Question-and-Answer Session
Operator
Thank you. (Operator instructions). Our first question is from the line of Greg Dunham with Deutsche Bank. Please go ahead with your question.
Greg Dunham – Deutsche Bank
Hi, thank you. You know, looking back, clearly the margin expansion is impressive especially when you have accelerated growth in to the mid teens as well, but I think what I most surprised that is your commentary about deal closings at the tail end of the quarter. Could you talk more specifically about that in terms of was it close rates, was it win rates, or you still seeing deals get through legal as efficiently they would have been say 6 months ago?
Bob Calderoni
You know, Greg, as you know a lot of our business closes late in the quarter and that was – remained the case here in the most recent quarter in Q4, and we felt very bullish going into the quarter, we remain bullish as the quarter progressed and with two weeks ago in September the market started melting down all around us. This is not something that occurred in October. The markets were melting down all around us in the newspaper everyday, banks were closing, and even worried that that was going to take the opportunity away and we didn’t see any change in that business at all including in the financial services sector, including in the automotive sector, including in the retail sector. And we those deals all progressed and we had better – maybe even better close rates. Our team was busy and it seemed like – you never close everything, almost everything closed that we thought we were going to close in there. So, we didn’t see any impact of anything. On the contrary it actually was stronger and we’re going into this current quarter with a good pipeline again.
Greg Dunham – Deutsche Bank
And you mentioned coverage being better than it has been in the past. Now, when you think about some of the investments that you are making, how much does your $0.70 target in your revenue target really require you to benefit from these investments in network near term?
Bob Calderoni
The investments we are making – the network is growing. So the business we have today is already growing. We expect the network to grow in the 20% to 30% range in 2009. We think there is an opportunity for that to grow even greater in 2010 and 2011 and it is going to require us to open up some new revenue streams. We’re going to make those investments in 2009 and we will see them payback for it in 2010 and 2011 and we’re able to do that Greg because we feel pretty confident in the subscription software growth that we have in our core business today. We’re going to implement some disciplined cost controls as well just to take a little bit of the pressure of the P&L. But we’re coming into 2009 with about 75 – we look at our annualized backlog it represents about 75% of our 2009 forecasted revenue. Last year we came into the year with only about 65% of the full year in backlog. So, we’re actually coming into the year with more visibility than in a year ago. The pipeline is strong, it remains strong, and we haven’t seen any slowdown in the business. And I think really comes down to it. I know this is a little bit of a surprise because we all listen to the same news reports and we all hear the same troubles out there in the market but Ariba is selling cost reduction and we are selling it on an on-demand solution where we can get time to value. We can do it without big upfront investments and customers can see rather short payback periods and I think, you know, spend management coupled with an on-demand delivery model is I think a perfect recipe for the problems many of these companies are facing.
- To read the full transcript on Seeking Alpha, click here »
