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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

OR

Commission file number 000-26299

ARIBA, INC.

(Exact name of registrant as specified in its charter)

(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 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.    ¨

Indicate by check mark whether Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x    No ¨

The aggregate market value of the common stock held by non-affiliates of the Registrant (based on the closing price for the common stock on the Nasdaq Stock Market on March 31, 2004) was approximately $770.4 million.

As of November 30, 2004, there were 65,254,920 shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement for its annual meeting of stockholders for the year ended September 30, 2004 are incorporated by reference in Part III of this Form 10-K.

Table of Contents

ARIBA, INC.

FORM 10-K

September 30, 2004

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PART I

ITEM 1.    BUSINESS

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 statement. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those discussed elsewhere in this report in the section entitled “Risk Factors” and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings. Ariba, Inc. is referred to herein as “Ariba” or “we.”

Recent Events

On July 1, 2004, we completed our merger with FreeMarkets, Inc. (“FreeMarkets”), a publicly held company headquartered in Pittsburgh, Pennsylvania. FreeMarkets provided companies with software, services and information for global supply management. Pursuant to the merger, former stockholders of FreeMarkets received 0.375 shares of our common stock (after giving effect to the one-for-six reverse split of our outstanding common stock effected on July 1, 2004) and $2.00 in cash for each outstanding share of FreeMarkets common stock held by them. See Note 4 of Notes to Consolidated Financial Statements for further discussion.

Overview

Ariba provides spend management solutions that allow enterprises to efficiently manage the purchasing of non-payroll goods and services required to run their business. We refer to these non-payroll expenses as “spend.” Our solutions include software applications, professional services and network access. They are designed to provide enterprises with technology and business process improvements to better manage their spending and, in turn, save money. Our software applications and services streamline and improve the business processes related to the identification of suppliers of goods and services, the negotiation of the terms of purchases, and ultimately the management of ongoing purchasing and settlement activities. These goods and services include commodities, raw materials, operating resources, services, temporary labor, travel and maintenance, repair and operations equipment.

Procurement organizations have increasingly evolved over the last several years from providing a primarily tactical function to providing a strategic function in an effort to lower costs. Enterprises have increasingly focused on global suppliers, manufacturers and service providers in order to reduce costs, better manage supplier relationships, make faster decisions, and establish more efficient procurement processes. At the same time, technological advances are further enabling these global business initiatives, as Internet connectivity has defined new ways to identify, negotiate and engage with suppliers and partners worldwide, while other data aggregation and enrichment tools are providing greater insight into procurement trends and best practices.

We believe that technology alone is not enough to transform procurement from a tactical to a strategic function. Accordingly, Ariba Spend Management solutions combine domain expertise, operational services, software applications and network access. We work closely with our customers, providing sourcing, procurement and commodity expertise around the world to help companies optimize their spend management processes and supplier relationships. We then leverage our broad spend management technology platform to help our customers realize repeatable savings over the long term.

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Ariba was incorporated in Delaware in September 1996 and from that date through March 1997 was in the development stage, conducting research and developing our initial products. Our principal executive offices are located at 807 11^th Avenue, Sunnyvale, California 94089.

Ariba Spend Management Solutions

Ariba is focused on providing world-class spend management solutions that drive rapid and sustainable bottom-line results. Our solutions allow enterprises to take a step-by-step approach with products and services that work together. By combining a comprehensive suite of software applications, professional services and network access, Ariba helps customers to address six key areas of spend management.

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 and highly configurable technology and related services. For customers seeking expert assistance, we offer sourcing process and commodity expertise in over 400 categories of spend. Finally, for those customers seeking managed services, we offer tailored solutions to outsource processes, spend categories or entire procurement operations. Customers may subscribe to our software products and services for a specified term, purchase a perpetual license or pay for services on a time-and-materials basis, depending upon their business requirements.

Ariba Software Applications

Ariba software applications were built to leverage the Internet and provide enterprises with real-time access to their business data and their business partners. They are designed to integrate with all major platforms and can be accessed via a web browser. One of the key differentiators of Ariba Spend Management solutions is the ability to integrate with multi-ERP (enterprise resource planning) software applications. Many large corporations use several different ERP platforms that cannot easily work with each other. For this reason, our software applications are designed to run on top of major legacy or backend applications for business processes, such as human resource management and accounting, thus eliminating the need for manual transfer of critical information from Ariba products to ERP systems. Except for Ariba QuickSource, our software applications are primarily provided as installed applications, but may also be delivered as hosted applications or service offerings. Ariba QuickSource is provided only as a hosted application.

Ariba Analysis is designed to provide our customers with a single, unified view of their spending activities across all of their suppliers, divisions and purchased goods or services. Analytical tools summarize data into meaningful dashboards to help purchasing and sourcing professionals identify specific groups of goods and services with the largest opportunities for savings. Savings opportunities are frequently identified for goods or

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services which employees purchase without proper authorization or from a fragmented supply base. By providing visibility into and control of spend across all categories, systems and divisions throughout the source-to-pay cycle, Ariba Analysis helps businesses drive significant reductions in spend. Ariba Analysis was first introduced in March 2002.

Ariba Buyer is a robust, scalable and reliable application that enables organizations to manage purchasing transactions for any good or service. The automation of the procurement business process is designed to reduce processing costs, improve productivity and help ensure compliance with enterprise-wide contracts. Ariba Buyer links end-users throughout an organization with approvers, and links the procurement application to back-end financial, purchasing and human resource systems to access important procurement information, such as supplier product information, price lists, web sites and order status. Ariba Buyer helps customers attain global user and supplier adoption, enforce purchasing compliance against corporate policies and contracts, and measure progress. All of these factors drive cost savings by reducing transaction expenses, decreasing cycle times and leveraging existing supplier relationships. Ariba Buyer leverages the Ariba Supplier Network to securely automate commerce transactions with suppliers on the Internet. Ariba Buyer was first introduced in June 1997.

Ariba Category Management enables sourcing and procurement professionals to collaborate, gain greater organizational visibility and control, and capture category knowledge. It helps teams make better decisions and increases adoption, compliance and efficiency by providing workspaces for process and knowledge management. Ariba Category Management was first introduced in February 2003.

Ariba Category Procurement enables customers to better manage complex categories of spend, including catalog, travel, third-party, time-based and project-based purchases. With Ariba Category Procurement, enterprises can improve category spend management across a broad range of categories, including but not limited to facilities management, janitorial services, information technology and management consulting, limousine services, field maintenance, legal services, market research, temporary labor and print services. Ariba Category Procurement was first introduced in February 2004.

Ariba Contract Compliance provides comprehensive enterprise-wide management of the contract lifecycle and provides buyers access to a centralized repository of contracted products and services. Using Ariba Contract Compliance, buyers can create, search, amend and re-source contracts, as well as monitor contract usage and supplier price compliance. Ariba Contract Compliance was first introduced in February 2002.

Ariba Contract Workbench provides a set of functionality focused on addressing the creation, authoring, and repository functions of the contract management lifecycle. It provides organizations with a user-friendly platform that allows users to more efficiently create and manage contracts with functionality that includes contract search, template selection, clause usage, and process and document management. Ariba Contract Workbench was first introduced in February 2004.

Ariba Data Enrichment facilitates spend analysis by cleansing, classifying and enriching real spend data from an enterprise’s various data systems. Ariba Data Enrichment uses natural language processing to classify free-form text descriptions, a database of over 16 million supplier records to further assist in classifying and enriching supplier data, and an exhaustive list of commodity-specific rules to add clarity to all types of spend. The technology base for Ariba Data Enrichment was developed by Softface, Inc. (“Softface”), which we acquired in April 2004.

Ariba eForms allows organizations to automate non-standard business processes outside of the core requisitioning process. Users are able to attach custom forms to existing Ariba software applications or create new software applications for nearly any type of operating resource request. Ariba eForms are created using XML (eXtensible Markup Language), a definition language that allows organizations to design forms that capture information from end-users and route the information for internal approval. Each Ariba eForm can have its own approval rules and can incorporate standard data from Ariba Buyer, including financial accounting and human resources information. Ariba eForms was first introduced in September 1998.

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Ariba Invoice streamlines and optimizes the invoice and reconciliation processes, enabling customers to gain more control over the procurement cycle. It replaces manual and paper-intensive activities with efficient electronic invoicing. Ariba Invoice provides customers with an intuitive user interface, robust workflow-based exception handling, and real-time supplier communication designed to create greater time, resource and cost efficiencies. The solution minimizes the costs and errors of manual data entry, invoice matching and exception resolution. Ariba Invoice was first introduced in April 2002.

Ariba QuickSource is an introductory negotiation platform that allows sourcing professionals to more fully automate the process of structuring and executing online markets by simplifying and enhancing the request-for-quote/request-for-proposal process. Ariba QuickSource is a hosted application that can be deployed quickly, is easy to use and delivers rapid, measurable savings. Ariba QuickSource was developed by FreeMarkets and first introduced in February 2001.

Ariba Settlement helps automate and centralize the payment reconciliation, disbursement and remittance processes across a global enterprise, thereby enabling enterprises to improve payment forecasts and status visibility for both internal and external stakeholders. Ariba Settlement enables enterprises to proactively and accurately manage payment terms, automate vendor disbursements, drive additional discounts and improve cash forecast visibility. Enterprises may schedule batch payments, optimize vendor discounts and electronically share remittance details with suppliers leveraging the Ariba Supplier Network. Ariba Settlement was first introduced in February 2004.

Ariba Sourcing is an enterprise-wide strategic sourcing application designed for all spend categories. It assists professional buyers at many steps in the sourcing process, from defining spending baselines and category requirements to finding suppliers and negotiating agreements. Ariba Sourcing speeds and streamlines the request-for-quote/request-for-proposal process, dynamic events, auctions and negotiations management by providing event management tools, team management functionality, communications facilitation, and automated supplier bid collection and analysis. Ariba Sourcing was first introduced in September 2001.

Ariba Supplier Performance Management helps enterprises define, measure and enhance the performance of suppliers to meet business goals. It enables enterprises to gather supplier performance data, use analysis templates to compare suppliers across a category for better sourcing and procurement decisions, collaborate on ideas, issues and documents throughout the sourcing process, and monitor supplier performance across transactional and subjective interactions using quantitative and qualitative data. Ariba Supplier Performance Management was first introduced in June 2003.

Ariba Travel and Expense 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 reduce travel approval and expense reimbursement cycle times. Ariba Travel and Expense provides a set of features to generate expense reports automatically from travel cards or procurement cards and can route expense reports to functional travel and expense managers. Ariba Travel and Expense was first introduced in September 1998.

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 our customers with their business partners and suppliers to exchange product and service information as well as a broad range of business documents, such as purchase orders and invoices. Over 100,000 suppliers of a wide array of goods and services are connected to the Ariba Supplier Network. As a result, our customers can connect once to the Ariba Supplier Network and simultaneously access many suppliers. By using the Ariba Supplier Network, businesses can realize cost savings through greater process efficiencies, better employee and contract compliance, reduced inventories and fair pricing opportunities.

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The Ariba Supplier Network is a multi-protocol network that allows buyers to send orders from Ariba Buyer in one standard format that are then converted into the supplier’s preferred transaction format. Supported formats include: cXML (Commerce eXtensible Markup Language), a format used on the Internet to describe commerce data and documents; EDI (Electronic Data Interchange), a format used to electronically exchange data and documents; CIF (Catalog Interchange Format), a format commonly used to electronically transfer catalog information; electronic mail; or facsimile. 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, we have 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 settlement that help suppliers manage business transactions and content simply through a web browser or by using XML. We have also created other Ariba Supplier Programs, including Ariba Supplier Advantage, Ariba Supplier Consulting and Ariba Ready, to help suppliers develop, deploy and promote their capabilities on the Ariba Supplier Network.

Access to the Ariba Supplier Network is provided to our customers as part of their license and maintenance agreements. For suppliers joining the Ariba Supplier Network, they 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, EDI or facsimile). Suppliers that exceed certain transaction volumes are charged a nominal fee for access to the Ariba Supplier Network. In addition, suppliers are charged fees for the optional Ariba Supplier Programs and premium technology support services.

Ariba Solutions Delivery

In addition to software applications, Ariba Spend Management solutions include a broad range of strategic services. Ariba Solutions Delivery services include implementation and strategic consulting services, education and training, commodity expertise and decision support services, benchmarking services, low-cost country sourcing and procurement outsourcing services. Our professionals work in concert with experts from third party consulting practices to help customers improve their procurement processes. All of these additional offerings are designed to improve the return on investment our customers receive through the use of our solutions.

Since our inception, Ariba customers have used our team of consultants who maintain deep knowledge of Ariba applications to lead or assist third-party consultants during the implementation process. Through our merger with FreeMarkets and acquisition of Alliente, we have enhanced the Ariba Solutions Delivery organization during the past year both by adding professionals with strategic sourcing expertise, business process re-engineering expertise, specific commodity expertise and best practices expertise, and by adding a procurement outsourcing capability. We now offer services capabilities in seven key areas:

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Strategic Relationships

We believe that strategic partnerships can assist us in gaining broader market acceptance as well as enhance our operating, marketing, sales and distribution capabilities. Our hardware platform partners include Hewlett-Packard, IBM and Sun Microsystems. These relationships help ensure the reliability, scalability and performance of Ariba solutions on these platforms. Our software partners include BEA Systems, IBM and TIBCO, as well as numerous other software companies. Our network service providers, such as American Express, enrich services offered by the Ariba Supplier Network.

We have reselling and/or hosting relationships with IBM, Unisys, EDS, AMS and USi. We have business consulting relationships with IBM, Accenture, Capgemini, Deloitte Consulting, BearingPoint and Unisys, as well as a number of regional consulting firms. These partners implement our products and assist us with sales lead generation. We have certified and trained consultants in these organizations for the implementation and operation of our products.

We have relied, and expect to continue to rely, on a number of third parties to implement, support and recommend our products and services during the evaluation stage of a customer’s purchase process. If we are unable to maintain or increase the quality of our relationships with providers that recommend, implement or support goods and services management systems, our business could be harmed. A number of our competitors, including Oracle, SAP and PeopleSoft, have significantly more established relationships with such providers and, as a result, these firms may be more likely to recommend competitors’ products and services rather than our products and services. Furthermore, it is possible that our current implementation partners, many of which have significantly greater financial, technical, marketing and other resources than we have, could begin to market software products and services that compete with our products and services.

Employees

As of September 30, 2004, we had a total of 1,686 employees, including 335 in research and development, 264 in sales and marketing, 909 in professional services, customer support and training, and 178 in administration, finance, information technology and human resources. Of these employees, 1,182 were located in

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the United States of America and 504 were located outside the United States of America. None of our employees is represented by a collective bargaining agreement, nor have we experienced any work stoppage. We consider our relations with our employees to be good.

Our future operating results depend in significant part on the continued service of our key technical, sales and senior management personnel, none of whom is bound by an employment agreement. Our future success also depends on our continuing ability to attract and retain highly qualified technical, sales and senior management personnel. Competition for these personnel is intense, and we may not be able to retain our key technical, sales and senior management personnel or attract these personnel in the future. We have experienced difficulty in recruiting qualified technical, sales and senior management personnel, and we expect to experience these difficulties in the future. If we are unable to hire and retain qualified personnel in the future, this inability could harm our business.

Sales

We sell our solutions primarily through our worldwide direct sales organization. As of September 30, 2004, our direct sales force consisted of 199 sales professionals, application specialists, and supporting personnel located in several domestic locations and in offices in North America, Europe, Asia, Australia and Latin America.

During our sales process, we typically engage the senior executive management teams of each prospective customer, often including the chief financial officer, chief procurement officer, chief information officer and chief executive officer. We utilize sales teams led by sales professionals and consisting of sales, technical and business process experts who work with our strategic partners to create organization-specific proposals, presentations and demonstrations that address the specific needs of each potential customer.

Marketing

We focus our marketing efforts toward educating our target market, generating new sales opportunities, and creating awareness for our spend management solutions. We conduct a variety of marketing programs worldwide to educate our target market, including business seminars, trade shows, press relations and industry analyst programs, and user groups.

Our marketing organization also serves an integral role in acquiring, organizing and prioritizing customer and industry feedback in order to help provide product direction to our development organizations. We formalized this customer-driven approach by establishing advisory council meetings, made up of numerous industry experts, to provide forums for discussing customer needs and requirements. In addition to providing information to prospective customers, advisory council meetings provide a useful forum in which to share information, test product concepts and collect data on customer and industry needs. We intend to continue to pursue these programs in the future.

Customer Service, Training and Support

We believe that customer satisfaction is essential for our long-term success and 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 electronic mail. We use a customer service automation system to track each customer inquiry until it is resolved.

Our education services group delivers education and training to our clients and partners. We offer a comprehensive series of classes to provide the knowledge and skills to successfully deploy, use and maintain our products and solutions. These courses focus on the technical aspects of our products as well as real-world business issues and processes. All of our classes include lecture, demonstration, discussion and hands-on use of our solutions. Classes are held regularly in our training facilities at our headquarters in Sunnyvale, California and in our offices in Pittsburgh, Pennsylvania, London and Singapore.

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Research and Development

We introduced our initial product, Ariba Buyer, in June 1997, and since then we 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 Enterprise Sourcing in September 2001, and recently upgraded the solution to incorporate functionality from legacy FreeMarkets applications. During fiscal year 2004, we introduced several new products, including Ariba Data Enrichment (based on technology acquired from Softface), Ariba QuickSource (which was previously offered by FreeMarkets), and several internally developed products such as Ariba Contract Workbench, Ariba Category Procurement and Ariba Settlement.

Our research and development expenses were $54.1 million, $54.0 million and $64.4 million for the fiscal years ended September 30, 2004, 2003 and 2002, respectively. Also, for the years ended September 30, 2004, 2003 and 2002, we recorded amortization of acquired technology as part of cost of revenues of $1.7 million, $4.0 million and $6.7 million, respectively, in connection with our various acquisitions.

Our research and development organization is divided into teams based upon our Ariba Spend Management solutions (e.g., Ariba Visibility Solution, Ariba Sourcing Solution and Ariba Procurement Solution) and the Ariba Supplier Network, as well as for 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.

We cannot be sure that existing and future development efforts will be completed within our anticipated schedules or that, if completed, they will have the features or quality necessary to make them successful in the marketplace. Further, despite testing by us and by current and potential customers, errors could be found in our products. We may not be able to successfully correct these errors in a timely and cost-effective manner. If we are unable to develop new products or enhancements to existing products or corrections on a timely and cost-effective basis, or if these new products or enhancements do not have the features or quality necessary to make them successful in the marketplace, our business will be harmed.

We expect that most of our enhancements to existing and future products will be developed internally or perhaps through acquisitions. However, we currently license certain externally developed technologies and will continue to evaluate externally developed technologies to integrate with our solutions. These externally developed technologies, if suffering from defects, quality issues or the lack of product functionality required to make our solutions successful in the marketplace, may impact and harm our business.

Acquisitions

On January 28, 2003, we acquired Goodex AG (“Goodex”), a privately-held European sourcing services provider. On January 13, 2004, we acquired Alliente Inc. (“Alliente”), a privately-held provider of procurement outsourcing services. On April 15, 2004, we acquired Softface, a privately-held provider of data enrichment solutions for spend management. On July 1, 2004, we merged with FreeMarkets, a publicly held provider of software, services and information for global supply management. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 4 and 5 of Notes to Consolidated Financial Statements for more detailed information.

International Operations

We currently have offices in 22 countries. All of our international operations are conducted through wholly owned subsidiaries, except for our Japanese subsidiary, Nihon Ariba K.K., and our Korean subsidiary, Ariba Korea, Ltd., in which Softbank and other strategic partners owned minority interests as of September 30, 2004.

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Revenues from our international operations were $85.0 million, $75.4 million and $73.5 million for the fiscal years ended September 30, 2004, 2003 and 2002, respectively. For the years ended September 30, 2004, 2003 and 2002, Softbank accounted for approximately 2%, 10% and 8% of our revenue, respectively. Also see Note 9 of Notes to Consolidated Financial Statements for financial information about our geographic areas. We have recently restructured our strategic relationship with Softbank. See “Overview of Fiscal Year 2004—Settlement of Dispute with Softbank” below and Notes 12 and 13 of Notes to Consolidated Financial Statements for the impact of our settlement with Softbank.

Competition

The market for our solutions is intensely competitive, evolving and subject to rapid technological change. The intensity of competition has increased and is expected to further increase in the future. This increased competition has resulted in price reductions and 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, Oracle and PeopleSoft. We also compete with several service providers including McKinsey and A.T. Kearney. In addition, we occasionally compete with other small niche providers of sourcing or procurement products and services, including Emptoris, Frictionless Commerce, Ketera Technologies, Perfect Commerce, Procuri and Verticalnet. 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.

We believe that the principal competitive factors affecting our market include a significant base of reference customers, breadth and depth of solution, product quality and performance, customer service, core technology, product features, ability to implement solutions and value of solutions, ability to integrate with multiple ERP platforms and size of vendor. Although we believe that our solutions currently compete favorably with respect to these factors, our market is rapidly evolving. We may not be able to maintain our competitive position against current and potential competitors, especially those with significantly greater financial, marketing, service, support, technical and other resources.

Many of our current and potential competitors have longer operating histories, significantly greater current and potential financial, technical, marketing and other resources, significantly greater name recognition, and a larger installed base of customers than we do. Some of these vendors have and may continue to introduce spend management modules that are included as part of broader enterprise applications at little or no cost. 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. 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 acquire significant market share. We also expect that competition will increase as a result of industry consolidations. As a result, we may not be able to successfully compete against our current and future competitors.

Intellectual Property and Other Proprietary Rights

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

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We license rather than sell our software products and require our customers to enter into license agreements, which impose restrictions on their ability to utilize the software. 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 materials under trade secret and copyright laws, which afford only limited protection. We can make no assurance that any of our proprietary rights with respect to the Ariba Supplier Network will be viable or of value in the future since the validity, enforceability and type of protection of proprietary rights in Internet-related industries are uncertain and still evolving.

We currently have twelve U.S. patents issued and 46 U.S. patent applications pending. We also have one foreign patent issued and 36 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 adversely affect Ariba.

Ariba and the Ariba logo are registered trademarks in the United States of America. In addition, we have Ariba, the Ariba logo and the Ariba “boomerang” design registered in one or more foreign countries. We also have filed applications to register these trademarks in several additional countries. The above-mentioned trademark applications are subject to review by the applicable governmental authority, may be opposed by private parties, and may not issue.

In January 2000, we entered into an intellectual property agreement with IBM under which, among other things, each party granted to the other party a perpetual cross-license to certain of the other party’s patents which were issued at the time of the agreement or which issued based on applications filed within three years after the agreement. Among other things, the cross-license allows each party to make, use, import, license or sell certain products and services under such patents of the other party. As such, the agreement forecloses each party from trying to enforce such patents against the other party by claiming that the other party’s products and services violated the patents.

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 of America. 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, we are a defendant in a lawsuit alleging that three of our products, Ariba Buyer, Ariba Marketplace (which we no longer offer) and Ariba Category Procurement, infringe patents held by a third party. See “Legal Proceedings—Patent Infringement Litigation” for more information. 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

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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, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could harm our business.

Available Information

Our Internet address is www.ariba.com. There we make available, free of charge, our annual report 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 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.

ITEM 2.    PROPERTIES

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

Our operations at our corporate headquarters in Sunnyvale, California consist principally of marketing, research and development and some administrative activities. We occupy approximately 191,200 square feet in a 716,000 square foot, five building office park. Our lease for the entire office park commenced January 25, 2001 and expires on January 24, 2013. We currently sublease two and one-half buildings, totaling 442,600 square feet, to third parties. These subleases expire on July 31, 2007, August 31, 2008 and May 13, 2008. The remaining 82,200 square feet is available for sublease.

We also occupy 108,900 square feet of office space in Pittsburgh, Pennsylvania under a lease covering 182,000 square feet that expires in May 2010. The remaining 73,100 square feet is available for sublease. 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 11,092 square feet of office space. Our other regional offices are located in Colorado Springs, Colorado; Chicago, Illinois; Burlington, Massachusetts; Detroit, Michigan; and Bridgewater, New Jersey. These leases total approximately 74,400 square feet and expire at various dates between calendar years 2004 and 2008. We lease other North American sales and support offices located in the metropolitan areas of Dallas, Texas; Los Angeles, California; Minneapolis, Minnesota; Greensboro, North Carolina; Philadelphia, Pennsylvania; Toronto, Canada; and Mexico. We also lease sales and support offices outside of North America in locations including Australia, Belgium, Brazil, China, Czech Republic, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Korea, the Netherlands, Singapore, Spain, Switzerland, Taiwan and the United Kingdom.

Prior to moving to our current corporate headquarters, we leased 131,560 square feet in Mountain View, California under a lease that expires October 31, 2006. This facility is currently fully subleased to third parties for the remaining term. We lease an additional 45,000 square feet in Mountain View, California under a lease that expires April 30, 2005 and this space is currently available for sublease. We are in the process of subleasing some of our excess leased facilities located in Sunnyvale and Mountain View, California; Lisle, Illinois; and Brussels, Belgium for the remaining lease terms.

We may add additional offices in the United States of America 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.

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ITEM 3.    LEGAL PROCEEDINGS

IPO Class Action Litigation

Between March 20, 2001 and June 5, 2001, a number of purported shareholder class action complaints were filed in the United States District Court for the Southern District of New York against Ariba, certain of our former officers and directors (the “Ariba Individual Defendants”) and three of the underwriters of our initial public offering (the “Ariba IPO”). These actions purport to be brought on behalf of purchasers of our common stock in the period from June 23, 1999, the date of the Ariba IPO, to December 23, 1999 (in some cases, to December 5 or 6, 2000), and make certain claims under the federal securities laws, including Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, relating to the Ariba IPO. In addition, since July 31, 2001, a number of purported shareholder class action complaints were filed in the United States District Court for the Southern District of New York against FreeMarkets, Inc., certain of its officers and directors (the “FreeMarkets Individual Defendants”) and the underwriters of FreeMarkets’ initial public offering (the “FreeMarkets IPO”). These actions purport to be brought on behalf of purchasers of FreeMarkets’ common stock in the period from December 9, 1999, the date of the FreeMarkets IPO, to December 6, 2000 (in some cases, to July 30, 2001), and make claims relating to the FreeMarkets IPO similar to the claims made in the Ariba IPO actions.

On June 26, 2001, the Ariba IPO actions were consolidated into a single action bearing the title In re Ariba, Inc. Securities Litigation, 01 CIV 2359. Similarly, the FreeMarkets IPO actions were consolidated into a single action bearing the title Steffey v. FreeMarkets, Inc. et al., 01 CIV 7039. On August 9, 2001, those consolidated actions were further consolidated (for pretrial purposes), with cases brought against additional issuers (who numbered in excess of 300) and their underwriters that made similar allegations regarding the IPOs of those issuers. On February 14, 2002, the parties signed and filed a stipulation dismissing the consolidated action without prejudice against Ariba, FreeMarkets and certain Individual Defendants, which the Court approved and entered as an order on March 1, 2002. On April 19, 2002, the plaintiffs filed an amended complaint in which they dropped their claims against Ariba, FreeMarkets and all of the Ariba Individual Defendants and the FreeMarkets Individual Defendants under Sections 11 and 15 of the Securities Act, but elected to proceed with their claims against such defendants under Sections 10(b) and 20(a) of the Exchange Act.

The amended consolidated complaint alleges that the prospectuses pursuant to which shares of common stock were sold in the Ariba IPO and the FreeMarkets IPO, which were incorporated in registration statements filed with the SEC, contained certain false and misleading statements or omissions regarding the practices of our and FreeMarkets’ underwriters with respect to their allocations to their customers of shares of common stock in the IPOs and their receipt of commissions from those customers related to such allocations. The complaint further alleges that the underwriters provided positive analyst coverage of Ariba and FreeMarkets after their respective IPOs, which had the effect of manipulating the market for our stock and FreeMarkets’ stock, respectively. Plaintiffs contend that such statements and omissions from the prospectuses and the alleged market manipulation by the underwriters through the use of analysts caused the post-IPO stock prices of Ariba and FreeMarkets to be artificially inflated. Plaintiffs seek compensatory damages in unspecified amounts as well as other relief.

On July 15, 2002, Ariba, FreeMarkets and the Ariba Individual Defendants and the FreeMarkets Individual Defendants, along with other issuers and their related officer and director defendants, filed a joint motion to dismiss based on common issues. On or around November 18, 2002, during the pendency of the motion to dismiss, the Court entered as an order a stipulation by which all of the Individual Defendants were dismissed from the case without prejudice in return for executing a tolling agreement. On February 19, 2003, the Court rendered its decision on the motion to dismiss, granting a dismissal of the remaining Section 10(b) claims against Ariba and FreeMarkets without prejudice. Plaintiffs have indicated that they intend to file an amended complaint.

On June 24, 2003, a special litigation committee of the Ariba Board of Directors approved a Memorandum of Understanding (the “MOU”) reflecting a settlement in which the plaintiffs agreed to dismiss the case against

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Ariba with prejudice in return for the assignment by Ariba of claims that it might have against its underwriters. No payment to the plaintiffs by Ariba was required under the MOU. On June 25, 2003, a special litigation committee of the FreeMarkets Board of Directors approved a substantively identical MOU with respect to FreeMarkets. After further negotiations, the essential terms of the MOUs were formalized in a Stipulation and Agreement of Settlement, which has been executed on Ariba’s and FreeMarkets’ behalf and on behalf of the Ariba Individual Defendants and the FreeMarkets Individual Defendants. The settling parties filed formal motions seeking preliminary approval of the proposed settlement on June 25, 2004. The underwriter defendants, who are not parties to the proposed settlement, filed a brief objecting to the settlement’s terms on July 14, 2004. In the meantime, the plaintiffs and underwriters have continued to litigate the consolidated action. The litigation is proceeding through the class certification phase by focusing on six cases chosen by the plaintiffs and underwriters. Neither Ariba nor FreeMarkets is a focus case. The Court issued an order on October 13, 2004 certifying classes in each of the six focus cases.

There can be no assurance that the proposed settlement will be approved by the Court. In the event that the settlement is not approved by the Court, we intend to vigorously defend against these claims.

Defending against securities class action relating to our IPO may require significant management time and, regardless of the outcome, result in significant legal expenses. If our defenses are unsuccessful or we are unable to settle on favorable terms, we could be liable for large damages that could seriously harm our business and results of operations.

Restatement Class Action and Shareholder Derivative Litigation.

Beginning January 21, 2003, a number of purported shareholder class action complaints were filed in the United States District Court for the Northern District of California against us and certain of our current and former officers and directors, all purporting to be brought on behalf of a class of purchasers of our common stock in the period from January 11, 2000 to January 15, 2003. The complaints bring claims under the federal securities laws, specifically Sections 10(b) and 20(a) of the Exchange Act, relating to our announcement that we would restate certain of our consolidated financial statements, and also, in the case of two complaints, relating to our acquisition activity and related accounting. Specifically, these actions allege that certain of our prior consolidated financial statements contained false and misleading statements or omissions relating to our failure to properly recognize expenses and other financial items, as reflected in the then proposed restatement. Plaintiffs contend that such statements or omissions caused our stock price to be artificially inflated. Plaintiffs seek compensatory damages as well as other relief.

On July 11, 2003, the Court entered two orders that (1) consolidated the cases for all purposes into a single action captioned In re Ariba, Inc. Securities Litigation, Case No. C-03-00277 JF, (2) appointed a lead plaintiff, and (3) approved the lead plaintiff’s selection of counsel. On September 15, 2003, the lead plaintiff filed a Consolidated Amended Complaint, which restated the allegations and claims described above and added a claim pursuant to Section 14(a) of the Exchange Act, based on the allegation that we failed to disclose certain payments and executive compensation items in our January 24, 2002 Proxy Statement. Prior to the hearing on defendants’ motion to dismiss the consolidated complaint, the parties stipulated that plaintiff would withdraw its complaint and file a further amended complaint by April 16, 2004. Plaintiffs’ allegations of wrongdoing in this further amended complaint are limited to our alleged failure to disclose certain payments and executive compensation items. Defendants’ motion to dismiss plaintiff’s further amended complaint was filed on June 18, 2004. A hearing on the motion took place on October 29, 2004, and the motion is now under submission.

Beginning January 27, 2003, several shareholder derivative actions were filed in the Superior Court of California for the County of Santa Clara against certain of our current and former officers and directors and against us as nominal defendant. The actions were filed by stockholders purporting to assert, on our behalf, claims for breach of fiduciary duties, aiding and abetting, violations of the California insider trading law, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, and contribution and

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indemnification. Specifically, the claims were based on our acquisition activity and related accounting implemented by the defendants, the alleged understatement of compensation expenses as reflected in our then proposed restatement, the alleged insider trading by certain defendants, the existence of the restatement class action litigation, and the allegedly excessive compensation paid by us to one of our officers, as reflected in our then proposed restatement. The complaints sought the payment by the defendants to Ariba of damages allegedly suffered by it, as well as other relief.

On May 7, 2003, the Court issued an order that (1) consolidated the cases for all purposes into a single action captioned In re Ariba, Inc. Shareholder Derivative Litigation, Lead Case No. CV 814325, and (2) appointed lead counsel. Plaintiffs filed an Amended Consolidated Derivative Complaint on May 28, 2003. The consolidated complaint restated the allegations, causes of action and relief sought as pleaded in the original complaints, and added allegations relating to our April 10, 2003 announcement of the restatement of certain financial statements and also added a cause of action for breach of contract. On October 28, 2003, we filed a demurrer, joined by the individual defendants, seeking dismissal of the action for failure to comply with applicable pre-litigation demand requirements. On January 6, 2004, the Court granted our demurrer and gave plaintiffs leave to file an amended complaint. After limited demand discovery, plaintiffs filed a Second Amended Consolidated Derivative Complaint on September 10, 2004. Our demurrer to the second amended complaint (brought on the same grounds as our first demurrer) was filed on November 5, 2004. A hearing on the demurrer is scheduled for March 1, 2005.

On March 7 and March 21, 2003, respectively, two shareholder derivative actions were filed in the United States District Court for the Northern District of California against certain of our current and former officers and directors and against us as nominal defendant. These actions were filed by shareholders purporting to assert, on our behalf, claims for violations of the Sarbanes-Oxley Act, violations of the California insider trading law, breach of fiduciary duties, misappropriation of information, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. Specifically, the claims were based on our announcements that we intended to and/or had restated certain financial statements and on alleged insider trading by certain defendants. The complaints sought the payment by the defendants to Ariba of damages allegedly suffered by Ariba, as well as other relief.

On June 23, 2003, the Court issued an order that (1) consolidated the two derivative cases for all purposes into a single action captioned In re Ariba, Inc. Derivative Litigation, Case No. C-03-02172 JF, and (2) appointed lead counsel. Plaintiffs filed an Amended Consolidated Derivative Complaint on June 26, 2003. On September 18, 2003, defendants filed a motion to dismiss or stay the action pending resolution of the parallel state court derivative litigation. Following a hearing, the Court issued a ruling on November 13, 2003 denying the motion but granting defendants’ alternative request for a stay of the action in light of the related securities class action litigation. Accordingly, this action is now stayed until the Court has determined the viability of the federal securities claim in the related action.

Litigating existing and potential securities class actions and shareholder derivative actions relating to the restatement of our consolidated financial statements will likely require significant attention and resources of management and, regardless of the outcome, result in significant legal expenses. In the case of the securities class actions, if our defenses are ultimately unsuccessful, or if we are unable to achieve a favorable settlement, we could be liable for large damages awards that could seriously harm our business, results of operations and financial condition.

Litigation Resulting From Our Merger with FreeMarkets.

On September 16, 2004, a purported shareholder class action was filed against Ariba and the former FreeMarkets board members in Delaware Chancery Court by stockholders who held FreeMarkets common stock from January 23, 2004 through July 1, 2004. The complaint alleges various breaches of fiduciary duty and a violation of the Delaware General Corporation Law on the part of the former FreeMarkets board members in

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connection with our merger with FreeMarkets, which was consummated on July 1, 2004. The plaintiff in this action contends, among other things, that the FreeMarkets board members breached their fiduciary duties to FreeMarkets’ common stockholders by negotiating the merger with us so as to provide themselves with downside protection against a decline in our market price through a beneficial option exchange formula while failing to provide the common stockholders protection in the event of a drop in the price of our stock, by contractually obligating themselves to recommend unanimously that FreeMarkets’ stockholders approve the merger, by failing to disclose to FreeMarkets’ stockholders certain material information before the merger closed, and by breaching their duties of loyalty to the common stockholders in various other respects. As FreeMarkets’ corporate successor, we are alleged to be liable for the FreeMarkets board member’s violation of the Delaware General Corporation Law. Plaintiff seeks disgorgement of benefits by the individual defendants, as well as monetary and rescissory damages from all of the defendants, jointly and severally.

The defendants’ Motion to Dismiss the complaint is due to be submitted to the Delaware Chancery Court on January 14, 2005.

Beginning in April 2001, eleven securities fraud class action complaints were filed against FreeMarkets and two of its executive officers in the United States District Court in Pittsburgh, Pennsylvania. The complaints, all of which assert the same claims, stem from FreeMarkets’ announcement on April 23, 2001 that, as a result of discussions with the SEC, it was considering amending its fiscal year 2000 financial statements for the purpose of reclassifying fees earned by FreeMarkets under a service contract with Visteon. All of the cases have been consolidated into a single proceeding. On October 30, 2001, FreeMarkets filed a motion seeking to dismiss all of the cases in their entirety. On January 17, 2003, the Court denied the motion to dismiss. On March 10, 2004, the Court certified the case as a class action. The certification order is now on appeal to the United States Court of Appeals for the Third Circuit. Although the case is in the discovery phase, only a limited amount of discovery has been taken. We believe that the Plaintiffs’ allegations are without merit and we intend to continue to vigorously defend against these claims.

Defending against class action litigation resulting from our merger with FreeMarkets may require significant management time and, regardless of the outcome, result in significant legal expenses. If our defenses are unsuccessful or we are unable to settle on favorable terms, we could be liable for large damages that could seriously harm our business and results of operations.

Patent Infringement Litigation

On May 26, 2004, a patent infringement action was filed against us in the United States District Court for the Eastern District of Virginia by ePlus, Inc, alleging that three of our products, Ariba Buyer, Ariba Marketplace and Ariba Category Procurement, infringe three U.S. patents owned by ePlus.

Discovery in this case is complete and the trial has been scheduled for January 4, 2005. The Court has indicated that it will bifurcate the trial and try the validity and infringement issues to the jury before trying the damages- related issues. Both parties had moved for summary judgment in their favor on the question of infringement. Additionally, we had moved for summary judgment that certain claims in the patents in suit are invalid. On November 19, 2004, the Court denied all the summary judgment motions.

We cannot predict the outcome of this litigation. If we were to lose, we could be liable for damages for past infringement. Plaintiff claims royalty damages of approximately $76 million to $98 million. We dispute that we are liable for any damages and dispute plaintiff’s calculation as to the amount of damages. If we were to lose, we could be enjoined from selling the products at issue in the litigation and enjoined from inducing customers to infringe. However, we believe we have strong defenses to ePlus’s claims and intend to vigorously defend against them.

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General

In addition, we have been or are subject to various claims and legal actions arising in the ordinary course of business. For example, we recently settled our dispute with Softbank, which is discussed in “Overview of Fiscal Year 2004—Settlement with Softbank,” and settled our litigation with BCE Emergis, Inc., a distributor in Canada.

We have accrued for estimable and probable losses in our consolidated financial statements for those matters where we believe that the likelihood that a loss has occurred is probable and the amount of loss is reasonably estimable. There can be no assurance that existing or future litigation arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows or that the amount of accrued losses is sufficient for any actual losses that may be incurred.

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

Not applicable.

ITEM 4A.    EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Ariba and their ages as of September 30, 2004 are as follows: