ERP) system. We have invested, and will continue to invest, significant capital and human resources in the design and implementation of the ERP system, which may be disruptive to our underlying business. Any disruptions
or delays in the design and implementation of the new ERP system, particularly any disruptions or delays that impact our operations, could adversely affect our ability to provide services and support to our customers, bill and track our customers,
file SEC reports in a timely manner and otherwise run our business. Further, as we are dependent upon our ability to gather and promptly transmit accurate information to key decision makers, our business, results of operations and financial
condition may be materially and adversely affected if our database infrastructure does not allow us to transmit accurate information, even for a short period of time. Even if we do encounter these adverse effects, the design and implementation of
the new ERP system may be much more costly than we anticipated. If we are unable to successfully design and implement the new ERP system as planned, our financial position, results of operations and cash flows could be negatively impacted.

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 organization. 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 Sourcing Solution Could Be
Negatively Affected If Customers Elect Not to Renew Their Contracts in Fiscal Year 2009 and Beyond

We have several large multi-year
contracts for our full service sourcing services, some of which will come up for renewal during fiscal year 2009 and 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.



17



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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 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.



18



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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 and Oracle. We also compete with several service providers, including McKinsey & Company and A.T. Kearney. 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 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. 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.

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



19



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| |  |  | 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.

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 7 of Notes to Consolidated Financial Statements.

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, 2008, 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 $5.9 million and leasehold impairments of $1.5 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 $1.7 million as of September 30, 2008.
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.

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

We hold a variety of interest bearing auction rate securities (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



20



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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 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 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
the ability and intent to hold these ARS investments until a recovery of the auction process or until maturity, 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 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, 2008 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, some of which are beyond our control:



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



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



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



| |  |  | general economic slowdowns;
| | - |  | ---------------------------



| |  |  | 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 license transactions; and
| | - |  | ---------------------------------------------------------------------------------------------



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



21



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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 34 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. For example, in the year ended September 30, 2008, we agreed to settle with Sky for $7.9 million related to two lawsuits alleging that certain products of Ariba and Procuri, Inc.
(Procuri) infringed patents held by Sky. See LitigationGeneral in Note 7 of Notes to Consolidated Financial Statements. It is possible that in the future, other 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.

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.

In addition, we may need to commence litigation or take other actions to protect our intellectual property rights. For example, in April 2007, we
filed a lawsuit against Emptoris, Inc. (Emptoris) for patent infringement in the United States District Court for the Eastern District of Texas. See Litigation-Patent Litigation with Emptoris, Inc. in Note 7 of
Notes to Consolidated Financial Statements. 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.



22



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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.

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.



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

Not applicable.



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

Ariba occupies two principal office
locations in Sunnyvale, California and Pittsburgh, Pennsylvania.

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 also 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.

Our sales activities are
headquartered in Atlanta, Georgia where we lease approximately 20,000 square feet of office space. 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.



23



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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 our and FreeMarkets initial public offerings (the IPOs) were filed in the United States District Court for the Southern District of New York against us and
FreeMarkets, Inc. (FreeMarkets), certain of the two companies former officers and directors, and the underwriters who handled the IPOs. These complaints were later consolidated into single class action proceedings related to each
IPO. Those 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. In June
2003, a proposed settlement was reached between plaintiffs and us and FreeMarkets (the individual defendants having been previously dismissed). We merged with FreeMarkets in July 2004. On December 5, 2006, the Court of Appeals granted the
underwriter defendants appeal of the District Courts order granting class certification in six focus cases. On June 25, 2007, in light of the Court of Appeals decision, and based on a stipulation among the parties to the
settlement, the District Court entered an order terminating the proposed settlement. On August 14, 2007, the plaintiffs filed amended complaints in the focus cases, seeking to address the deficiencies raised in the Court of Appeals
opinion. On September 27, 2007, plaintiffs moved to certify the classes in those focus cases. On December 28, 2007, the underwriters filed a motion to strike the class allegations in the amended complaints, which the issuers in the focus
cases later joined. On March 26, 2008, the District Court denied in part the defendants motions to dismiss the amended complaints in the focus cases, while dismissing those proposed class plaintiffs who sold their securities of the
relevant issuers for a price in excess of the initial offering price or purchased their securities outside the certified class period. On October 10, 2008, the Court granted plaintiffs request to withdraw without prejudice their motion to
certify the classes in the focus cases. As of September 30, 2008, no amount is accrued as a loss is not considered probable or estimable.

Patent Litigation with Emptoris, Inc.

On April 19, 2007, we sued Emptoris in the United States District Court for the
Eastern District of Texas for patent infringement. On October 29, 2008, after a seven day jury trial, we received a verdict that Emptoris willfully infringed one Ariba patent and also infringed a second Ariba patent. The jury awarded Ariba
approximately $4.9 million in damages. A hearing for Emptoris post-trial motions seeking to attack the verdict has been set for December 16, 2008. At that hearing the court will also consider our request for a permanent injunction and
enhancement of the damage award. Emptoris may seek to appeal the findings of the jury and rulings of the court. As such, the impact of the jurys verdict cannot be determined at this time. On November 20, 2007, Emptoris sued us for
infringement of one of its patents in the same Texas court where our patent claims were tried. In October 2008, Emptoris dismissed its patent case against Ariba with prejudice. As of September 30, 2008, no amount is accrued as a loss is not
considered probable or estimable.

General

Defending against these actions and various other 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 our defenses are unsuccessful or if we are unable to settle on favorable terms, we could be liable for a large damages award and, in the case of patent litigation, be subject to an injunction that could seriously harm our business and
results of operations. For instance, in January 2008, we paid $5.9 million to settle a patent infringement matter brought by Sky against us and $2.0 million was paid by Procuri to settle a separate patent infringement matter brought against it
by Sky.



24



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Indemnification

We sell software licenses, access to our on-demand offerings and/or services to our customers under contracts that we refer 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 our 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 we cannot address the infringement by replacing the product or service, or modifying the product or service, we are 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, 2008.



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

Not applicable.



25



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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, 2008, there were approximately 903 stockholders
of record.



|                    |  |                      |       |     |   |      
|------------------- |  | -------------------- | ----- | --- | - | -----
|                    |  | Price RangePer Share
|Three Months Ended: |  | High                 |       | Low
|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
|                    |  |                     
|September 30, 2007  |  | $                    | 11.18 |     | $ | 8.32 
|June 30, 2007       |  | $                    | 10.17 |     | $ | 8.38 
|March 31, 2007      |  | $                    | 11.08 |     | $ | 7.50 
|December 31, 2006   |  | $                    | 9.30  |     | $ | 7.15 

Equity Compensation Plan Information

The following table sets forth as of September 30, 2008 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         |  | 682,009                                                                                  |     |  | $                                                                       | 15.35 |     |                                                                                                                                      | 4,805,668 | (1)
|Equity compensation plans not approved by security holders (2) |  | 132,942                                                                                  | (3) |  | $                                                                       | 13.22 | (3) |                                                                                                                                      |          |    
|                                                               |  |                                                                                          |     |  |                                                                         |       |     |                                                                                                                                      |           |    
|Total                                                          |  | 814,951                                                                                  |     |  | $                                                                       | 15.00 |     |                                                                                                                                      | 4,805,668 |    
|                                                               |  |                                                                                          |     |  |                                                                         |       |     |                                                                                                                                      |           |    



|(1) | Includes 960,000 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 (the Incentive Plan) exclude unvested shares of restricted common stock as of September 30, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | See Note 9 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 2000 acquisitions of
TradingDynamics, Inc., Tradex, Inc. (Tradex) and SupplierMarket.com, Inc. and our fiscal year 2004 merger with FreeMarkets (the Assumed Plans).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26



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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 during the quarter ended September 30, 2008.

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, 2008  July 31, 2008           |  | 4,845                          |  | $                           | 14.95 |                                                                               | 
|August 1, 2008  August 31, 2008       |  | 148,115                        |  |                             | 17.66 |                                                                               | 
|September 1, 2008  September 30, 2008 |  |                               |  |                             |      |                                                                               | 
|                                       |  |                                |  |                             |       |                                                                               |  
|Total                                  |  | 152,960                        |  | $                           | 17.58 |                                                                               | 
|                                       |  |                                |  |                             |       |                                                                               |  

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 High
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, 2008, 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



27



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|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, 2008, and the consolidated balance sheet data as of the end of
each such fiscal year, are derived from our consolidated financial statements (in thousands, except per share data). The operating results for any period should not be considered indicative of results for any future period.



|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------- | ------------------------------------- | --------------------------------- | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | -------- | - |  | - | ------- | -
|                                                                                   |                                       | For the Years Ended September 30, |        
|                                                                                   | 2008                                  |                                   |         | 2007 |  |   | 2006    |   |  | 2005 |         |   | 2004 |  
|                                                                                   | (in thousands, except per share data) |                                  
|Consolidated Statements of Operations Data (1):                                    |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Revenues:                                                                          |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Subscription and maintenance                                                       |                                       | $                                 | 187,150 |      |  | $ | 142,309 |   |  | $    | 130,057 |   |      | $ | 130,294  |   |  | $ | 105,113 |  
|Services and other                                                                 |                                       |                                   | 140,910 |      |  |   | 159,358 |   |  |      | 165,959 |   |      |   | 192,749  |   |  |   | 140,685 |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Total revenues                                                                     |                                       |                                   | 328,060 |      |  |   | 301,667 |   |  |      | 296,016 |   |      |   | 323,043  |   |  |   | 245,798 |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Cost of revenues:                                                                  |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Subscription and maintenance (2)                                                   |                                       |                                   | 40,088  |      |  |   | 32,709  |   |  |      | 27,039  |   |      |   | 27,628   |   |  |   | 22,428  |  
|Services and other (2)                                                             |                                       |                                   | 94,189  |      |  |   | 114,615 |   |  |      | 131,551 |   |      |   | 128,798  |   |  |   | 72,717  |  
|Amortization of acquired technology and customer intangible assets                 |                                       |                                   | 14,257  |      |  |   | 14,074  |   |  |      | 15,702  |   |      |   | 19,501   |   |  |   | 5,065   |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Total cost of revenues                                                             |                                       |                                   | 148,534 |      |  |   | 161,398 |   |  |      | 174,292 |   |      |   | 175,927  |   |  |   | 100,210 |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Gross profit                                                                       |                                       |                                   | 179,526 |      |  |   | 140,269 |   |  |      | 121,724 |   |      |   | 147,116  |   |  |   | 145,588 |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Operating expenses:                                                                |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Sales and marketing (2)                                                            |                                       |                                   | 110,834 |      |  |   | 93,904  |   |  |      | 82,456  |   |      |   | 94,299   |   |  |   | 76,054  |  
|Research and development (2)                                                       |                                       |                                   | 52,270  |      |  |   | 51,159  |   |  |      | 50,085  |   |      |   | 49,610   |   |  |   | 54,362  |  
|General and administrative (2)                                                     |                                       |                                   | 48,919  |      |  |   | 39,780  |   |  |      | 32,850  |   |      |   | 34,725   |   |  |   | 26,680  |  
|Other incomeSoftbank                                                              |                                       |                                   | (566    | )    |  |   | (13,564 | ) |  |      | (13,585 | ) |      |   | (9,490   | ) |  |   |        |  
|Amortization of other intangible assets                                            |                                       |                                   | 739     |      |  |   | 525     |   |  |      | 800     |   |      |   | 798      |   |  |   | 460     |  
|In-process research and development                                                |                                       |                                   |        |      |  |   |        |   |  |      |        |   |      |   |         |   |  |   | 100     |  
|Restructuring and integration costs (benefit)                                      |                                       |                                   | 10,108  |      |  |   | (4,194  | ) |  |      | 26,321  |   |      |   | 41,248   |   |  |   | 16,803  |  
|Impairment of goodwill (3)                                                         |                                       |                                   |        |      |  |   |        |   |  |      |        |   |      |   | 247,830  |   |  |   |        |  
|Litigation provision                                                               |                                       |                                   | 5,900   |      |  |   |        |   |  |      |        |   |      |   | 37,000   |   |  |   |        |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Total operating expenses                                                           |                                       |                                   | 228,204 |      |  |   | 167,610 |   |  |      | 178,927 |   |      |   | 496,020  |   |  |   | 174,459 |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Loss from operations                                                               |                                       |                                   | (48,678 | )    |  |   | (27,341 | ) |  |      | (57,203 | ) |      |   | (348,904 | ) |  |   | (28,871 | )
|Interest and other income, net                                                     |                                       |                                   | 8,359   |      |  |   | 14,301  |   |  |      | 10,935  |   |      |   | 5,863    |   |  |   | 2,808   |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Net loss before income taxes and minority interests                                |                                       |                                   | (40,319 | )    |  |   | (13,040 | ) |  |      | (46,268 | ) |      |   | (343,041 | ) |  |   | (26,063 | )
|Provision (benefit) for income taxes                                               |                                       |                                   | 743     |      |  |   | 1,937   |   |  |      | 1,533   |   |      |   | 6,570    |   |  |   | (294    | )
|Minority interests in net income (loss) of consolidated subsidiaries               |                                       |                                   |        |      |  |   |        |   |  |      |        |   |      |   | 17       |   |  |   | (539    | )
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Net loss                                                                           |                                       | $                                 | (41,062 | )    |  | $ | (14,977 | ) |  | $    | (47,801 | ) |      | $ | (349,628 | ) |  | $ | (25,230 | )
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Net loss per sharebasic and diluted (4)                                           |                                       | $                                 | (0.53   | )    |  | $ | (0.21   | ) |  | $    | (0.73   | ) |      | $ | (5.49    | ) |  | $ | (0.51   | )
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  
|Weighted average shares used in computing net loss per sharebasic and diluted (4) |                                       |                                   | 77,318  |      |  |   | 70,106  |   |  |      | 65,924  |   |      |   | 63,655   |   |  |   | 49,625  |  
|                                                                                   |                                       |                                   |         |      |  |   |         |   |  |      |         |   |      |   |          |   |  |   |         |  



28



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|                                                                                            |  |               |         |   |      |   |         |  |      |         |      |   |         |  |   |        
|------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                                                                            |  | September 30,
|                                                                                            |  | 2008          |         |   | 2007 |   | 2006    |  | 2005 |         | 2004
|Consolidated Balance Sheets Data (1)                                                        |  |               |         |   |      |   |         |  |      |         |      |   |         |  |   |        
|Cash and cash equivalents, restricted cash, marketable securities and long-term investments |  | $             | 136,970 |   |      | $ | 183,046 |  | $    | 170,616 |      | $ | 147,435 |  | $ | 213,419
|Working (deficit) capital                                                                   |  | $             | (41,172 | ) |      | $ | 35,880  |  | $    | 39,404  |      | $ | 17,989  |  | $ | 27,281 
|Total assets                                                                                |  | $             | 627,461 |   |      | $ | 583,586 |  | $    | 586,944 |      | $ | 594,239 |  | $ | 937,484
|Restructuring obligations, less current portion and deferred rent obligations               |  | $             | 59,295  |   |      | $ | 74,734  |  | $    | 103,074 |      | $ | 90,540  |  | $ | 62,448 
|Minority interests                                                                          |  | $             |        |   |      | $ |        |  | $    |        |      | $ |        |  | $ | 19,547 
|Total stockholders equity                                                                  |  | $             | 391,018 |   |      | $ | 351,144 |  | $    | 333,023 |      | $ | 336,242 |  | $ | 653,090



|(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, 2008
reflect the following business combinations (all of which were accounted for using the purchase method of accounting):
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On January 13, 2004, we acquired Alliente, Inc. (Alliente). The consolidated statements of operations data includes the results of operations of
Alliente subsequent to January 13, 2004 and the consolidated balance sheet data includes the financial position of Alliente subsequent to January 13, 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On April 15, 2004, we acquired Softface. The consolidated statements of operations data includes the results of operations of Softface subsequent to
April 15, 2004 and the consolidated balance sheet data includes the financial position of Softface subsequent to April 15, 2004.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On July 1, 2004, we merged with FreeMarkets. The consolidated statements of operations data includes the results of operations of FreeMarkets subsequent to
July 1, 2004 and the consolidated balance sheet data includes the financial position of FreeMarkets subsequent to July 1, 2004.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On December 17, 2007, we acquired Procuri. The consolidated statements of operations data includes the results of operations of Procuri subsequent to
December 17, 2007 and the consolidated balance sheet data includes the financial position of Procuri subsequent to December 17, 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In connection with the adoption of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, and in accordance with Staff Accounting
Bulletin (SAB) 107, we reclassified stock-based compensation for the years ended September 30, 2005 and 2004 of $19.6 million and $2.8 million, respectively, 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 (benefit), net of the effects of cancellations, by operating expense category (in thousands):
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                              |  |                          |        |      |   |      
|--------------------------------------------- |  | ------------------------ | ------ | ---- | - | -----
|                                              |  | Year Ended September 30,
|                                              |  | 2005                     |        | 2004
|Cost of revenuessubscription and maintenance |  | $                        | 865    |      | $ | 68   
|Cost of revenuesservices and other           |  |                          | 3,665  |      |   | 212  
|Sales and marketing                           |  |                          | 8,986  |      |   | 1,763
|Research and development                      |  |                          | 2,398  |      |   | 271  
|General and administrative                    |  |                          | 3,690  |      |   | 474  
|                                              |  |                          |        |      |   |      
|Total                                         |  | $                        | 19,604 |      | $ | 2,788
|                                              |  |                          |        |      |   |      

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

|(4) | The above information has been restated to reflect the one-for-six reverse split of our outstanding common stock effected on July 1, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

See Note 10 of Notes to Consolidated Financial Statements for an explanation of the determination of the number of shares used to compute basic and
diluted net loss per share. We have paid no cash dividends during the five-year period ended September 30, 2008.



29



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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 2009 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.

On December 17, 2007, we acquired Procuri, Inc. (Procuri), a privately held company
headquartered in Atlanta, Georgia, to expand our on-demand supply management solutions. We have included the financial results of Procuri in our 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 payoff Procuris outstanding debt, $46.1 million of our common stock (based on the issuance of 4.1 million
shares of our common stock) and $1.5 million for transaction costs.

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.



30



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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.

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 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 license revenue versus services revenue would drive overall gross margin higher and vice versa.

Overview of Fiscal Year 2008

Our revenues increased
to $328.1 million in the year ended September 30, 2008 compared to $301.7 million in the year ended September 30, 2007. Subscription and maintenance revenues increased $44.8 million, or 32%, partially offset by a decrease in services and
other revenues of $18.4 million, or 12%. Subscription revenues were $112.3 million in the year ended September 30, 2008, as compared to $67.6 million in the year ended September 30, 2007. 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 managed services revenues and perpetual license revenues in the year ended September 30, 2008.

Operating expenses
increased to $228.2 million in the year ended September 30, 2008 compared to $167.6 million in the year ended September 30, 2007. The increase in operating expenses is primarily attributable to; (1) an increase in restructuring and
integration charge of $14.3 million primarily related to abandonment of approximately 54,000 square feet of leased space in our Sunnyvale, California headquarters and severance benefit costs in connection with a workforce reduction initiative
associated with the integration of Procuri and to better align our expenses with our revenues and to enable us to invest in certain growth initiatives; (2) a decrease in other incomeSoftbank of $13.0 million as a result of the
amortization period ending in October 2007; (3) an increase in compensation and benefits expense of $8.9 million due to an increase in headcount in supporting our transition to an on-demand model and our acquisition of Procuri in December 2007;
(4) an increase in stock-based compensation expense of $8.4 million primarily associated with restricted stock grants in fiscal year 2008; (5) an increase in litigation provision of $5.9 million in connection with the settlement of a
patent infringement matter; and (6) an increase in legal expenses of $3.8 million associated with patent infringement matters. In sum, our total net expenses, including cost of revenue and other items, increased to $369.1 million compared to
$316.6 million in the year ended September 30, 2007, which caused a net loss for the year ended September 30, 2008 of $41.1 million compared to $15.0 million in the year ended September 30, 2007.



31



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Outlook for Fiscal Year 2009

With the increase in our backlog, introduction of new offerings and continued shift in demand toward subscription software sales, we expect continued growth in subscription revenue in fiscal year 2009 compared to
fiscal year 2008 but at a lower growth rate than in 2008. We also expect total revenues to grow in fiscal year 2009 compared to fiscal year 2008, at a comparable growth rate than in 2008.

We plan to monitor expenses in fiscal year 2009. 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. Accordingly, we anticipate continued improvement in our results from operations, before giving effect to these excluded expenses.

Deteriorating worldwide economic conditions may 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 2009 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 conditions, we believe that key risks to our revenues in fiscal year 2009 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; our deferral of services revenues as a result of
including software implementation and other services as part of a sale with our subscription software solutions; the market acceptance of spend management solutions as a standalone market category; the overall level of information technology
spending; and potential 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; our ability to find new tenants for abandoned space; and the potential adverse impacts resulting from legal proceedings. We may not be successful in addressing such risks and difficulties. See Risk Factors for additional
information.



32



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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 |  
|                                                                   |  | 2008/2007                       |    |  | 2007/2006                   |   |  | 2008 |    |  | 2007 |    |  | 2006 |   
|Revenues:                                                          |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Subscription and maintenance                                       |  | 32                              | %  |  | 9                           | % |  | 57   | %  |  | 47   | %  |  | 44   | % 
|Services and other                                                 |  | (12                             | )  |  | (4                          | ) |  | 43   |    |  | 53   |    |  | 56   |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Total revenues                                                     |  | 9                               |    |  | 2                           |   |  | 100  |    |  | 100  |    |  | 100  |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Cost of revenues:                                                  |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Subscription and maintenance                                       |  | 23                              |    |  | 21                          |   |  | 12   |    |  | 11   |    |  | 9    |   
|Services and other                                                 |  | (18                             | )  |  | (13                         | ) |  | 29   |    |  | 38   |    |  | 45   |   
|Amortization of acquired technology and customer intangible assets |  | 1                               |    |  | (10                         | ) |  | 4    |    |  | 5    |    |  | 5    |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Total cost of revenues                                             |  | (8                              | )  |  | (7                          | ) |  | 45   |    |  | 54   |    |  | 59   |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Gross profit                                                       |  | 28                              |    |  | 15                          |   |  | 55   |    |  | 46   |    |  | 41   |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Operating expenses:                                                |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Sales and marketing                                                |  | 18                              |    |  | 14                          |   |  | 34   |    |  | 31   |    |  | 28   |   
|Research and development                                           |  | 2                               |    |  | 2                           |   |  | 16   |    |  | 17   |    |  | 17   |   
|General and administrative                                         |  | 23                              |    |  | 21                          |   |  | 15   |    |  | 13   |    |  | 11   |   
|Other incomeSoftbank                                              |  | (96                             | )  |  | (0                          | ) |  | (0   | )  |  | (5   | )  |  | (5   | ) 
|Amortization of other intangible assets                            |  | 41                              |    |  | (34                         | ) |  | 0    |    |  | 0    |    |  | 0    |   
|Restructuring and integration costs (benefit)                      |  | NM                              |    |  | NM                          |   |  | 3    |    |  | (1   | )  |  | 9    |   
|Litigation provision                                               |  | NM                              |    |  |                            |   |  | 2    |    |  |     |    |  |     |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Total operating expenses                                           |  | 36                              |    |  | (6                          | ) |  | 70   |    |  | 55   |    |  | 60   |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Loss from operations                                               |  | (78                             | )  |  | 52                          |   |  | (15  | )  |  | (9   | )  |  | (19  | ) 
|Interest and other income, net                                     |  | (42                             | )  |  | 31                          |   |  | 2    |    |  | 5    |    |  | 4    |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Net loss before income taxes                                       |  | (209                            | )  |  | 72                          |   |  | (13  | )  |  | (4   | )  |  | (15  | ) 
|Provision for income taxes                                         |  | (62                             | )  |  | 26                          |   |  | 0    |    |  | 1    |    |  | 1    |   
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   
|Net loss                                                           |  | (174                            | )% |  | 69                          | % |  | (13  | )% |  | (5   | )% |  | (16  | )%
|                                                                   |  |                                 |    |  |                             |   |  |      |    |  |      |    |  |      |   



NM means not meaningful

Comparison of the Fiscal Years Ended September 30, 2008, 2007 and 2006

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.

Subscription and maintenance

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.



33



---

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 consist primarily of Ariba Buyer and Ariba Sourcing product maintenance fees. 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. We
anticipate that subscription revenues will increase in fiscal year 2009 compared to fiscal year 2008, partially offset by modest declines of maintenance revenues in fiscal year 2009.

Subscription and maintenance revenues for the year ended September 30, 2007 were $142.3 million, a 9% increase from subscription and maintenance
revenues of $130.1 million for the year ended September 30, 2006. Subscription revenues for the year ended September 30, 2007 were $67.6 million compared to $55.2 million for the year ended September 30, 2006. The increase of
$12.4 million, or 22%, was primarily due to growth in overall software bookings, a shift from perpetual license sales to more subscription sales and the growth of Ariba Supplier Network revenue. Maintenance revenues for the year ended
September 30, 2007 were $74.7 million compared to $74.8 million for the year ended September 30, 2006.

Services and
other

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 is primarily attributable to declines in managed services revenues and perpetual license revenues in the year
ended September 30, 2008. We anticipate that services and other revenues will decline slightly in fiscal year 2009 compared to fiscal year 2008 primarily due to continuing declines in perpetual license revenues.

Services and other revenues were $159.4 million for the year ended September 30, 2007, a 4% decrease from services and other revenues of $166.0
million for the year ended September 30, 2006. The decrease of $6.6 million in services and other revenues is primarily due to a shift from perpetual license sales to more subscription sales, a decline in renewals of Sourcing services revenues
in the year ended September 30, 2007 and a slight increase in the deferral of consulting services revenues in the year ended September 30, 2007 due to such services being bundled with other products or services without evidence of fair
value.

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, 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 is 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. We anticipate that cost of subscription and maintenance expenses will remain relatively consistent as a percentage of revenues in the year ending September 30, 2009 compared to the year ended September 30, 2008.

Cost of subscription and maintenance revenues for the year ended September 30, 2007 was $32.7 million, a 21% increase from cost of subscription and
maintenance revenues of $27.0 million for the year ended September 30, 2006. This increase is primarily the result of an increase in hosted support costs associated with the overall 22% increase in subscription revenues in the year ended
September 30, 2007.



34



---

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 $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 is 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 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. The decrease in compensation and benefits in the year ended September 30, 2008 is also attributed to 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 the Board of Directors of the Company to
eliminate bonuses for executives and reduce bonuses for certain key employees. 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, 2009 compared to the year ended September 30, 2008.

Cost of services and other revenues was $114.6 million for the
year ended September 30, 2007, a 13% decrease from cost of services and other revenues of $131.6 million for the year ended September 30, 2006. This decrease of $16.9 million is primarily due to the following: (1) decreased
compensation and benefits expense and travel expense of $3.9 million and $2.2 million, respectively, due to a slight decrease in average headcount resulting from our re-allocation of services personnel to sales efforts in fiscal year 2007 in
managing our transition to an on-demand model; (2) decreased overhead costs of $5.2 million associated with the slight decrease in average headcount; (3) decreased stock-based compensation of $2.2 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 and a decrease in stock-based compensation expense related to restricted stock grants; and (4) decreased temporary and contract
labor costs of $1.7 million primarily due to cost cutting efforts initiated in fiscal year 2007.

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 Softface and FreeMarkets. This expense amounted to $14.3 million, $14.1 million and $15.7 million for the years ended
September 30, 2008, 2007 and 2006, respectively, and primarily relates to our 2008 acquisition of Procuri and 2004 merger with FreeMarkets. The decrease in the year ended September 30, 2007 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, 2009 compared to the year ended September 30, 2008 due to decreases in
costs resulting from our merger with FreeMarkets 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, 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



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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 is also due to continued operational
improvements in consulting services in the year ended September 30, 2008.

Our gross profit as a percentage of revenues for the year
ended September 30, 2007 was 46% compared to 41% for the year ended September 30, 2006. The increase in gross profit as a percentage of revenues was primarily due to an increase in services and other gross profit as a percentage of
services and other revenues and due to the shift in our revenue mix, with subscription and maintenance revenues constituting a higher percentage of revenues and services and other constituting a lower percentage of revenue in fiscal year 2007
compared to fiscal year 2006. Our gross profit of services and other as a percentage of services and other revenues for the year ended September 30, 2007 was 28% compared to 21% for the year ended September 30, 2006, primarily due to
operational improvement in consulting and managed services.

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, 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 is 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 in time 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. We anticipate that sales and marketing expenses will remain relatively consistent as a percentage of revenues in the year ending September 30, 2009 compared to the year ended
September 30, 2008.

Sales and marketing expenses for the year ended September 30, 2007 were $93.9 million, a 14% increase from
sales and marketing expenses of $82.5 million for the year ended September 30, 2006. This increase of $11.4 million is primarily due to the following: (1) increased compensation and benefits expense of $6.2 million associated with an 18%
increase in average sales and marketing headcount in supporting our transition to an on-demand model; (2) increased sales commissions of $5.9 million primarily associated with reversals of sales commission of $5.5 million in the year ended
September 30, 2006; and (3) a $4.9 million insurance reimbursement in the year ended September 30, 2006 related to litigation expenses which had previously been charged to sales and marketing. These increases were partially offset by
a decrease in stock-based compensation expense of $3.6 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 and a decrease in stock-based
compensation expense related to restricted stock grants.



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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, consulting costs and the cost of software development tools and equipment. 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 is primarily attributable to
increased stock-based compensation expense of $1.0 million primarily due to restricted stock grants in the year ended September 30, 2008. We anticipate that research and development expenses will slightly decline as a percentage of revenues in
the year ending September 30, 2009 compared to the year ended September 30, 2008.

Research and development expenses for the year
ended September 30, 2007 were $51.2 million, a 2% increase from research and development expenses of $50.1 million for the year ended September 30, 2006. The increase of $1.1 million is primarily due to an increase in compensation and
benefits expense of $1.6 million, or 7%, due to an 8% increase in average headcount and a $739,000 increase in consulting expense related to the continued development of our on-demand solutions in fiscal year 2007. These increases were partially
offset by a decrease in stock-based compensation expense of $1.5 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 and a decrease in stock-based
compensation expense related to restricted stock grants.

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, 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 is 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 the Board of Directors of the Company to eliminate bonuses for executives and reduce bonuses for certain key employees within general and administrative. We
anticipate that general and administrative expenses will decline as a percentage of revenues in the year ending September 30, 2009 compared to the year ended September 30, 2008 due to reduced legal expenses.

General and administrative expenses for the year ended September 30, 2007 were $39.8 million, a 21% increase from general and administrative
expenses of $32.9 million for the year ended September 30, 2006. This increase of $6.9 million is primarily due to the following: (1) an increase in intellectual property related legal expenses of $5.3 million associated with legal
expenses related to patent infringement matters; and (2) increased overhead and salaries expense of $1.1 million and $1.0 million, respectively, associated with an 8% increase in average general and administrative headcount in supporting the
transition to an on-demand model. These increases were partially offset by a decrease in stock-based compensation expense of $1.3 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.



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Other incomeSoftbank

During the years ended September 30, 2008, 2007 and 2006, we recorded $566,000, $13.6 million 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 12 of Notes to Consolidated Financial Statements.

Amortization of other intangible
assets

Amortization of other intangible assets was $739,000, $525,000 and $800,000 in the years ended September 30, 2008, 2007 and
2006, 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 remain relatively consistent in the year ended September 30, 2009 as compared to the year ended September 30, 2008.

Restructuring and integration costs

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 with Efficient Frontier, Inc. (Efficient Frontier) 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.

For the year ended September 30, 2006, we recorded a charge to operations of $26.3 million for
restructuring and integration costs, which is comprised of the following: (1) in June 2006, we revised our estimates for rental rate projections to reflect current market conditions primarily in the Northern California real estate market and
sublease commencement dates, resulting in a charge of $24.4 million; (2) severance and related benefits of $273,000 resulting from our goal to better align expenses with our revenue levels and to enable us to invest in certain strategic growth
initiatives; (3) property taxes of $942,000 related to abandoned facilities in California based on a property tax audit assessment related to fiscal years 2003 through 2006; and (4) an adjustment to our restructuring obligation of $730,000
related to a prior period. We assessed our findings with respect to the prior period item using the guidance of Staff Accounting Bulletin (SAB) No. 99, and concluded that the amount of the error was immaterial to fiscal year 2006 and the
prior period.



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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. See Litigation  General
in Note 7 of Notes to Consolidated Financial Statements.

Interest and other income, net

Interest and other income, net for the year ended September 30, 2008 was $8.4 million, a decrease of $5.9 million from interest and other income, net
of $14.3 million for the year ended September 30, 2007. The decrease is 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. (Ariba Korea) and the substantial
liquidation of the entity in the year ended September 30, 2007.

Interest and other income, net for the year ended September 30,
2007 was $14.3 million, an increase of $3.4 million from interest and other income, net of $10.9 million for the year ended September 30, 2006. The increase is primarily attributable to the following: (1) an increase in interest income of
$2.6 million due to an overall increase in the rate of return on marketable investments and an increase in average cash and marketable securities balances in fiscal year 2007; (2) a net realized gain of $2.2 million associated with the
repatriation of cash from Ariba Korea, Ltd. (Ariba Korea) and the substantial liquidation of the entity in the year ended September 30, 2007; (3) an increase in foreign currency transaction gains in the amount of $1.3 million
on accounts receivable billed from Ariba, Inc. in foreign currencies to customers headquartered in foreign countries due to the U.S. dollar weakening against the Euro and British Pound; and (4) a net realized gain associated with currency
translation adjustments of $425,000 due to the substantial liquidation of FreeMarkets s.a./n.v., the former FreeMarkets entity in Belgium, in the year ended September 30, 2007. These amounts were partially offset by a gain of $1.9 million in
the year ended September 30, 2006 related to the settlement of a legal matter assumed in the merger with FreeMarkets and the release of a tax reserve of $800,000 in the year ended September 30, 2006.

Provision for income taxes

We
recorded income tax provisions of $743,000, $1.9 million and $1.5 million for the years ended September 30, 2008, 2007 and 2006, respectively. The decrease in the year ended September 30, 2008 is primarily attributable to a recovery of
foreign income taxes paid in previous periods in the current year related to a foreign subsidiary. The increase in the year ended September 30, 2007 is primarily attributable to an increase in withholding taxes associated with the repatriation
of cash from Ariba Korea in the year ended September 30, 2007.

As of September 30, 2008, we had net operating loss carryforwards
for federal, state and foreign tax purposes of approximately $1.4 billion, $793.0 million and $4.2 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 2028, from fiscal year 2009 through fiscal year 2028 and from fiscal year 2010 through fiscal year 2013, 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, 2008, 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 $99,000, which will expire in fiscal year 2019. We also had manufacturers credit carryforwards as of September 30, 2008 for
state tax purposes of approximately $1.1 million, which will expire in various years from fiscal year 2009 through fiscal year 2012.



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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.

Liquidity and Capital Resources

As of September 30, 2008, we had $107.4 million in cash, cash equivalents and long-term investments and $29.6 million in restricted cash, for total cash, cash equivalents, long-term investments and restricted cash of $137.0 million.
Our working deficit on September 30, 2008 was $41.2 million. All significant cash, cash equivalents, marketable securities and long-term investments are held in accounts in the United States. As of September 30, 2007, we had $153.0 million
in cash, cash equivalents, marketable securities and long-term investments and $30.0 million in restricted cash, for total cash, cash equivalents, marketable securities, long-term investments and restricted cash of $183.0 million. Our working
capital on September 30, 2007 was $35.9 million.

We hold a variety of interest-bearing auction rate securities (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 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 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. All of the ARS investments are investment grade quality and were in compliance with our
investment policy at the time of acquisition. We currently have the ability and intent to hold these ARS investments until a recovery of the auction process or until maturity. As of September 30, 2008, we reclassified the entire ARS investment
balance from marketable securities to 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, 2008. 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 $19.1 million of student loan securities and $4.9 million of commercial paper and credit derivative products was
adjusted by 300 basis points (bps) and 350 bps, 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 our ARS investments of $3.5 million, all of which was deemed temporary.

We review our impairments in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and related
guidance issued by the Financial Accounting Standards Board (FASB) and SEC 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. In evaluating the impairment of each ARS, we classified such impairment as temporary. The differentiating factors between temporary and other-
than-temporary impairment are primarily



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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 other-than-temporary impairment charge is required related to these investments. Such other-than-temporary impairment may be greater than the
$3.5 million currently accounted for as a temporary decline.

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 short-term 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 decided to modify our current investment strategy by limiting our investments in ARS to our current holdings and increasing
our investments in more liquid investments.

The decrease in total cash, cash equivalents, marketable securities, long-term investments and
restricted cash of $46.0 million in the year ended September 30, 2008 is primarily attributable to cash paid, net of cash acquired, of $55.6 million related to our acquisition of Procuri in the year ended September 30, 2008, partially
offset by cash flows from operations of in the year ended September 30, 2008.

The decrease in working capital of $77.1 million in the
year ended September 30, 2008 is primarily attributed to cash paid, net of cash acquired, of $55.6 million related to our acquisition of Procuri and the impact to our current liabilities of the increase in current deferred revenues of $19.4
million in the year ended September 30, 2008.

Net cash from operating activities was $21.6 million for the year ended
September 30, 2008, compared to net cash from operating activities of $16.6 million for the year ended September 30, 2007. Cash flows from 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.

Net cash from operating activities was $16.6 million for the year ended September 30, 2007, compared to net cash from operating activities of $22.5 million for the year ended September 30, 2006. Cash flows
from operating activities decreased $6.0 million primarily due to a higher net loss excluding non-cash charges and a $2.0 million increase in payments on lease abandonment accruals due to a payment of $5.4 million associated with surrendering the
abandoned space in Pittsburgh, Pennsylvania, partially offset by a decline of $3.4 million associated with the Mountain View, California lease that expired in October 2007.

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



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$16.9 million is 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 year ended September 30, 2008. Capital expenditures were relatively consistent in the years ended September 30, 2008 and 2007.

Net cash used in investing activities was $11.0 million for the year ended September 30, 2007, compared to net cash used in investing activities of
$37.1 million for the year ended September 30, 2006. The decrease is primarily attributable to the decrease in purchases of investments, net of sales of $27.9 million, partially offset by an increase in capital expenditures of $2.3 million due
to purchases of computer equipment in the year ended September 30, 2007.

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 repurchase of common stock in both periods represents 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. Proceeds from the issuance of common stock in both periods are attributed to stock option
exercises and the employee stock purchase plan.

Net cash provided by financing activities was $3.0 million for the year ended
September 30, 2007, compared to net cash provided by financing activities of $5.0 million for the year ended September 30, 2006. The repurchase of common stock in both periods represents 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. Proceeds from the issuance of common stock in both periods are attributed to stock option
exercises and the employee stock purchase program. The decrease in net cash provided by financing activities in the year ended September 30, 2007 of $2.0 million is attributed to a change in the terms of the employee stock purchase plan in
August 2006 whereby the option component of the plan was eliminated.

As of September 30, 2008, we did not have any 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 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 $3.2 million and escalate annually, with the total future minimum lease payments amounting to $184.8 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, 2008, as a form of security through fiscal year 2013. Also, we are required by other lease agreements to hold an additional $802,000 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 $29.6
million is classified as restricted cash on our consolidated balance sheet as of September 30, 2008.

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.



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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, 2008 (in thousands):



|                          |  |               |         |                           |   |         |                |  |   |        
|------------------------- |  | ------------- | ------- | ------------------------- | - | ------- | -------------- |  | - | -------
|Year Ending September 30, |  | LeasePayments |         | ContractualSubleaseIncome |   |         | NetObligations
|2009                      |  | $             | 46,807  |                           | $ | (11,410 | )              |  | $ | 35,397 
|2010                      |  |               | 47,313  |                           |   | (12,435 | )              |  |   | 34,878 
|2011                      |  |               | 48,051  |                           |   | (13,129 | )              |  |   | 34,922 
|2012                      |  |               | 49,993  |                           |   | (13,831 | )              |  |   | 36,162 
|2013                      |  |               | 19,731  |                           |   | (4,507  | )              |  |   | 15,224 
|Thereafter                |  |               | 10,723  |                           |   |        |                |  |   | 10,723 
|                          |  |               |         |                           |   |         |                |  |   |        
|Total                     |  | $             | 222,618 |                           | $ | (55,312 | )              |  | $ | 167,306
|                          |  |               |         |                           |   |         |                |  |   |        

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, 2008 noted above, $73.7 million is for occupied properties and $148.9
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, 2008.

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 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



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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 marketable securities, contingencies related to the
collectibility of accounts receivable and pending litigation and accounting for income taxes. 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 in accordance with SAB 104, Revenue Recognition, Emerging Issues Task Force
(EITF) 00-21, Revenue Arrangements with Multiple Deliverables, EITF 00-3, Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entitys Hardware, and
Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions. 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 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, we do not recognize revenue until the fee is collected.

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 accounted for under SOP 97-2 is based on vendor-specific objective evidence (VSOE) of fair value, which is limited to the price when sold separately. VSOE or other methods of determining fair
value that are allowable under EITF 00-21 are utilized for multiple element arrangements that are not subject to SOP 97-2.

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.



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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 recognizable under EITF 00-21 and license revenue deferred until all requirements of SOP 97-2 are met. Deferred revenue is recognized as revenue upon delivery of
the product, as services are rendered, or as other requirements under SAB 104, EITF 00-21 or SOP 97-2 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 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 in the past. We performed the annual assessment in the fourth quarter of fiscal years 2008, 2007 and 2006 and
no indication of goodwill impairment was noted. The balance of goodwill is $406.5 million as of September 30, 2008, 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.

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, 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, 2006, we revised our estimates for sublease rental rate projections to reflect continued soft market conditions
in the Northern California real estate market and sublease commencement dates, resulting in a charge of $24.4 million. The remaining charge in the year ended



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September 30, 2006 was related to property taxes of $942,000 based on a property tax audit assessment related to fiscal years 2003 through 2006 (see
Note 7 of Notes to Consolidated Financial Statements for further discussion) and an adjustment to the Companys restructuring obligation related to a prior period. The cumulative understatement of expenses for periods prior to the year ended
September 30, 2006 was approximately $730,000. We concluded that the effect of the adjustment was not material to fiscal year 2006 and the prior periods. We recorded the cumulative understatement as an increase in restructuring and integration
expense and to total operating expenses during the year ended September 30, 2006. During the year ended September 30, 2006, we also recorded a $472,000 decrease to the restructuring obligation due to the assignment of a lease of an excess
legacy FreeMarkets facility. The reversal of the remaining obligation related to this facility was recorded as a decrease to goodwill.

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.

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 sublessees 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 Notes 7 of Notes to Consolidated Financial Statements.

Our lease
abandonment accrual is net of $73.4 million of estimated sublease income. Actual sublease payments due under noncancelable subleases of excess facilities totaled $55.3 million as of September 30, 2008 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, 2008, 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 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 $1.7 million as of September 30, 2008.



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Fair value of marketable securities

We hold a variety of interest-bearing auction rate securities (ARS) that represent investments in pools of assets, including student loans,
commercial paper and credit derivative products. As of September 30, 2008, we held $19.1 million of student loan securities that failed to settle in auctions commencing February 2008 and $4.9 million 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 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. All of the ARS investments are investment grade quality and were in compliance with our investment policy at the time of acquisition. We currently
have the ability and intent to hold these ARS investments until a recovery of the auction process or until maturity. As of September 30, 2008, we have classified the entire ARS investment balance as long-term investments on our consolidated
balance sheet because of our current inability to predict that these investments will be available for settlement within the next twelve months. We have also modified our current investment strategy and increased our investments in more liquid money
market instruments.

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 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 model (DCF) to determine the estimated fair value of
our investment in ARS as of September 30, 2008. 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 $19.1 million of student loan securities and $4.9 million of commercial paper
and credit derivative products was adjusted by 300 basis points (bps) and 350 bps, 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 our ARS investments of $3.5 million, all of
which was deemed temporary.

The Company reviews its impairments in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and related guidance issued by the FASB and SEC 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. In evaluating the impairment of each ARS, the Company classified such impairment as temporary. 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
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 other-than-temporary impairment charge is required related to these investments. Such other-than-temporary impairment may be greater than the $3.5 million currently accounted for as
a temporary decline.



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Legal contingencies

We are subject to various claims and legal actions. See Legal Proceedings. We accrue for estimated losses in accordance with GAAP for those matters where we believe that the likelihood that a loss has
occurred is probable and the amount of loss is reasonably estimable. Although we currently believe that we have properly accrued for estimable and probable losses regarding the outcome of outstanding legal proceedings, claims and litigation
involving us, litigation is inherently uncertain, and there can be no assurance that existing or future litigation will not have a material adverse effect on our business, results of operations or financial condition or that the current amount of
accrued losses is sufficient for any actual losses that may be incurred.

Taxes

Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many
transactions and calculations where the ultimate tax outcome is uncertain. Such differences could have a material effect on our income tax provision and net income in the period in which such determination is made.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax
returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the period when the tax returns are filed and the global tax implications are known.

The amount of income tax we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments.
Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. However, our future results may include favorable or
unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, audits are closed or when statutes of limitation on potential assessments expire. Additionally, the jurisdictions in which our earnings or
deductions are realized may differ from our current estimates.

On October 1, 2007, we adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance
with SFAS No. 109, Accounting for Income Taxes. 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.

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



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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, 2008, 2007 and 2006, approximately 31%, 29% and 30%, 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, 2008 (in thousands):



|                 |  |          |                 |                |     |                             |       |  |   |     |  
|---------------- |  | -------- | --------------- | -------------- | --- | --------------------------- | ----- |  | - | --- | -
|                 |  | Buy/Sell |                 | Contract Value |     | UnrealizedGain (Loss)in USD |      
|                 |  |          | ForeignCurrency |                | USD |                            
|Foreign Currency |  |          |                 |                |     |                             |       |  |   |     |  
|Euro             |  | Sell     |                 | 3,500          |     | $                           | 5,446 |  | $ | 508 |  
|Swiss Franc      |  | Buy      |                 | 1,200          |     |                             | 1,104 |  |   | (33 | )
|Czech Koruna     |  | Buy      |                 | 15,000         |     |                             | 965   |  |   | (48 | )
|Singapore Dollar |  | Buy      |                 | 1,200          |     |                             | 882   |  |   | (22 | )
|                 |  |          |                 |                |     |                             |       |  |   |     |  
|Total            |  |          |                 |                |     | $                           | 8,397 |  | $ | 405 |  
|                 |  |          |                 |                |     |                             |       |  |   |     |  

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, 2008.

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 $840,000. 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.

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



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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. All investments in the table below are carried at market value, which approximates cost.

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 30,2009 |        |   | Year EndingSeptember 30,2010 |   | Year EndingSeptember 30,2011 |  |   | Year EndingSeptember 30,2012 |   | Year EndingSeptember 30,2013 |   |   | Thereafter |   |        | Total | 
|Cash equivalents            |  | $                            | 70,890 |   |                              | $ |                             |  | $ |                             |   |                              | $ |  |            | $ |       |       |  | $ |       |   |  | $ | 70,890  |  
|Average interest rate       |  |                              | 2.79   | % |                              |   |                             |  |   |                             |   |                              |   |  |            |   |       |       |  |   |       |   |  |   | 2.79    | %
|Investments                 |  | $                            |       |   |                              | $ |                             |  | $ |                             |   |                              | $ |  |            | $ |       |       |  | $ | 20,525 |   |  | $ | 20,525  |  
|Average interest rate       |  |                              |       |   |                              |   |                             |  |   |                             |   |                              |   |  |            |   |       |       |  |   | 3.32   | % |  |   | 3.32    | %
|Restricted cash             |  | $                            |       |   |                              | $ |                             |  | $ | 466                          |   |                              | $ |  |            | $ | 29,175 |       |  | $ |       |   |  | $ | 29,641  |  
|Average interest rate       |  |                              |       |   |                              |   |                             |  |   | 3.70                         | % |                              |   |  |            |   | 3.70   | %     |  |   |       |   |  |   | 3.70    | %
|                            |  |                              |        |   |                              |   |                              |  |   |                              |   |                              |   |   |            |   |        |       |  |   |        |   |  |   |         |  
|Total investment securities |  | $                            | 70,890 |   |                              | $ |                             |  | $ | 466                          |   |                              | $ |  |            | $ | 29,175 |       |  | $ | 20,525 |   |  | $ | 121,056 |  
|                            |  |                              |        |   |                              |   |                              |  |   |                              |   |                              |   |   |            |   |        |       |  |   |        |   |  |   |         |  

The table above does not include uninvested cash of $15.9 million held as of September 30,
2008. Total cash, cash equivalents, marketable securities, long-term investments and restricted cash as of September 30, 2008 was $137.0 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 Ernst & Young LLP, Independent Registered Public Accounting Firm                                         |  | 53        
|Consolidated Balance Sheets as of September 30, 2008 and 2007                                                      |  | 54        
|Consolidated Statements of Operations and Comprehensive Loss for the years ended September 30, 2008, 2007 and
2006 |  | 55        
|Consolidated Statements of Stockholders Equity for the years ended September 30, 2008, 2007 and
2006              |  | 56        
|Consolidated Statements of Cash Flows for the years ended September 30, 2008, 2007 and 2006                        |  | 57        
|Notes to Consolidated Financial Statements                                                                         |  | 58        



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Report of Ernst & Young LLP, 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, 2008 and 2007,
and the related consolidated statements of operations and comprehensive loss, stockholders equity, and cash flows for each of the three years in the period ended September 30, 2008. 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 as of September 30, 2008 and 2007, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 2008, 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, 2008, 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 18, 2008 expressed an unqualified opinion thereon.

As discussed in Note 1 to the consolidated financial statements, the
Company adopted FIN 48: Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No.109, effective October 1, 2007.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

November 18, 2008



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ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in
thousands, except per share amounts)



|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                            |  | September 30,2008 |            |   | September 30,2007 |  
|ASSETS                                                                                                                                                      |  |                   |            |   |                   |   |            |  
|Current assets:                                                                                                                                             |  |                   |            |   |                   |   |            |  
|Cash and cash equivalents                                                                                                                                   |  | $                 | 86,804     |   |                   | $ | 61,311     |  
|Marketable securities                                                                                                                                       |  |                   |           |   |                   |   | 83,667     |  
|Restricted cash                                                                                                                                             |  |                   |           |   |                   |   | 820        |  
|Accounts receivable, net of allowance for doubtful accounts of $1,938 and $1,973 in 2008 and 2007, respectively                                             |  |                   | 28,968     |   |                   |   | 29,130     |  
|Prepaid expenses and other current assets                                                                                                                   |  |                   | 7,859      |   |                   |   | 10,743     |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total current assets                                                                                                                                        |  |                   | 123,631    |   |                   |   | 185,671    |  
|Property and equipment, net                                                                                                                                 |  |                   | 19,773     |   |                   |   | 20,230     |  
|Long-term investments                                                                                                                                       |  |                   | 20,525     |   |                   |   | 8,048      |  
|Restricted cash, less current portion                                                                                                                       |  |                   | 29,641     |   |                   |   | 29,200     |  
|Goodwill                                                                                                                                                    |  |                   | 406,507    |   |                   |   | 326,101    |  
|Other intangible assets, net                                                                                                                                |  |                   | 23,965     |   |                   |   | 10,461     |  
|Other assets                                                                                                                                                |  |                   | 3,419      |   |                   |   | 3,875      |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total assets                                                                                                                                                |  | $                 | 627,461    |   |                   | $ | 583,586    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                        |  |                   |            |   |                   |   |            |  
|Current liabilities:                                                                                                                                        |  |                   |            |   |                   |   |            |  
|Accounts payable                                                                                                                                            |  | $                 | 12,202     |   |                   | $ | 10,882     |  
|Accrued compensation and related liabilities                                                                                                                |  |                   | 21,480     |   |                   |   | 24,192     |  
|Accrued liabilities                                                                                                                                         |  |                   | 15,677     |   |                   |   | 18,976     |  
|Restructuring obligations                                                                                                                                   |  |                   | 19,925     |   |                   |   | 19,065     |  
|Deferred revenue                                                                                                                                            |  |                   | 95,519     |   |                   |   | 76,110     |  
|Deferred incomeSoftbank                                                                                                                                    |  |                   |           |   |                   |   | 566        |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total current liabilities                                                                                                                                   |  |                   | 164,803    |   |                   |   | 149,791    |  
|Deferred rent obligations                                                                                                                                   |  |                   | 18,174     |   |                   |   | 22,628     |  
|Restructuring obligations, less current portion                                                                                                             |  |                   | 41,121     |   |                   |   | 52,106     |  
|Deferred revenue, less current portion                                                                                                                      |  |                   | 6,396      |   |                   |   | 7,917      |  
|Other liabilities                                                                                                                                           |  |                   | 5,949      |   |                   |   |           |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total liabilities                                                                                                                                           |  |                   | 236,443    |   |                   |   | 232,442    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|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; 86,928 and 78,628 shares issued and outstanding as of September 30, 2008 and
2007, respectively |  |                   | 174        |   |                   |   | 157        |  
|Additional paid-in capital                                                                                                                                  |  |                   | 5,154,137  |   |                   |   | 5,067,993  |  
|Accumulated other comprehensive (loss) income                                                                                                               |  |                   | (3,094     | ) |                   |   | 1,112      |  
|Accumulated deficit                                                                                                                                         |  |                   | (4,760,199 | ) |                   |   | (4,718,118 | )
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total stockholders equity                                                                                                                                  |  |                   | 391,018    |   |                   |   | 351,144    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  
|Total liabilities and stockholders equity                                                                                                                  |  | $                 | 627,461    |   |                   | $ | 583,586    |  
|                                                                                                                                                            |  |                   |            |   |                   |   |            |  

See accompanying notes to consolidated financial statements.



54



---

ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)



|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------ | ------- | - | -------- | - | ------- | -------- |  | - | ------- | -
|                                                                               |  | Year Ended September 30, |        
|                                                                               |  | 2008                     |         |   | 2007 (1) |   |         | 2006 (1) | 
|Revenues:                                                                      |  |                          |         |   |          |   |         |          |  |   |         |  
|Subscription and maintenance                                                   |  | $                        | 187,150 |   |          | $ | 142,309 |          |  | $ | 130,057 |  
|Services and other                                                             |  |                          | 140,910 |   |          |   | 159,358 |          |  |   | 165,959 |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Total revenues                                                                 |  |                          | 328,060 |   |          |   | 301,667 |          |  |   | 296,016 |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Cost of revenues:                                                              |  |                          |         |   |          |   |         |          |  |   |         |  
|Subscription and maintenance                                                   |  |                          | 40,088  |   |          |   | 32,709  |          |  |   | 27,039  |  
|Services and other                                                             |  |                          | 94,189  |   |          |   | 114,615 |          |  |   | 131,551 |  
|Amortization of acquired technology and customer intangible assets             |  |                          | 14,257  |   |          |   | 14,074  |          |  |   | 15,702  |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Total cost of revenues                                                         |  |                          | 148,534 |   |          |   | 161,398 |          |  |   | 174,292 |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Gross profit                                                                   |  |                          | 179,526 |   |          |   | 140,269 |          |  |   | 121,724 |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Operating expenses:                                                            |  |                          |         |   |          |   |         |          |  |   |         |  
|Sales and marketing                                                            |  |                          | 110,834 |   |          |   | 93,904  |          |  |   | 82,456  |  
|Research and development                                                       |  |                          | 52,270  |   |          |   | 51,159  |          |  |   | 50,085  |  
|General and administrative                                                     |  |                          | 48,919  |   |          |   | 39,780  |          |  |   | 32,850  |  
|Other incomeSoftbank                                                          |  |                          | (566    | ) |          |   | (13,564 | )        |  |   | (13,585 | )
|Amortization of other intangible assets                                        |  |                          | 739     |   |          |   | 525     |          |  |   | 800     |  
|Restructuring and integration costs (benefit)                                  |  |                          | 10,108  |   |          |   | (4,194  | )        |  |   | 26,321  |  
|Litigation provision                                                           |  |                          | 5,900   |   |          |   |        |          |  |   |        |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Total operating expenses                                                       |  |                          | 228,204 |   |          |   | 167,610 |          |  |   | 178,927 |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Loss from operations                                                           |  |                          | (48,678 | ) |          |   | (27,341 | )        |  |   | (57,203 | )
|Interest and other income, net                                                 |  |                          | 8,359   |   |          |   | 14,301  |          |  |   | 10,935  |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Net loss before income taxes                                                   |  |                          | (40,319 | ) |          |   | (13,040 | )        |  |   | (46,268 | )
|Provision for income taxes                                                     |  |                          | 743     |   |          |   | 1,937   |          |  |   | 1,533   |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Net loss                                                                       |  | $                        | (41,062 | ) |          | $ | (14,977 | )        |  | $ | (47,801 | )
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Net loss per sharebasic and diluted                                           |  | $                        | (0.53   | ) |          | $ | (0.21   | )        |  | $ | (0.73   | )
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Weighted average shares used in computing net loss per sharebasic and diluted |  |                          | 77,318  |   |          |   | 70,106  |          |  |   | 65,924  |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Comprehensive loss:                                                            |  |                          |         |   |          |   |         |          |  |   |         |  
|Net loss                                                                       |  | $                        | (41,062 | ) |          | $ | (14,977 | )        |  | $ | (47,801 | )
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Unrealized (loss) gain on investments                                          |  |                          | (3,005  | ) |          |   | (510    | )        |  |   | 128     |  
|Foreign currency translation adjustment                                        |  |                          | (1,201  | ) |          |   | 772     |          |  |   | 626     |  
|Cash flow hedge                                                                |  |                          |        |   |          |   |        |          |  |   | (290    | )
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Other comprehensive (loss) income                                              |  |                          | (4,206  | ) |          |   | 262     |          |  |   | 464     |  
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  
|Comprehensive loss                                                             |  | $                        | (45,268 | ) |          | $ | (14,715 | )        |  | $ | (47,337 | )
|                                                                               |  |                          |         |   |          |   |         |          |  |   |         |  



|(1) | The Company made certain reclassifications to prior year amounts to conform to the current year presentation, none of which affected net loss or net loss per share. See Note 1 of
Notes to Consolidated Financial Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



55



---

ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(in thousands, except share amounts)



|                                                                 |  |              |   |  |                          |     |   |                                 |   |           |                                            |  |   |                    |   |  |                          |        |   |  |   |            |   |  |   |         |  
|---------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | --- | - | ------------------------------- | - | --------- | ------------------------------------------ |  | - | ------------------ | - |  | ------------------------ | ------ | - |  | - | ---------- | - |  | - | ------- | -
|                                                                 |  | Common Stock |   |  | AdditionalPaid-InCapital |     |   | DeferredStock-BasedCompensation |   |           | AccumulatedOtherComprehensive(Loss) Income |  |   | AccumulatedDeficit |   |  | TotalStockholdersEquity |       
|                                                                 |  | Shares       |   |  | Amount                   |     |   |                                 |   |           |                                           
|Balances at September 30, 2005                                   |  | 71,736,681   |   |  | $                        | 143 |   |                                 | $ | 5,023,965 |                                            |  | $ | (35,537            | ) |  | $                        | 3,011  |   |  | $ | (4,655,340 | ) |  | $ | 336,242 |  
|SFAS No. 123R adjustment                                         |  |             |   |  |                          |    |   |                                 |   | (37,656   | )                                          |  |   | 35,537             |   |  |                          |       |   |  |   |           |   |  |   | (2,119  | )
|Exercise of stock options                                        |  | 407,681      |   |  |                          | 1   |   |                                 |   | 2,799     |                                            |  |   |                   |   |  |                          |       |   |  |   |           |   |  |   | 2,800   |  
|Issuance of common stock                                         |  | 1,005,330    |   |  |                          | 2   |   |                                 |   | 5,344     |                                            |  |   |                   |   |  |                          |       |   |  |   |           |   |  |   | 5,346   |  
|Issuance of restricted stock, net of cancellations               |  | 2,656,798    |   |  |                          | 6   |   |                                 |   | (6        | )                                          |  |   |                   |   |  |                          |       |   |  |   |           |   |  |   |        |  
|Exchange and retirement of employee-owned mature stock for taxes |  | (395,850     | ) |  |                          | (1  | ) |                                 |   | (3,133    | )                                          |  |   |                   |   |  |                          |       |   |  |   |           |   |  |   | (3,134  | )
|Amortization of stock-based compensation                         |  |             |   |  |                          |    |   |                                 |   | 41,225    |                                            |  |   |                   |   |  |                          |       |   |  |   |           |   |  |   | 41,225  |  
|Unrealized investment gain, net                                  |  |             |   |  |                          |    |   |                                 |   |          |                                            |  |   |                   |   |  |                          | 128    |   |  |   |           |   |  |   | 128     |  
|Foreign currency translation adjustment                          |  |             |   |  |                          |    |   |                                 |   |          |                                            |  |   |                   |   |  |                          | 626    |   |  |   |           |   |  |   | 626     |  
|Cash flow hedge                                                  |  |             |   |  |                          |    |   |                                 |   |          |                                            |  |   |                   |   |  |                          | (290   | ) |  |   |           |   |  |   | (290    | )
|Net loss                                                         |  |             |   |  |                          |    |   |                                 |   |          |                                            |  |   |                   |   |  |                          |       |   |  |   | (47,801    | ) |  |   | (47,801 | )
|                                                                 |  |              |   |  |                          |     |   |                                 |   |           |                                            |  |   |                    |   |  |                          |        |   |  |   |            |   |  |   |         |  
|Balances at September 30, 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 (Note 6)                                       |  |             |   |  |                          |    |   |                                 |   |          |                                            |  |   |                   |   |  |                          |       |   |  |   | (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 |  
|                                                                 |  |              |   |  |                          |     |   |                                 |   |           |                                            |  |   |                    |   |  |                          |        |   |  |   |            |   |  |   |         |  

See accompanying notes to consolidated financial statements.



56



---

ARIBA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                |  | Year Ended September 30, |        
|                                                                                |  | 2008                     |         |   | 2007 |   |          | 2006 | 
|Operating activities:                                                           |  |                          |         |   |      |   |          |      |  |   |          |  
|Net loss                                                                        |  | $                        | (41,062 | ) |      | $ | (14,977  | )    |  | $ | (47,801  | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                          |         |   |      |   |          |      |  |   |          |  
|Provisions for (recovery of) doubtful accounts                                  |  |                          | 506     |   |      |   | (267     | )    |  |   | 131      |  
|Depreciation and amortization                                                   |  |                          | 22,899  |   |      |   | 21,609   |      |  |   | 23,351   |  
|Stock-based compensation                                                        |  |                          | 40,859  |   |      |   | 32,449   |      |  |   | 41,225   |  
|Restructuring                                                                   |  |                          | 10,108  |   |      |   | (4,194   | )    |  |   | 26,321   |  
|Realized gainscurrency translation adjustment                                  |  |                          |        |   |      |   | (2,625   | )    |  |   |         |  
|Impairment of equity investments                                                |  |                          |        |   |      |   |         |      |  |   | 149      |  
|Changes in operating assets and liabilities:                                    |  |                          |         |   |      |   |          |      |  |   |          |  
|Accounts receivable                                                             |  |                          | 3,609   |   |      |   | 2,801    |      |  |   | 10,095   |  
|Prepaid expenses and other assets                                               |  |                          | 5,948   |   |      |   | (945     | )    |  |   | (783     | )
|Accounts payable                                                                |  |                          | 1,225   |   |      |   | 1,019    |      |  |   | 709      |  
|Accrued compensation and related liabilities                                    |  |                          | (3,687  | ) |      |   | (502     | )    |  |   | (5,352   | )
|Accrued liabilities                                                             |  |                          | (7,914  | ) |      |   | (3,554   | )    |  |   | (3,067   | )
|Deferred revenue                                                                |  |                          | 13,258  |   |      |   | 18,351   |      |  |   | 8,200    |  
|Deferred incomeSoftbank                                                        |  |                          | (566    | ) |      |   | (13,564  | )    |  |   | (13,585  | )
|Restructuring obligations                                                       |  |                          | (23,592 | ) |      |   | (19,028  | )    |  |   | (17,055  | )
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                       |  |                          | 21,591  |   |      |   | 16,573   |      |  |   | 22,538   |  
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Investing activities:                                                           |  |                          |         |   |      |   |          |      |  |   |          |  
|Cash paid for acquisitions, net of cash acquired                                |  |                          | (55,638 | ) |      |   |         |      |  |   |         |  
|Purchases of property and equipment                                             |  |                          | (7,657  | ) |      |   | (7,410   | )    |  |   | (5,085   | )
|Proceeds from maturities and sales of investments                               |  |                          | 97,953  |   |      |   | 145,725  |      |  |   | 121,681  |  
|Purchases of investments                                                        |  |                          | (29,768 | ) |      |   | (151,181 | )    |  |   | (155,071 | )
|Allocation from restricted cash, net                                            |  |                          | 1,022   |   |      |   | 1,830    |      |  |   | 1,425    |  
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) investing activities                             |  |                          | 5,912   |   |      |   | (11,036  | )    |  |   | (37,050  | )
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Financing activities:                                                           |  |                          |         |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of common stock                                          |  |                          | 6,394   |   |      |   | 6,570    |      |  |   | 8,146    |  
|Repurchase of common stock                                                      |  |                          | (7,203  | ) |      |   | (3,558   | )    |  |   | (3,134   | )
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Net cash (used in) provided by financing activities                             |  |                          | (809    | ) |      |   | 3,012    |      |  |   | 5,012    |  
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                    |  |                          | (1,201  | ) |      |   | 765      |      |  |   | 588      |  
|Net increase (decrease) in cash and cash equivalents                            |  |                          | 25,493  |   |      |   | 9,314    |      |  |   | (8,912   | )
|Cash and cash equivalents at beginning of year                                  |  |                          | 61,311  |   |      |   | 51,997   |      |  |   | 60,909   |  
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents at end of year                                        |  | $                        | 86,804  |   |      | $ | 61,311   |      |  | $ | 51,997   |  
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  
|Supplemental disclosures of cash flow information:                              |  |                          |         |   |      |   |          |      |  |   |          |  
|Net cash paid for income taxes                                                  |  | $                        | 1,816   |   |      | $ | 2,461    |      |  | $ | 1,516    |  
|                                                                                |  |                          |         |   |      |   |          |      |  |   |          |  

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 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 enterprise resource planning and other software systems and can be used by companies of all sizes across industries worldwide. 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.

Reclassifications

As license
revenues are less than 10% of total revenues in each of the periods in the 3-year period ended September 30, 2008, the Company reclassified $18.2 million and $23.9 million of license revenues from revenueslicense in the years ended
September 30, 2007 and 2006 to revenues-subscription and maintenance and revenues-services and other. The Company also reclassified $1.7 million and $2.0 million of license cost of revenues from cost of revenueslicense in the years ended
September 30, 2007 and 2006 to cost of revenues-services and other. The following table reflects the effects of the license reclassification for the years ended September 30, 2007 and 2006 (in thousands):



|                                      |  |                               |         |                               |   |                       |  |                |         |  |   |        
|------------------------------------- |  | ----------------------------- | ------- | ----------------------------- | - | --------------------- |  | -------------- | ------- |  | - | -------
|                                      |  | Year Ended September 30, 2007 |         | Year Ended September 30, 2006
|                                      |  | As PreviouslyReported         |         | AsReclassified                |   | As PreviouslyReported |  | AsReclassified
|Revenueslicense                      |  | $                             | 18,215  |                               | $ |                      |  | $              | 23,914  |  | $ |       
|Revenuessubscription and maintenance |  | $                             | 140,606 |                               | $ | 142,309               |  | $              | 126,626 |  | $ | 130,057
|Revenuesservices and other           |  | $                             | 142,846 |                               | $ | 159,358               |  | $              | 145,476 |  | $ | 165,959

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 certain marketable securities, contingencies related to the collectibility of accounts receivable and pending litigation and accounting for income taxes. In addition, we use assumptions to estimate the
fair value of stock-based compensation.

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.



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Marketable securities and long-term investments

The Company holds a variety of interest-bearing auction rate securities (ARS) that represent investments in pools of assets, including student
loans, commercial paper and credit derivative products. As of September 30, 2008, the Company holds $19.1 million of student loan securities that failed to settle in auctions commencing February 2008 and $4.9 million 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 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. All of the ARS investments are investment grade quality and were in compliance with the Companys
investment policy at the time of acquisition. The Company currently has the ability and intent to hold these ARS investments until a recovery of the auction process or until maturity. As of September 30, 2008, 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.

Typically, 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, 2008. 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 $19.1 million of student loan securities and $4.9 million of commercial paper and credit derivative products was adjusted by 300 basis points (bps) and 350 bps, 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 $3.5 million, all of which was deemed temporary.

The Company reviews its impairments in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, and related guidance issued by the
Financial Accounting Standards Board (FASB) and Security and Exchange Commission (SEC) 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. In evaluating the impairment of each ARS, the Company classified such impairment as temporary. 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 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 other-than-temporary impairment charge is required related to these investments. Such other-than-temporary impairment may be greater than the $3.5 million currently
accounted for as a temporary decline.



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Fair value of financial instruments and concentration of credit risk

The carrying value of the Companys financial instruments, including cash and cash equivalents, marketable securities, long-term investments,
accounts receivable and accounts payable approximates fair value. Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, long-term investments and trade
accounts receivable. The Company maintains its cash, cash equivalents, marketable securities 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 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, 2008, 2007 and 2006. No customer accounted for more than 10% of net accounts receivable as of September 30, 2008. However, one customer accounted for more than 10% of net accounts receivable as of September 30, 2007.

Allowance for doubtful accounts

The Company evaluates the collectibility 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.

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 in current operations in interest and other income, net. The Company recognized gains of approximately $2.9 million, $2.2 million and $892,000
for the years ended September 30, 2008, 2007 and 2006, respectively.

The Company uses derivative financial instruments for the
purpose of reducing its exposure to adverse fluctuations in foreign exchange rates. While these hedging instruments are subject to fluctuations in value, such fluctuations are generally offset by the value of the underlying exposures being hedged.
The Company is not a party to leveraged derivatives and does not hold or issue financial instruments for speculative purposes.

The Company
routinely uses forward exchange contracts to hedge its net exposures, by currency, related to the monetary assets and liabilities of its operations denominated in non-functional currency. The Company utilizes forward exchange contracts to hedge
trade and intercompany receivables and payables. In addition, from time to time, the Company may enter into forward exchange contracts to establish with certainty the U.S. dollar amount of future firm commitments denominated in a foreign currency.
The primary business objective of this hedging program is to minimize the gains and losses resulting from exchange rate changes.

The
forward foreign exchange contracts require the Company to exchange foreign currencies for U.S. dollars or vice versa and such contracts generally mature in six months or less. These contracts are marked to market through operations each period. As
of September 30, 2008, the Companys outstanding foreign exchange contracts were in Euros (EUR), Swiss Francs (CHF), Czech Koruna (CZK) and Singapore Dollars (SGD) and had a notional amount of $8.4 million, and these contracts had
remaining maturities of three months or less. As



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of September 30, 2007, the Companys outstanding foreign exchange contracts in Euros (EUR), Japanese Yen (JPY), Swiss Francs (CHF), Czech Koruna
(CZK), Singapore Dollars (SGD) and British Pounds (GBP) had a notional amount of $6.0 million, and these contracts had remaining maturities of three months or less.

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.

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 betterments are capitalized, while the costs of maintenance and repairs are charged against earnings as incurred.

Impairment of long-lived assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal 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 in accordance with SFAS No. 144. 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, 2008.

Factors the
Company considers important 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, a significant decline in the Companys stock price for a sustained period, 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



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significant declines since January 2004. The Company performed the annual assessment in the fourth quarter of fiscal years 2008, 2007 and 2006 and no
indication of impairment was noted. The balance of goodwill is $406.5 million as of September 30, 2008, 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.

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. 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 in accordance with Staff
Accounting Bulletin (SAB) 104, Revenue Recognition, Emerging Issues Task Force (EITF) 00-21, Revenue Arrangements with Multiple Deliverables, EITF 00-3, Application of AICPA Statement of Position 97-2 to
Arrangements That Include the Right to Use Software Stored on Another Entitys Hardware, and Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions. 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 accounted for under SOP 97-2 is based on vendor-specific objective evidence (VSOE) of fair value,
which is limited to the price when sold separately. VSOE or other methods of determining fair value that are allowable under EITF 00-21 are utilized for multiple element arrangements that are not subject to SOP 97-2.

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.



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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 under EITF 00-21 and license revenue deferred until all requirements of SOP 97-2 are met. Deferred
revenue is recognized as revenue upon delivery of the Companys product, as services are rendered, or as other requirements under SAB 104, EITF 00-21 or SOP 97-2 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

In accordance with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed, 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.

The Company follows the guidance set forth in SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, in
accounting for the development of its on-demand application service. SOP 98-1 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, which is three years. At September 30, 2008, the Company had approximately $2.1 million of capitalized software related to our enterprise resource planning system implementation that was not yet in use
and, as such, was not yet being amortized.

Advertising expense

Advertising costs are expensed as incurred and totaled $606,000, $743,000 and $154,000 during the years ended September 30, 2008, 2007 and 2006,
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.

Effective October 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123R, Share-Based Payment. This
statement applies to all awards granted after the effective date and to modifications, repurchases or cancellations of existing awards. Additionally, under the modified prospective transition method



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of adoption, the Company recognizes compensation expense for the portion of outstanding awards on the adoption date for which the requisite service period
has not yet been rendered based on the grant-date fair value of those awards calculated under SFAS No. 123 and SFAS No. 148. The Company amortizes the fair value of awards granted both before and after October 1, 2005 on an
accelerated basis.

SFAS No. 123R 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 cumulative effect of the use of the estimated forfeiture method for prior periods upon adoption of SFAS No. 123R was not material.

Determining Fair Value

Valuation
and amortization method.The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model and a multiple option award approach. All options are amortized over the requisite service periods of the
awards, which are generally the vesting periods, and are amortized using the accelerated method.

Expected term. The expected term
of options granted represents the period of time that they are expected to be outstanding. The Company estimates the expected term of options granted based on historical exercise patterns, which the Company believes are representative of future
behavior.

Expected volatility. The Company estimates the volatility of its common stock in the Black-Scholes option valuation at
the date of grant based on historical volatility rates over the expected term, consistent with SFAS No. 123R.

Risk-free
interest rate.The Company bases the risk-free interest rate in the Black-Scholes option valuation model on the implied yield in effect at the time of option grant on U.S. Treasury zero-coupon issues with equivalent remaining terms.

Dividends.The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the
foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model.

Forfeitures.SFAS No. 123R requires the Company to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to
estimate pre-vesting option forfeitures and records share-based compensation expense only for those awards that are expected to vest.

The
Company did not grant stock options in the years ended September 30, 2008 and 2007. The Company granted 8,600 options in the year ended September 30, 2006. The fair value of options granted were estimated at the date of grant using the
Black-Scholes option pricing model and the following assumptions: expected life of 2.5 years, risk-free interest rate of 4.37%, volatility of 79% and dividend yield of 0%.

The Company modified the terms of its employee stock purchase plan in August 2006 to eliminate the option component associated with the plan. The fair
value of the option component of the employee stock purchase plan prior to August 2006 was estimated at the date of grant using a Black-Scholes option-pricing model. The following weighted-average assumptions were used in each quarter of fiscal
2006: expected life of 1.25 years, risk-free interest rate of 4.34%, volatility of 51% and dividend yield of 0%. The following weighted-average assumptions were used in each quarter of fiscal 2005: expected life of 1.25 years, risk-free interest
rate of 3.89%, volatility of 45% and dividend yield of 0%.

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, 2008, 2007 and 2006, the Company recorded $677,000, $2.4 million and $9.4 million,
respectively, of stock-based compensation expense associated with employee and director stock options and employee stock purchase plan programs.



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During the years ended September 30, 2008, 2007 and 2006, the Company granted 2.7 million,
1.9 million and 3.6 million shares, respectively, of restricted common stock to executive officers and certain employees with a fair value of $31.3 million, $17.5 million and $31.7 million, respectively. These amounts are being amortized
in accordance with SFAS 123R, over the vesting period of the individual restricted common stock grants, which are two to three years.

During the year ended September 30, 2008, the Company also granted 1.0 million shares of restricted common stock to executive officers and certain key employees with a fair value of $12.2 million, whose vesting and the number of
shares were contingent upon meeting performance milestones related to subscription software revenues for the year ended September 30, 2008 and upon subsequent service periods. The number of shares that will vest upon meeting the performance
milestones and subsequent service periods is up to 200%, or 2.1 million shares with a fair value of $24.4 million. 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 performance milestone was achieved at 200% in the year ended September 30, 2008 and compensation
expense is recorded based upon the fair value based on the closing price on the date of grant over the vesting period, or three years.

During the years ended September 30, 2008, 2007 and 2006, the Company recorded $37.4 million, $27.5 million and $30.4 million, respectively, of stock-based compensation expense associated with restricted stock grants. As of
September 30, 2008, there was $31.8 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 0.9 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 $2.7 million, $2.5 million and $1.4 in the years ended September 30, 2008, 2007 and 2006, respectively.

Total stock-based compensation of $40.9 million, $32.4 million and $41.2 million was recorded in the years ended September 30, 2008, 2007 and 2006,
respectively, to various cost and operating expense categories as follows (in thousands):



|                                              |  |                          |        |      |   |        |  |   |       
|--------------------------------------------- |  | ------------------------ | ------ | ---- | - | ------ |  | - | ------
|                                              |  | Year Ended September 30,
|                                              |  | 2008                     |        | 2007 |   | 2006  
|Cost of revenuessubscription and maintenance |  | $                        | 2,262  |      | $ | 2,023  |  | $ | 2,309 
|Cost of revenuesservices and other           |  |                          | 5,758  |      |   | 7,169  |  |   | 9,344 
|Sales and marketing                           |  |                          | 15,915 |      |   | 10,102 |  |   | 13,681
|Research and development                      |  |                          | 6,226  |      |   | 5,199  |  |   | 6,670 
|General and administrative                    |  |                          | 10,698 |      |   | 7,956  |  |   | 9,221 
|                                              |  |                          |        |      |   |        |  |   |       
|Total                                         |  | $                        | 40,859 |      | $ | 32,449 |  | $ | 41,225
|                                              |  |                          |        |      |   |        |  |   |       

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.



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On October 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS
No. 109, Accounting for Income Taxes. 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.

Net loss per share

Net loss per share is calculated in accordance with SFAS No. 128, Earnings per Share. Under the provisions of SFAS No. 128, basic net
loss per share is computed by dividing the net 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 loss per share is computed by
dividing the net 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 warrants and employee stock purchase plans shares.

Comprehensive loss

Comprehensive 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.

Adoption of accounting standards and new accounting standards

In September 2006, the FASB
issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair
value measurements. In October 2008, the FASB issued FASB Staff Position (FSP) No. 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active, which clarifies the application of SFAS No. 157
when the market for a financial asset is inactive. Specifically, FSP No. 157-3 clarifies how (1) managements internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable
market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. The
provisions of SFAS No. 157 and FSP No. 157-3 are effective for the fiscal year beginning October 1, 2008. The Company does not expect that the adoption of SFAS No. 157 and FSP No. 157-3 will have a material effect on the
Companys financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115, which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain
financial assets and liabilities on an instrument-by-instrument basis. Subsequent measurements for the financial assets and liabilities an entity elects to record at fair value will be recognized in earnings. SFAS No. 159 also establishes
additional disclosure requirements. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted provided that the entity also adopts SFAS No. 157. SFAS No. 159 is effective
October 1, 2008. The Company does not expect that the adoption of SFAS No. 159 will have a material effect on the Companys financial position, results of operations or cash flows.



66



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In December 2007, the FASB issued SFAS No. 141 (revised), 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. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact of the provisions of SFAS No. 141(R)
and will adopt this standard on October 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. 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, SFAS No. 160 revises the accounting for both increases and decreases in a parents controlling ownership interest. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, with early adoption
prohibited. The Company will evaluate the impact of the provisions of SFAS No. 160 and will adopt this standard on October 1, 2009.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133.SFAS No. 161 requires disclosures of how and why an entity uses
derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. SFAS No. 161
is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. The Company will evaluate the impact of the provisions of SFAS No. 161 and will adopt this standard on October 1, 2009.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets. FSP No. 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve
the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (Revised 2007), Business
Combinations. FSP No. 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. The Company will evaluate the impact the provisions of FSP No. 142-3 and will adopt this standard on
October 1, 2009.

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. A total of $9.2 million of cash remains in escrow by a third-party escrow agent for indemnification
claims. The escrow shall be released 18 months after the closing of the merger, subject to claims against the escrow. There is an additional indemnification obligation of $7.0 million by the stockholders of Procuri outside the escrow that shall
expire 30 months after the closing of the merger with respect to certain intellectual property and tax representations.



67



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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 Company is still in the process of finalizing the valuation of the acquired assets and liabilities, and therefore the purchase price allocation is preliminary and subject to change once finalized. The primary areas of
the purchase price allocation that are not yet finalized relate to the valuation of non-income based taxes. The following is a summary of the preliminary 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 |  
|                                             |  |   |         |  

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 7 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 |                             |   |                                           |   |                                       |  |                  
|                                                     |  |                          |        |                             |   |                                           |   |                                       |  |                  



68



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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 collectibility 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.

Changes in the
allowance for doubtful accounts for the years ended September 30, 2008, 2007 and 2006 are as follows (in thousands):



|                                |  |                              |       |           |                           |      |                        |  |   |        |   |  |   |      
|------------------------------- |  | ---------------------------- | ----- | --------- | ------------------------- | ---- | ---------------------- |  | - | ------ | - |  | - | -----
|Classification                  |  | Balance atBeginning ofPeriod |       | Additions |                           |      | Balance atEnd ofPeriod
|                                |  | Expense/(Recovery)           |       |           | Deductions/Write-offs (a) |      |                       
|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
|Year ended September 30, 2006   |  |                              |       |           |                           |      |                        |  |   |        |   |  |   |      
|Allowance for doubtful accounts |  | $                            | 4,764 |           | $                         | 131  |                        |  | $ | (1,884 | ) |  | $ | 3,011



|(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, 2008 and 2007 (in thousands):



|                                                               |  |               |         |   |      |   |         |  
|-------------------------------------------------------------- |  | ------------- | ------- | - | ---- | - | ------- | -
|                                                               |  | September 30, |        
|                                                               |  | 2008          |         |   | 2007 |  
|Computer equipment and software (2 to 3 years)                 |  | $             | 63,348  |   |      | $ | 59,898  |  
|Office equipment (2 years)                                     |  |               | 6,685   |   |      |   | 8,260   |  
|Furniture and fixtures (5 years)                               |  |               | 17,347  |   |      |   | 17,309  |  
|Leasehold improvements (lesser of lease term or economic life) |  |               | 21,763  |   |      |   | 23,221  |  
|                                                               |  |               |         |   |      |   |         |  
|                                                               |  |               | 109,143 |   |      |   | 108,688 |  
|Less accumulated depreciation and amortization                 |  |               | (89,370 | ) |      |   | (88,458 | )
|                                                               |  |               |         |   |      |   |         |  
|Total property and equipment, net                              |  | $             | 19,773  |   |      | $ | 20,230  |  
|                                                               |  |               |         |   |      |   |         |  



69



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Depreciation and amortization expense of property and equipment totaled $7.9 million, $7.0 million and
$6.8 million for the years ended September 30, 2008, 2007 and 2006, respectively.

Included in the other assets balance of $3.9
million as of September 30, 2007 is approximately $905,000 of prepaid acquisition costs related to the acquisition of Procuri that was pending as of such date and consisting of payments to financial advisors and other professional fees. This
amount was included in the purchase price allocation related to the Procuri acquisition. See Note 2 of Notes to Consolidated Financial Statements.

Accrued liabilities consisted of the following as of September 30, 2008 and 2007 (in thousands):



|                          |  |               |        |      |   |       
|------------------------- |  | ------------- | ------ | ---- | - | ------
|                          |  | September 30,
|                          |  | 2008          |        | 2007
|Accrued taxes             |  | $             | 6,258  |      | $ | 11,610
|Other accrued liabilities |  |               | 9,419  |      |   | 7,366 
|                          |  |               |        |      |   |       
|Accrued liabilities       |  | $             | 15,677 |      | $ | 18,976
|                          |  |               |        |      |   |       

Included in the accrued taxes balance of $11.6 million as of September 30, 2007 is
approximately $5.0 million, which was reclassified to long-term liabilities upon the adoption of FIN 48.

Note 4Investments

The following is a summary of cash equivalents and available-for-sale securities as of September 30, 2008 and 2007 (in thousands):



|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------------- |  | ------------------ | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                                      |  | 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
|                                      |  |                    |        |                      |   |                       |  |   |           |   |  |   |       



|                                      |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|------------------------------------- |  | ------------------ | ------- | -------------------- | - | --------------------- |  | - | --------- | - |  | - | -------
|                                      |  | September 30, 2007
|                                      |  | AmortizedCost      |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|Money market funds                    |  | $                  | 44,424  |                      | $ |                      |  | $ |          |   |  | $ | 44,424 
|Corporate notes and bonds             |  |                    | 92,225  |                      |   |                      |  |   | (510      | ) |  |   | 91,715 
|                                      |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|                                      |  | $                  | 136,649 |                      | $ |                      |  | $ | (510      | ) |  | $ | 136,139
|                                      |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|Included in cash and cash equivalents |  | $                  | 44,424  |                      | $ |                      |  | $ |          |   |  | $ | 44,424 
|Included in marketable securities     |  |                    | 84,177  |                      |   |                      |  |   | (510      | ) |  |   | 83,667 
|Included in long-term investments     |  |                    | 8,048   |                      |   |                      |  |   |          |   |  |   | 8,048  
|                                      |  |                    |         |                      |   |                       |  |   |           |   |  |   |        
|                                      |  | $                  | 136,649 |                      | $ |                      |  | $ | (510      | ) |  | $ | 136,139
|                                      |  |                    |         |                      |   |                       |  |   |           |   |  |   |        



70



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



|                                        |  |               |        |      |   |       
|--------------------------------------- |  | ------------- | ------ | ---- | - | ------
|                                        |  | September 30,
|                                        |  | 2008          |        | 2007
|Due in one year or less                 |  | $             |       |      | $ |      
|Due after one year through two years    |  |               |       |      |   |      
|Due after two years through three years |  |               |       |      |   | 8,048 
|Due after three years                   |  |               | 20,525 |      |   | 83,667
|                                        |  |               |        |      |   |       
|                                        |  | $             | 20,525 |      | $ | 91,715
|                                        |  |               |        |      |   |       

The long-term investments and marketable securities as of September 30, 2008 and 2007,
respectively, due after three years are primarily auction rate securities. The Company had $3.5 million and $510,000 of gross unrealized losses on auction rate securities as of September 30, 2008 and 2007, respectively. Based on 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 because the Company has the ability and intent to hold these investments until a recovery of the par value,
which may be maturity, the Company does not consider the investments to be other-than-temporarily impaired at September 30, 2008 (see Note 1 of Notes to Consolidated Financial Statements). The losses are currently recorded within
stockholders equity.

Note 5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, 2008 (in thousands):



|                                          |  |                   |        
|----------------------------------------- |  | ----------------- | -------
|                                          |  | Netcarryingamount
|Goodwill balance as of September 30, 2006 |  | $                 | 326,101
|Goodwill adjustments                      |  |                   |       
|                                          |  |                   |        
|Goodwill balance as of September 30, 2007 |  |                   | 326,101
|Goodwill related to Procuri               |  |                   | 80,406 
|                                          |  |                   |        
|Goodwill balance as of September 30, 2008 |  | $                 | 406,507
|                                          |  |                   |        

For the year ended September 30, 2008, 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, 2008 and 2007 has been allocated by management between the three reporting units. The goodwill balance as of
September 30, 2008 was $342.4 million, $64.1 million and zero for North America, Europe Middle-East and Africa (EMEA) and Asia-Pacific (APAC). The goodwill balance as of September 30, 2007 was $274.7 million, $51.4
million and zero for North America, Europe Middle-East and Africa (EMEA) and Asia-Pacific (APAC), respectively.



71



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The table below reflects changes or activity in the balances related to other intangible assets for the
years ended September 30, 2008 and 2007 (in thousands):



|                                             |  |                 |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|-------------------------------------------- |  | --------------- |  | ------------------- | ------ | ----------------------- | - | ------- | ----------------- |  | ------------------- | ------ | ----------------------- | - | ------ | ----------------- | - | ------- | - |  | - | ------
|                                             |  |                 |  | September 30, 2008  |        | September 30, 2007     
|                                             |  | Useful Life     |  | Grosscarryingamount |        | Accumulatedamortization |   |         | Netcarryingamount |  | Grosscarryingamount |        | Accumulatedamortization |   |        | Netcarryingamount
|Other Intangible Assets                      |  |                 |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Existing software technology                 |  | 24 months       |  | $                   | 13,300 |                         | $ | (11,548 | )                 |  | $                   | 1,752  |                         | $ | 10,400 |                   | $ | (10,400 | ) |  | $ |      
|Contracts and related customer relationships |  | 48 to 72 months |  |                     | 80,881 |                         |   | (59,527 | )                 |  |                     | 21,354 |                         |   | 56,281 |                   |   | (46,415 | ) |  |   | 9,866 
|Trade names/trademarks                       |  | 24 to 60 months |  |                     | 2,200  |                         |   | (1,703  | )                 |  |                     | 497    |                         |   | 1,800  |                   |   | (1,205  | ) |  |   | 595   
|Non-competition agreements                   |  | 24 months       |  |                     | 600    |                         |   | (238    | )                 |  |                     | 362    |                         |   |       |                   |   |        |   |  |   |      
|                                             |  |                 |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Total                                        |  |                 |  | $                   | 96,981 |                         | $ | (73,016 | )                 |  | $                   | 23,965 |                         | $ | 68,481 |                   | $ | (58,020 | ) |  | $ | 10,461
|                                             |  |                 |  |                     |        |                         |   |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       

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.

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, 2006. Amortization of $525,000 related to trade name/trademark was recorded as operating expense in the year ended September 30, 2007.

Amortization of other intangible assets for the year ended September 30, 2006 totaled $16.5 million. Of the total, amortization of $15.7 million
related to contracts and related customer relationship and existing software technology was recorded as cost of revenues in the year ended September 30, 2006. Amortization of $800,000 related to trade name/trademark was recorded as operating
expense in the year ended September 30, 2006.

The Company anticipates amortization of existing other intangible assets to total $6.3
million in fiscal year 2009, $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 thereafter.



72



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Note 6Income Taxes

The provision for income taxes for the years ended September 30, 2008, 2007 and 2006 was comprised of the following (in thousands):



|        |  |         |       |          |   |      |       |  |   |      
|------- |  | ------- | ----- | -------- | - | ---- | ----- |  | - | -----
|        |  | Current |       | Deferred |   |      | Total
|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
|        |  |         |       |          |   |      |       |  |   |      
|2006:   |  |         |       |          |   |      |       |  |   |      
|Federal |  | $       |      |          | $ |     |       |  | $ |     
|State   |  |         |      |          |   |     |       |  |   |     
|Foreign |  |         | 1,533 |          |   |     |       |  |   | 1,533
|        |  |         |       |          |   |      |       |  |   |      
|Total   |  | $       | 1,533 |          | $ |     |       |  | $ | 1,533
|        |  |         |       |          |   |      |       |  |   |      

The Companys loss before income taxes for the years ended September 30, 2008, 2007 and
2006 consisted of the following components (in thousands):



|                  |  |      |         |   |      |   |         |      |  |   |         |  
|----------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                  |  | 2008 |         |   | 2007 |   |         | 2006 | 
|Domestic          |  | $    | (45,932 | ) |      | $ | (16,021 | )    |  | $ | (51,518 | )
|Foreign           |  |      | 5,613   |   |      |   | 2,981   |      |  |   | 5,250   |  
|                  |  |      |         |   |      |   |         |      |  |   |         |  
|Total pretax loss |  | $    | (40,319 | ) |      | $ | (13,040 | )    |  | $ | (46,268 | )
|                  |  |      |         |   |      |   |         |      |  |   |         |  

The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of
35% to the loss before income taxes and actual income tax expense for the years ended September 30, 2008, 2007 and 2006 is as follows (in thousands):



|                                                       |  |      |         |   |      |   |        |      |  |   |         |  
|------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                       |  | 2008 |         |   | 2007 |   |        | 2006 | 
|Computed tax benefit                                   |  | $    | (14,112 | ) |      | $ | (4,564 | )    |  | $ | (16,194 | )
|State taxes, net of federal benefit                    |  |      | (2,362  | ) |      |   | (801   | )    |  |   | (2,671  | )
|Nondeductible expenses and other permanent differences |  |      | 1,816   |   |      |   | 487    |      |  |   | (420    | )
|Foreign taxes                                          |  |      | (1,433  | ) |      |   | 659    |      |  |   | (305    | )
|Provision to return adjustments                        |  |      |        |   |      |   | (6,462 | )    |  |   |        |  
|Other                                                  |  |      | 199     |   |      |   | 124    |      |  |   | (619    | )
|Change in valuation allowance                          |  |      | 16,635  |   |      |   | 12,494 |      |  |   | 21,742  |  
|                                                       |  |      |         |   |      |   |        |      |  |   |         |  
|Total                                                  |  | $    | 743     |   |      | $ | 1,937  |      |  | $ | 1,533   |  
|                                                       |  |      |         |   |      |   |        |      |  |   |         |  



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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, 2008 and 2007 are as follows (in thousands):



|                                                |  |      |          |   |      |   |          |  
|----------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                |  | 2008 |          |   | 2007 |  
|Deferred Tax Assets                             |  |      |          |   |      |   |          |  
|Accruals and allowances                         |  | $    | 78,274   |   |      | $ | 82,537   |  
|Capitalized research and experimentation costs  |  |      | 102,097  |   |      |   | 107,262  |  
|Depreciation and amortization                   |  |      | 111,656  |   |      |   | 125,155  |  
|Credit carryforwards                            |  |      | 65,134   |   |      |   | 66,100   |  
|Net operating loss and other carryforwards      |  |      | 551,823  |   |      |   | 521,432  |  
|                                                |  |      |          |   |      |   |          |  
|Deferred tax assets                             |  |      | 908,984  |   |      |   | 902,486  |  
|Valuation allowance                             |  |      | (898,718 | ) |      |   | (897,046 | )
|                                                |  |      |          |   |      |   |          |  
|Deferred tax assets, net of valuation allowance |  |      | 10,266   |   |      |   | 5,440    |  
|Deferred Tax Liabilities                        |  |      |          |   |      |   |          |  
|Unremitted earnings of foreign subsidiaries     |  |      |         |   |      |   | (1,342   | )
|Acquired intangibles                            |  |      | (9,553   | ) |      |   | (4,098   | )
|                                                |  |      |          |   |      |   |          |  
|Net deferred tax assets                         |  | $    | 713      |   |      | $ |         |  
|                                                |  |      |          |   |      |   |          |  
|Recorded As:                                    |  |      |          |   |      |   |          |  
|Current deferred tax asset                      |  | $    | 40,569   |   |      | $ | 41,629   |  
|Valuation allowance                             |  |      | (40,085  | ) |      |   | (41,629  | )
|                                                |  |      |          |   |      |   |          |  
|Net current deferred tax asset                  |  |      | 484      |   |      |   |         |  
|                                                |  |      |          |   |      |   |          |  
|Non-current deferred tax asset                  |  |      | 868,415  |   |      |   | 860,857  |  
|Valuation allowance                             |  |      | (858,633 | ) |      |   | (855,417 | )
|                                                |  |      |          |   |      |   |          |  
|Net non-current deferred tax asset              |  |      | 9,782    |   |      |   | 5,440    |  
|Current deferred tax liability                  |  |      |         |   |      |   | (1,342   | )
|Non-current deferred tax liability              |  |      | (9,553   | ) |      |   | (4,098   | )
|                                                |  |      |          |   |      |   |          |  
|Net deferred tax assets                         |  | $    | 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 increase in the total valuation allowance for the years ended September 30, 2008, 2007 and 2006 was $1.7 million, $11.5 million and $21.7 million, respectively.
Subsequently recognized tax benefits relating to the valuation allowance as of September 30, 2008 will be allocated as follows (in thousands):



|                                                                                      |  |      |        
|------------------------------------------------------------------------------------- |  | ---- | -------
|                                                                                      |  | 2008
|Income tax benefit that would be reported in the consolidated statement of operations |  | $    | 894,228
|Additional paid-in capital                                                            |  |      | 4,490  
|                                                                                      |  |      |        
|Total                                                                                 |  | $    | 898,718
|                                                                                      |  |      |        

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, 2008, the Company had net
operating loss carryforwards for federal, state and foreign tax purposes of approximately $1.4 billion, $793.0 million and $4.2 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 2028, from fiscal year 2009 through fiscal year 2028



74



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and from fiscal year 2010 through fiscal year 2013, respectively. As of September 30, 2008, 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 $99,000 which will expire in fiscal year 2019. The Company also had manufacturers credit carryforwards as of September 30, 2008 for state tax purposes of approximately
$1.1 million, which will expire in various years from fiscal year 2009 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.

The undistributed earnings of the foreign subsidiaries is approximately $21.6 million as of September 30, 2008. 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
FIN 48. FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. 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 FIN 48 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 upon
adoption of FIN 48 as of October 1, 2007.

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



|                                                                                   |  |                              |       |  
|---------------------------------------------------------------------------------- |  | ---------------------------- | ----- | -
|                                                                                   |  | Year EndedSeptember 30, 2008 |      
|Gross unrecognized tax benefits as of October 1, 2007 (FIN 48 adoption date)       |  | $                            | 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 fiscal year 2008                   |  |                              | 122   |  
|Lapses of statutes of limitations                                                  |  |                              | (267  | )
|Changes in unrecognized tax benefits due to foreign currency translation           |  |                              | 178   |  
|                                                                                   |  |                              |       |  
|Total gross unrecognized tax benefits as of September 30, 2008                     |  | $                            | 4,475 |  
|                                                                                   |  |                              |       |  

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

As of September 30, 2008, approximately $4.5 million of unrecognized benefits would affect the
Companys effective tax rate if realized. The Company recognized interest and penalties related to uncertain tax positions in the Companys provision for income taxes line of the Companys consolidated statements of operations of
$12,000 during fiscal year 2008. The gross amount of interest and penalties accrued as of September 30, 2008 was $1.5 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 our unrecognized tax benefits. The Company
believes that it has adequately provided for any reasonably foreseeable



75



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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, 2005 and forward. Globally, the Companys income tax returns are open to examination among various jurisdictions ranging from fiscal year ended
September 30, 2002 forward.

Note 7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 $3.2 million and escalate annually, with the total future minimum lease payments amounting to $184.8 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, 2008, as a form of security through fiscal year 2013. Also, the Company is required by other
lease agreements to hold an additional $802,000 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 $29.6 million is classified as restricted cash on the Companys consolidated balance sheet as of September 30, 2008.

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 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 $24.8 million, $30.9 million and $33.6 million for the years ended September 30, 2008, 2007 and 2006, respectively. Gross
operating rental expense was reduced by sublease income of $8.7 million, $14.4 million and $17.2 million for the years ended September 30, 2008, 2007 and 2006, 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, 2008 (in thousands):



|                          |  |               |         |                           |   |       
|------------------------- |  | ------------- | ------- | ------------------------- | - | ------
|Year Ending September 30, |  | LeasePayments |         | ContractualSubleaseIncome
|2009                      |  | $             | 46,807  |                           | $ | 11,410
|2010                      |  |               | 47,313  |                           |   | 12,434
|2011                      |  |               | 48,051  |                           |   | 13,129
|2012                      |  |               | 49,993  |                           |   | 13,831
|2013                      |  |               | 19,731  |                           |   | 4,508 
|Thereafter                |  |               | 10,723  |                           |   |      
|                          |  |               |         |                           |   |       
|Total                     |  | $             | 222,618 |                           | $ | 55,312
|                          |  |               |         |                           |   |       

Of the total operating lease commitments as of September 30, 2008 noted above, $73.7 million
is for occupied properties and $148.9 million is for abandoned properties, which are a component of the restructuring obligation.



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Restructuring and integration costs

The Company recorded a charge (benefit) to operations for restructuring and integration costs of $10.1 million, $(4.2) million and $26.3 million for the
years ended September 30, 2008, 2007 and 2006, respectively. See disclosure below for a detailed discussion of these amounts.

The
following table details accrued restructuring and integration obligations and related activity for the three years ended September 30, 2008 (in thousands):



|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|---------------------------------------------------------- |  | -------------------- | ------ | - | --------------------- | - | ------- | -------------------- |  | - | ------------------------------------- | - |  | - | ------- | -
|                                                           |  | Severanceandbenefits |        |   | Leaseabandonmentcosts |   |         | Leaseholdimpairments |  |   | Totalrestructuringandintegrationcosts |  
|Accrued restructuring obligations as of October 1, 2005    |  | $                    | 1,684  |   |                       | $ | 84,816  |                      |  | $ |                                      |   |  | $ | 86,500  |  
|Cash paid                                                  |  |                      | (1,915 | ) |                       |   | (15,140 | )                    |  |   |                                      |   |  |   | (17,055 | )
|Total charge to operating expense                          |  |                      | 273    |   |                       |   | 26,048  |                      |  |   |                                      |   |  |   | 26,321  |  
|Purchase accounting adjustment                             |  |                      |       |   |                       |   | (472    | )                    |  |   |                                      |   |  |   | (472    | )
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Accrued restructuring obligations as of September 30, 2006 |  |                      | 42     |   |                       |   | 95,252  |                      |  |   |                                      |   |  |   | 95,294  |  
|Cash paid                                                  |  |                      | (42    | ) |                       |   | (18,986 | )                    |  |   |                                      |   |  |   | (19,028 | )
|Total charge to operating expense                          |  |                      |       |   |                       |   | (4,194  | )                    |  |   |                                      |   |  |   | (4,194  | )
|Reclassification to deferred rent                          |  |                      |       |   |                       |   | (901    | )                    |  |   |                                      |   |  |   | (901    | )
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Accrued restructuring obligations as of September 30, 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  |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Less: current portion                                      |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   | 19,925  |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  
|Accrued restructuring obligations, less current portion    |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  | $ | 41,121  |  
|                                                           |  |                      |        |   |                       |   |         |                      |  |   |                                       |   |  |   |         |  

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 $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.

Severance and benefits costs primarily include involuntary termination and health benefits, outplacement costs and payroll taxes for terminated
personnel. During the year ended September 30, 2006, an additional $273,000 of severance and benefits was recorded due to the continued reduction of the Companys workforce, primarily to better align its expenses with its revenue levels
and to enable the Company to invest in certain growth initiatives.



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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, 2008, $60.4 million of lease abandonment costs
remain accrued and are expected to be paid by fiscal year 2013.

In the year ended September 30, 2008, the Company evaluated our
office space in Sunnyvale, California, and ceased use of approximately 54,000 square feet of space in its corporate headquarters. In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, and SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, 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 with Efficient Frontier, Inc. (Efficient Frontier) 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.

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 in accordance with EITF 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination.This restructuring cost
was considered part of the preliminary purchase accounting for Procuri.

During the year ended September 30, 2007, the Company entered
into the sixth amendment to its lease in Pittsburgh, Pennsylvania, effective January 1, 2007. The amendment extends the lease term for approximately 91,000 square feet of office space that the Company occupies through December 2017. Effective
January 1, 2007, the Company also surrendered approximately 91,000 square feet of abandoned space it leased and made a payment of approximately $5.4 million to the landlord concurrent with the landlords signing of the sixth amendment in
February 2007. The difference between the Companys lease abandonment reserve associated with this abandoned space and the payment of $5.4 million is approximately $901,000 and is being recognized as contra rent expense over the remaining term
of the lease through December 2017.

Also during the year ended September 30, 2007, the Company 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 the Company and NetScreen. Pursuant to the amendment, Juniper agreed to
renew its sublease of approximately 177,000 square feet of space at the Companys Sunnyvale,



78



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California headquarters through January 2013. In addition, Juniper agreed, effective no later than December 1, 2007, to lease approximately 89,000
square feet of additional space at the Companys Sunnyvale, California headquarters through January 2013. See also Note 15 of Notes to Consolidated Financial Statements. Also in June 2007, the Company revised its estimates for rental rate
projections and 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 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, 2006, the Company revised its estimates for sublease rental rate
projections to reflect continued soft market conditions in the Northern California real estate market and sublease commencement dates, resulting in a charge of $24.4 million. The remaining charges in the year ended September 30, 2006 was for
property taxes of $942,000 related to abandoned facilities in California based on a property tax assessment related to fiscal years 2003 through 2006 and an adjustment of $730,000 to the Companys restructuring obligation related to a prior
period. The Company concluded that the effect of the adjustment was not material to fiscal year 2006 or the prior periods. The Company recorded the $730,000 understatement as an increase in restructuring and integration expense and to total
operating expenses during the year ended September 30, 2006. During the year ended September 30, 2006, the Company also recorded a $472,000 decrease to the restructuring obligation due to the assignment of a lease of an excess legacy
FreeMarkets facility. The reversal of the remaining obligation related to this facility has been recorded as a decrease to goodwill.

The
Companys lease abandonment accrual is net of $73.4 million of estimated sublease income. Actual sublease payments due under noncancelable subleases of excess facilities totaled $55.3 million as of September 30, 2008, 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, 2008,
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 $1.7 million as of September 30, 2008.

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, 2008.

Other accruals

During fiscal year 2006, the County of Santa Clara in California examined the Companys personal property tax returns for fiscal years
2003 through 2006 and assessed additional tax and interest of $3.3 million. The Company disagreed with the assessment and had appealed the assessments. 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, approximately $772,000 related to
occupied space and was recorded as a benefit to general and administrative in the Consolidated Statement of Operations and approximately $557,000 related to abandoned space and was recorded as a benefit to restructuring and integration in the
Consolidated Statement of Operations.



79



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In October 2008, the Compensation Committee of the Board of Directors of the Company elected to eliminate
cash bonuses for executives and reduce cash bonuses for certain key employees for the year ended September 30, 2008, resulting in a decrease of approximately $2.2 million in bonus expenses, included within cost of revenue and operating expenses
in the fourth quarter of 2008.

In March 2008, the Company changed its paid time off policy for all non-California U.S. employees whereby
employees are no longer permitted to carryover unused paid time off from one fiscal year to the subsequent fiscal year. This change resulted in a decrease of approximately $2.1 million in accrued compensation and a related decrease in compensation
and benefits expense, included within cost of revenue and operating expenses in the fourth quarter of 2008.

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 complaints were later consolidated into single class action
proceedings related to each IPO. Those 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. In June 2003, a proposed settlement was reached between plaintiffs and the Company and FreeMarkets (the individual defendants having been previously dismissed). The Company merged with FreeMarkets in July 2004. On
December 5, 2006, the Court of Appeals granted the underwriter defendants appeal of the District Courts order granting class certification in six focus cases. On June 25, 2007, in light of the Court of Appeals decision,
and based on a stipulation among the parties to the settlement, the District Court entered an order terminating the proposed settlement. On August 14, 2007, the plaintiffs filed amended complaints in the focus cases, seeking to address the
deficiencies raised in the Court of Appeals opinion. On September 27, 2007, plaintiffs moved to certify the classes in those focus cases. On December 28, 2007, the underwriters filed a motion to strike the class allegations in the
amended complaints, which the issuers in the focus cases later joined. On March 26, 2008, the District Court denied in part the defendants motions to dismiss the amended complaints in the focus cases, while dismissing those proposed class
plaintiffs who sold their securities of the relevant issuers for a price in excess of the initial offering price or purchased their securities outside the certified class period. On October 10, 2008, the Court granted plaintiffs request
to withdraw without prejudice their motion to certify the classes in the focus cases. As of September 30, 2008, no amount is accrued as a loss is not considered probable or estimable.

Patent Litigation with Emptoris, Inc.

On April 19, 2007, we sued Emptoris, Inc. (Emptoris) in the United States District Court for the Eastern District of Texas for patent infringement. On October 29, 2008, after a seven day jury trial, the Company
received a verdict that Emptoris willfully infringed one Ariba patent and also infringed a second Ariba patent. The jury awarded Ariba approximately $4.9 million in damages. A hearing for Emptoris post-trial motions seeking to attack the
verdict has been set for December 16, 2008. At that hearing the court will also consider Aribas request for a permanent injunction and enhancement of the damage award. Emptoris may seek to appeal the findings of the jury and rulings of
the court. As such, the impact of the jurys verdict cannot be determined at this time. On November 20, 2007, Emptoris sued the Company for infringement of one of its patents in the same Texas court where the Companys patent
claims were tried. In October 2008, Emptoris dismissed its patent case against Ariba with prejudice. As of September 30, 2008, no amount is accrued as a loss is not considered probable or estimable.



80



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General

Defending against these actions and various other 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. For instance, in January 2008, the Company paid $5.9 million to settle a patent infringement matter brought by Sky Technologies LLC (Sky) against the Company and $2.0 million was paid by
Procuri to settle a separate patent infringement matter brought against it by Sky.

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, 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 as of September 30, 2008.

Note 8Segment Information

The Company follows
SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which
separate financial information is available that is regularly evaluated by the chief operating decision makers in deciding how to allocate resources and in assessing performance.

The Company has three geographic operating segments: North America; Europe, Middle East and Africa (EMEA); and Asia-Pacific
(APAC). The segments are determined in accordance with how management views and evaluates the Companys business and based on the aggregation criteria as outlined in SFAS No. 131. 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



81



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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.

Financial information for each reportable segment was as
follows for the years ended September 30, 2008, 2007 and 2006 (in thousands):



|                   |  |                          |         |      |   |         |  |   |        
|------------------ |  | ------------------------ | ------- | ---- | - | ------- |  | - | -------
|                   |  | Year Ended September 30,
|                   |  | 2008                     |         | 2007 |   | 2006   
|Revenue            |  |                          |         |      |   |         |  |   |        
|North America     |  | $                        | 193,004 |      | $ | 186,222 |  | $ | 177,929
|EMEA              |  |                          | 77,094  |      |   | 63,963  |  |   | 66,979 
|APAC              |  |                          | 25,837  |      |   | 23,527  |  |   | 23,298 
|Corporate revenue |  |                          | 32,125  |      |   | 27,955  |  |   | 27,810 
|                   |  |                          |         |      |   |         |  |   |        
|Total revenue      |  | $                        | 328,060 |      | $ | 301,667 |  | $ | 296,016
|                   |  |                          |         |      |   |         |  |   |        

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,
|                                  |  | 2008                     |         | 2007 |   | 2006  
|                                  |  | (in thousands)          
|Contribution margin               |  |                          |         |      |   |        |  |   |       
|North America                    |  | $                        | 83,411  |      | $ | 73,559 |  | $ | 66,522
|EMEA                             |  |                          | 24,159  |      |   | 16,988 |  |   | 19,287
|APAC                             |  |                          | 3,033   |      |   | 2,612  |  |   | 2,487 
|                                  |  |                          |         |      |   |        |  |   |       
|Total segment contribution margin |  | $                        | 110,603 |      | $ | 93,159 |  | $ | 88,296
|                                  |  |                          |         |      |   |        |  |   |       

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

The reconciliation of segment information to the Companys net loss before income taxes is as follows for
the years ended September 30, 2008, 2007 and 2006 (in thousands):



|                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                  |  | Year Ended September 30, |         
|                                                                                                  |  | 2008                     |          |   | 2007 |   |          | 2006 | 
|Segment contribution margin                                                                       |  | $                        | 110,603  |   |      | $ | 93,159   |      |  | $ | 88,296   |  
|Corporate revenue                                                                                 |  |                          | 32,125   |   |      |   | 27,955   |      |  |   | 27,810   |  
|Corporate costs, such as research and development, corporate general and administrative and other |  |                          | (166,868 | ) |      |   | (151,614 | )    |  |   | (144,071 | )
|Amortization of acquired technology and customer intangible assets                                |  |                          | (14,257  | ) |      |   | (14,074  | )    |  |   | (15,702  | )
|Other incomeSoftbank                                                                             |  |                          | 566      |   |      |   | 13,564   |      |  |   | 13,585   |  
|Amortization of other intangibles                                                                 |  |                          | (739     | ) |      |   | (525     | )    |  |   | (800     | )
|Restructuring and integration costs (benefit)                                                     |  |                          | (10,108  | ) |      |   | 4,194    |      |  |   | (26,321  | )
|Interest and other income, net                                                                    |  |                          | 8,359    |   |      |   | 14,301   |      |  |   | 10,935   |  
|                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Loss before income taxes                                                                          |  | $                        | (40,319  | ) |      | $ | (13,040  | )    |  | $ | (46,268  | )
|                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  



82



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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,
|                            |  | 2008                     |         | 2007 |   | 2006   
|Subscription revenues       |  | $                        | 112,287 |      | $ | 67,632  |  | $ | 55,246 
|Maintenance revenues        |  |                          | 74,863  |      |   | 74,677  |  |   | 74,811 
|Services and other revenues |  |                          | 140,910 |      |   | 159,358 |  |   | 165,959
|                            |  |                          |         |      |   |         |  |   |        
|Total                       |  | $                        | 328,060 |      | $ | 301,667 |  | $ | 296,016
|                            |  |                          |         |      |   |         |  |   |        

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



|                   |  |               |        |      |   |       
|------------------ |  | ------------- | ------ | ---- | - | ------
|                   |  | September 30,
|                   |  | 2008          |        | 2007
|Long-Lived Assets: |  |               |        |      |   |       
|United States      |  | $             | 18,042 |      | $ | 17,756
|International      |  |               | 1,731  |      |   | 2,474 
|                   |  |               |        |      |   |       
|Total              |  | $             | 19,773 |      | $ | 20,230
|                   |  |               |        |      |   |       

Note 9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. 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. 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, 2008, 4.1 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, 2008, there were 601,178
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. 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, 2008, there have been 5.1 million shares issued under the Purchase Plan and 572,000 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.



83



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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, 2008, a total of 7.7 million shares of the Companys common stock are reserved for issuance in connection with the acquisition of FreeMarkets or granted by the Company after the acquisition of
FreeMarkets under the FreeMarkets Plans. The number of shares reserved under the Third Amended and Restated Stock Incentive Plan automatically increased on October 1 of each year until 2008 by the lesser of 817,750 shares or 3% of the total
number of shares of common stock outstanding on that date. The number of shares reserved under the Broad Based Equity Incentive Plan automatically increases on October 1 of each year until 2009 by the lesser of 136,291 shares or 1% of the total
number of shares of common stock outstanding on that date. As of September 30, 2008, there were 131,414 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, 2008:



|                                |  |                 |   |  |                                      |      
|------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                |  | Number ofShares |   |  | Weighted-AverageGrant DateFair Value
|Nonvested at September 30, 2005 |  | 7,273,101       |   |  | $                                    | 7.17 
|Granted                         |  | 3,566,746       |   |  |                                      | 8.88 
|Vested                          |  | (2,386,267      | ) |  |                                      | 7.29 
|Forfeited                       |  | (909,948        | ) |  |                                      | 6.84 
|                                |  |                 |   |  |                                      |      
|Nonvested at September 30, 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
|                                |  |                 |   |  |                                      |      

The fair value of stock awards vested was $46.0 million, $29.8 million and $18.4 million for the
years ended September 30, 2008, 2007 and 2006, respectively.



84



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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, 2008:



|                                  |  |                  |   |  |                               |      
|--------------------------------- |  | ---------------- | - |  | ----------------------------- | -----
|                                  |  | Number ofOptions |   |  | Weighted-AverageExercisePrice
|Outstanding at September 30, 2005 |  | 3,354,918        |   |  | $                             | 14.27
|Granted                           |  | 8,600            |   |  |                               | 8.44 
|Exercised                         |  | (407,681         | ) |  |                               | 6.76 
|Forfeited                         |  | (1,008,985       | ) |  |                               | 21.72
|                                  |  |                  |   |  |                               |      
|Outstanding at September 30, 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
|                                  |  |                  |   |  |                               |      
|Exercisable at September 30, 2008 |  | 814,951          |   |  | $                             | 15.00
|                                  |  |                  |   |  |                               |      

The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2008
was $3.7 million. 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 2008 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, 2008. 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, 2008, 2007 and 2006 was $2.8 million, $1.8 million and $685,000, respectively. The weighted-average grant date fair value of options granted during the year
ended September 30, 2006 was $4.30.

The following table summarizes information about stock options outstanding as of
September 30, 2008



|                         |  |                                     |  |                                                  |  |                               |      
|------------------------ |  | ----------------------------------- |  | ------------------------------------------------ |  | ----------------------------- | -----
|                         |  | Options Outstanding and Exercisable
|Range of Exercise Prices |  | Number ofOptions                    |  | Weighted-AverageRemainingContractualLife (years) |  | Weighted-AverageExercisePrice
|$  0.01$    4.88        |  | 134,845                             |  | 0.71                                             |  | $                             | 4.45 
|$  5.57$    7.39        |  | 178,370                             |  | 6.23                                             |  | $                             | 6.20 
|$  7.44$  11.96         |  | 175,634                             |  | 5.35                                             |  | $                             | 10.26
|$11.99$  25.80          |  | 194,800                             |  | 5.55                                             |  | $                             | 12.92
|$26.53$733.50           |  | 131,302                             |  | 3.25                                             |  | $                             | 47.18
|                         |  |                                     |  |                                                  |  |                               |      
|$  0.01$733.50          |  | 814,951                             |  | 4.48                                             |  | $                             | 15.00
|                         |  |                                     |  |                                                  |  |                               |      

Accumulated Other Comprehensive (Loss) Income

The components of accumulated other comprehensive income as of September 30, 2008 and 2007 are as follows (in thousands):



|                                              |  |                   |        |   |                   |   |       |  
|--------------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ----- | -
|                                              |  | September 30,2008 |        |   | September 30,2007 |  
|Foreign currency translation adjustments      |  | $                 | 421    |   |                   | $ | 1,622 |  
|Unrealized loss on securities                 |  |                   | (3,515 | ) |                   |   | (510  | )
|                                              |  |                   |        |   |                   |   |       |  
|Accumulated other comprehensive (loss) income |  | $                 | (3,094 | ) |                   | $ | 1,112 |  
|                                              |  |                   |        |   |                   |   |       |  



85



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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
10Net Loss Per Share

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



|                                                                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                    |  | Year Ended September 30, |        
|                                                                                    |  | 2008                     |         |   | 2007 |   |         | 2006 | 
|Net loss                                                                            |  | $                        | (41,062 | ) |      | $ | (14,977 | )    |  | $ | (47,801 | )
|                                                                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Weighted average shares outstanding                                                 |  |                          | 85,342  |   |      |   | 77,654  |      |  |   | 73,754  |  
|Weighted average common shares issued subject to repurchase agreement               |  |                          | (8,024  | ) |      |   | (7,548  | )    |  |   | (7,830  | )
|                                                                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Weighted average shares used in computation of net loss per sharebasic and diluted |  |                          | 77,318  |   |      |   | 70,106  |      |  |   | 65,924  |  
|                                                                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Basic and diluted loss per share                                                    |  | $                        | (0.53   | ) |      | $ | (0.21   | )    |  | $ | (0.73   | )
|                                                                                    |  |                          |         |   |      |   |         |      |  |   |         |  

At September 30, 2008, 2007 and 2006, 224,000, 622,000 and 1.0 million potential common
shares, respectively, consisting almost entirely of outstanding options, are excluded from the determination of diluted net loss per share, as the effect of such shares is anti-dilutive.

Note 11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 $2.7 million, $2.5 million and $1.4 million in the years ended September 30, 2008, 2007 and 2006, respectively. The Company also made a discretionary cash contribution of $841,000 to the 401(k) Plan during
the year ended September 30, 2006.

Note 12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, $13.6 million and $13.6 million in the years ended September 30, 2008, 2007 and 2006,
respectively. As of September 30, 2008 and 2007, deferred income related to the Softbank settlement was zero and $566,000, respectively.



86



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Note 13Selected Quarterly Financial Data (unaudited)



|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ---------------------------------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                               |  | 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 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  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |         |  



87



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|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|------------------------------------------------------------------------------ |  | ---------------------------------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ------------ | - |  | - | ------ | -
|                                                                               |  | Fiscal Year 2007For the Quarter Ended    |       
|                                                                               |  | Sept. 30,2007                            |        |   | June 30,2007 |   |        | March 31,2007 |  |   | Dec. 31,2006 |  
|                                                                               |  | (In thousands, except per share amounts) |       
|Revenues:                                                                      |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Subscription and maintenance                                                   |  | $                                        | 37,458 |   |              | $ | 36,613 |               |  | $ | 34,219       |   |  | $ | 34,019 |  
|Services and other                                                             |  |                                          | 38,059 |   |              |   | 38,951 |               |  |   | 39,200       |   |  |   | 43,148 |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Total revenues                                                                 |  |                                          | 75,517 |   |              |   | 75,564 |               |  |   | 73,419       |   |  |   | 77,167 |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Cost of revenues:                                                              |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Subscription and maintenance                                                   |  |                                          | 8,175  |   |              |   | 8,490  |               |  |   | 8,195        |   |  |   | 7,849  |  
|Services and other                                                             |  |                                          | 26,599 |   |              |   | 28,490 |               |  |   | 29,196       |   |  |   | 30,330 |  
|Amortization of acquired technology and customer intangible assets             |  |                                          | 3,288  |   |              |   | 3,356  |               |  |   | 3,734        |   |  |   | 3,696  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Total cost of revenues                                                         |  |                                          | 38,062 |   |              |   | 40,336 |               |  |   | 41,125       |   |  |   | 41,875 |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Gross profit                                                                   |  |                                          | 37,455 |   |              |   | 35,228 |               |  |   | 32,294       |   |  |   | 35,292 |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Operating expenses:                                                            |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Sales and marketing                                                            |  |                                          | 24,443 |   |              |   | 23,389 |               |  |   | 23,096       |   |  |   | 22,976 |  
|Research and development                                                       |  |                                          | 12,314 |   |              |   | 13,254 |               |  |   | 13,033       |   |  |   | 12,558 |  
|General and administrative                                                     |  |                                          | 10,672 |   |              |   | 10,822 |               |  |   | 8,714        |   |  |   | 9,572  |  
|Other incomeSoftbank                                                          |  |                                          | (3,391 | ) |              |   | (3,390 | )             |  |   | (3,389       | ) |  |   | (3,394 | )
|Amortization of other intangible assets                                        |  |                                          | 100    |   |              |   | 101    |               |  |   | 124          |   |  |   | 200    |  
|Restructuring and integration (benefit)                                        |  |                                          | (389   | ) |              |   | (3,805 | )             |  |   |             |   |  |   |       |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Total operating expenses                                                       |  |                                          | 43,749 |   |              |   | 40,371 |               |  |   | 41,578       |   |  |   | 41,912 |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Loss from operations                                                           |  |                                          | (6,294 | ) |              |   | (5,143 | )             |  |   | (9,284       | ) |  |   | (6,620 | )
|Interest and other income, net                                                 |  |                                          | 2,839  |   |              |   | 3,456  |               |  |   | 4,896        |   |  |   | 3,110  |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net loss before income taxes                                                   |  |                                          | (3,455 | ) |              |   | (1,687 | )             |  |   | (4,388       | ) |  |   | (3,510 | )
|Provision for income taxes                                                     |  |                                          | 329    |   |              |   | 347    |               |  |   | 684          |   |  |   | 577    |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net loss                                                                       |  | $                                        | (3,784 | ) |              | $ | (2,034 | )             |  | $ | (5,072       | ) |  | $ | (4,087 | )
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Net loss per sharebasic and diluted                                           |  | $                                        | (0.05  | ) |              | $ | (0.03  | )             |  | $ | (0.07        | ) |  | $ | (0.06  | )
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  
|Weighted average shares used in computing net loss per sharebasic and diluted |  |                                          | 71,657 |   |              |   | 70,340 |               |  |   | 69,704       |   |  |   | 68,723 |  
|                                                                               |  |                                          |        |   |              |   |        |               |  |   |              |   |  |   |        |  



88



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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
Exchange Act Rule 13a-15(b). Disclosure controls and procedures are procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (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, 2008 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, 2008. 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 91 of this Form 10-K, regarding the Companys internal controls over financial reporting.

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.



89



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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.



90



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Report of Ernst & Young LLP, 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, 2008 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. 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, 2008, 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 and the related consolidated statements of operations and comprehensive loss, stockholders
equity, and cash flows for each of the three years in the period ended September 30, 2008 and our report dated November 18, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

November 18, 2008



91



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

Not applicable.



92



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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 2009 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2008 (the 2009 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 2009 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 2009 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 2009 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 2009 Proxy Statement, which is incorporated herein by reference.



93



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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.                                                                                                                   
|            | 
|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 3.4 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                              
|            | 
|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       |  | 1996 Stock Plan, as amended (which is incorporated herein by reference to Exhibit 10.2 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                                                
|            | 
|10.3       |  | 1999 Equity Incentive Plan, as amended (which is incorporated herein by reference to Exhibit 10.3 to the Registrants Form 10-K/A dated December 31, 2001).                                                                                                                                                                                                     
|            | 
|10.4       |  | Employee Stock Purchase Plan (which is incorporated herein by reference to Exhibit 10.5 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                                               
|            | 
|10.5       |  | 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).                                                                                                                                                                        



94



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|            |  |                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                  
|10.6       |  | 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).                                                                                                                     
|            | 
|10.7        |  | 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).                                                                               
|            | 
|10.8        |  | 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).                                                                            
|            | 
|10.9        |  | 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).                           
|            | 
|10.10       |  | 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).                    
|            | 
|10.11       |  | 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).
|            | 
|10.12       |  | 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).                                                    
|            | 
|10.13      |  | 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).                                                                                 
|            | 
|10.14      |  | 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).                                                                      
|            | 
|10.15      |  | Offer Letter, dated October 16, 2001, by and between the Registrant and James W. Frankola (which is incorporated herein by reference to Exhibit 10.23 to the Registrants Form 10-Q
dated February 14, 2002).                                                                                
|            | 
|10.16      |  | 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).                                                                                       
|            | 
|10.17      |  | Severance Agreement, dated August 26, 2004, by and between the Registrant and Tayloe Stansbury (which is incorporated herein by reference to
Exhibit 10.36 to the Registrants Form 10-K dated December 14, 2004).                                                                           
|            | 
|10.18       |  | 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).                                                           
|            | 
|10.19       |  | 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).                                                
|            | 
|10.20       |  | First Amendment to Sublease, dated as of October 7, 2004, by and between Motorola, Inc. and the Registrant (which is incorporated herein by
reference to Exhibit 10.10 to the Registrants Form 10-Q dated February 9, 2005).                                                                



95



---

|            |  |                                                                                                                                                                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                          
|10.21       |  | 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).                                                                   
|            | 
|10.22      |  | Employment Agreement, dated January 23, 2004, by and between the Registrant and Kent Parker (which is incorporated herein by reference to Exhibit 10.40 to the Registrants Form 10-K
dated December 7, 2005).                                                                                                       
|            | 
|10.23       |  | 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 16, 2007).                                                                            
|            | 
|10.24       |  | 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).                                                                                    
|            | 
|10.25       |  | 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).                                                               
|            | 
|10.26      |  | Separation Agreement, dated as of November 16, 2007, between Ariba, Inc. and H. Tayloe Stansbury (which is incorporated herein by reference to Exhibit 10.42 to Ariba, Inc.s Form 10-Q
dated February 6, 2008).                                                                                                     
|            | 
|10.27      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2008 Performance Stock Units), by and between Ariba, Inc. and James Frankola (which is incorporated herein by
reference to Exhibit 10.43 to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                    
|            | 
|10.28      |  | Ariba, Inc.: FreeMarkets, Inc. Third Amended and Restated Stock Incentive Plan Notice of Stock Unit Award and Agreement (FY 2008 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, 2008).
|            | 
|10.29      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2008 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, 2008).                                    
|            | 
|10.30      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2008 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, 2008).                                  
|            | 
|10.31       |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and James Frankola (which is incorporated herein by reference to Exhibit 10.47
to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                                                      
|            | 
|10.32       |  | Ariba, Inc.: FreeMarkets, Inc. Third Amended and Restated Stock Incentive Plan Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and Kent Parker (which is incorporated herein
by reference to Exhibit 10.48 to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                  
|            | 
|10.33      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and Kevin Costello (which is incorporated herein by reference to Exhibit 10.49
to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                                                      
|            | 
|10.34      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and Robert Calderoni (which is incorporated herein by reference to Exhibit 10.50
to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                                                    



96



---

|            |  |                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                         
|10.35      |  | Ariba Bonus PlanExecutive Officers (which is incorporated herein by reference to Exhibit 10.51 to Ariba, Inc.s Form 10-Q dated May 7, 2008).                                                                      
|            | 
|10.36      |  | 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).                                              
|            | 
|10.37      |  | 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).             
|            | 
|10.38      |  | 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).
|            | 
|10.39     |  | Amended and Restated Severance Agreement, dated August 25, 2008, by and between the Registrant and Robert M. Calderoni.                                                                                             
|            | 
|10.40     |  | Amended and Restated Severance Agreement, dated September 5, 2008, by and between the Registrant and Kevin Costello.                                                                                                
|            | 
|10.41     |  | Amended and Restated Employment Agreement, dated August 15, 2008, by and between the Registrant and Kent Parker.                                                                                                    
|            | 
|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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



97



---

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 19, 2008.



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 19, 2008
|                                                       |  |                                                                                                  
|/s/    AHMED
RUBAIE Ahmed Rubaie                       |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/     HARRIET
EDELMAN Harriet Edelman                |  | Director                                                                                          |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/    ROBERT D.
JOHNSON Robert D. Johnson             |  | Director                                                                                          |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/     RICHARD A.
KASHNOW Richard Kashnow             |  | Director                                                                                          |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/    ROBERT E. KNOWLING,
JR. Robert E. Knowling, Jr. |  | Director                                                                                          |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/    THOMAS F.
MONAHAN Thomas F. Monahan             |  | Director                                                                                          |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/    KARL E.
NEWKIRK Karl E. Newkirk                 |  | Director                                                                                          |  | November 19, 2008
|                                                       |  |                                                                                                  
|/s/    RICHARD F.
WALLMAN Richard F. Wallman           |  | Director                                                                                          |  | November 19, 2008



98



---

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.                                                                                                                   
|            | 
|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 3.4 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                              
|            | 
|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       |  | 1996 Stock Plan, as amended (which is incorporated herein by reference to Exhibit 10.2 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                                                
|            | 
|10.3       |  | 1999 Equity Incentive Plan, as amended (which is incorporated herein by reference to Exhibit 10.3 to the Registrants Form 10-K/A dated December 31, 2001).                                                                                                                                                                                                     
|            | 
|10.4       |  | Employee Stock Purchase Plan (which is incorporated herein by reference to Exhibit 10.5 to the Registrants Form S-1 Registration No. 333-76953).                                                                                                                                                                                                               
|            | 
|10.5       |  | 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).                                                                                                                                                                        
|            | 
|10.6       |  | 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).                                                                                                                                                                                        
|            | 
|10.7        |  | 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).                                                                                                                                                  
|            | 
|10.8        |  | 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).                                                                                                                                               
|            | 
|10.9        |  | 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).                                                                                              



1



---

|            |  |                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                  
|10.10       |  | 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).                    
|            | 
|10.11       |  | 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).
|            | 
|10.12       |  | 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).                                                    
|            | 
|10.13      |  | 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).                                                                                 
|            | 
|10.14      |  | 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).                                                                      
|            | 
|10.15      |  | Offer Letter, dated October 16, 2001, by and between the Registrant and James W. Frankola (which is incorporated herein by reference to Exhibit 10.23 to the Registrants Form 10-Q
dated February 14, 2002).                                                                                
|            | 
|10.16      |  | 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).                                                                                       
|            | 
|10.17      |  | Severance Agreement, dated August 26, 2004, by and between the Registrant and Tayloe Stansbury (which is incorporated herein by reference to Exhibit 10.36 to the Registrants
Form 10-K dated December 14, 2004).                                                                           
|            | 
|10.18       |  | 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).                                                           
|            | 
|10.19       |  | 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).                                                
|            | 
|10.20       |  | First Amendment to Sublease, dated as of October 7, 2004, by and between Motorola, Inc. and the Registrant (which is incorporated herein by reference to Exhibit 10.10 to the
Registrants Form 10-Q dated February 9, 2005).                                                                
|            | 
|10.21       |  | 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).                                           
|            | 
|10.22      |  | Employment Agreement, dated January 23, 2004, by and between the Registrant and Kent Parker (which is incorporated herein by reference to Exhibit 10.40 to the Registrants Form 10-K
dated December 7, 2005).                                                                               
|            | 
|10.23       |  | 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 16, 2007).                                                    



2



---

|            |  |                                                                                                                                                                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                          
|10.24       |  | 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).                                                                                    
|            | 
|10.25       |  | 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).                                                               
|            | 
|10.26      |  | Separation Agreement, dated as of November 16, 2007, between Ariba, Inc. and H. Tayloe Stansbury (which is incorporated herein by reference to Exhibit 10.42 to Ariba, Inc.s Form 10-Q dated
February 6, 2008).                                                                                                     
|            | 
|10.27      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2008 Performance Stock Units), by and between Ariba, Inc. and James Frankola (which is incorporated herein by
reference to Exhibit 10.43 to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                    
|            | 
|10.28      |  | Ariba, Inc.: FreeMarkets, Inc. Third Amended and Restated Stock Incentive Plan Notice of Stock Unit Award and Agreement (FY 2008 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, 2008).
|            | 
|10.29      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2008 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, 2008).                                    
|            | 
|10.30      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement (FY 2008 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, 2008).                                  
|            | 
|10.31       |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and James Frankola (which is incorporated herein by reference to Exhibit 10.47 to
Ariba, Inc.s Form 10-Q dated February 6, 2008).                                                                      
|            | 
|10.32       |  | Ariba, Inc.: FreeMarkets, Inc. Third Amended and Restated Stock Incentive Plan Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and Kent Parker (which is incorporated herein
by reference to Exhibit 10.48 to Ariba, Inc.s Form 10-Q dated February 6, 2008).                                  
|            | 
|10.33      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and Kevin Costello (which is incorporated herein by reference to Exhibit 10.49 to
Ariba, Inc.s Form 10-Q dated February 6, 2008).                                                                      
|            | 
|10.34      |  | Ariba, Inc. 1999 Equity Incentive Plan: Notice of Stock Unit Award and Agreement, by and between Ariba, Inc. and Robert Calderoni (which is incorporated herein by reference to Exhibit 10.50 to
Ariba, Inc.s Form 10-Q dated February 6, 2008).                                                                    
|            | 
|10.35      |  | Ariba Bonus PlanExecutive Officers (which is incorporated herein by reference to Exhibit 10.51 to Ariba, Inc.s Form 10-Q dated May 7, 2008).                                                                                                                                                                       
|            | 
|10.36      |  | 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).                                                                                                                                               
|            | 
|10.37      |  | 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).                                                                                                              
|            | 
|10.38      |  | 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).                                                                                                 



3



---

|            |  |                                                                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                   
|10.39     |  | Amended and Restated Severance Agreement, dated August 25, 2008, by and between the Registrant and Robert M. Calderoni.                                                       
|            | 
|10.40     |  | Amended and Restated Severance Agreement, dated September 5, 2008, by and between the Registrant and Kevin Costello.                                                          
|            | 
|10.41     |  | Amended and Restated Employment Agreement, dated August 15, 2008, by and between the Registrant and Kent Parker.                                                              
|            | 
|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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4