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12/18/2002-- PHOTO BY PAULINE LUBENS/SAN JOSE MERCURY NEWS --Bob Calderoni thought he was joining one of Silicon Valley's hottest new technology companies when he signed on as CFO of Ariba in January 2001. Little did he realize that Ariba had no where to go but down. Six of seven founders had already fled the the company after cashing in more than an billion dollars worth of stock options. And the seventh, Keith Krach, was on his way out the door. When Krach left, the board of directors asked Calderoni, the son of a factory worker who immigrated from Italy, if he wanted to take over. After 45 days of soul searching, he accepted.

Upon hearing that SAP had agreed to buy Ariba for $4.3 billion, my reaction was probably the same as anyone who followed the Sunnyvale-based company's meteoric rise and fall during the dot-com bubble:

Ariba is still in business?

It sure is, despite the premature reports of its death. It did not collapse into oblivion, or file for bankruptcy, or conduct a fire sale of its assets. Instead, it was simply forgotten.

But while we weren't paying attention, something remarkable happened. The company kept plugging away, and for the past few years it has been growing at a clip so fast that onetime competitor SAP felt compelled to snap it up.

I couldn't help but wonder: How did Ariba survive?

"We were left for dead by a lot of people back then," said Ariba Chief Executive Robert Calderoni. "Like a lot of companies in 2001, the world turned upside-down on us. But I always believed we had an opportunity to make something out of our original idea."

As conceived, Ariba had a good notion: Get businesses to automate their whole supply chain by putting it online.

"What we all thought would happen in two or three years took 10 years," said Richard Williams, a senior software analyst at Cross Research who has covered the company through its entire history.

To understand just how improbable the company's success is, we have to hop in the Wayback Machine and set the dial for the late 1990s, Silicon Valley.

Entrepreneur Keith Krach, a former General Motors executive, had sold his startup, Rasna, for $500 million in 1995 and was working out of Benchmark Capital offices plotting his next move. He helped hatch the idea for Ariba and pulled in several of his former Rasna colleagues to start the company.

The idea worked like this: Ariba would create software that it would sell to allow various industries to set up their own marketplaces to buy and sell the parts and supplies over the Internet. It raised what now seems like a paltry $24 million in venture capital, went public in June 1999 when its stock soared 291 percent on the first day of trading, and became the poster child of "B-to-B e-commerce."

On Sept. 22, 2000, Ariba's stock closed at $168.75 a share, or what today would be a split-adjusted $1,012.50 a share. That made it worth more than $40 billion.

"I'll never forget when I had a conversation with board member Bob Kagle who had also worked at GM," Krach recently recalled. "I said, 'Do you realize we're worth more than General Motors? How long do you think that's going to last?' "

Not long. A year later, Ariba's stock had fallen below $2 (a split-adjusted $9.84). Krach was replaced as CEO by Calderoni, his chief financial officer, who had been hired in 2000. Employees were slashed from 2,500 to 700.

The company had to restate earnings due to a $10 million payment Krach made to another executive. Ariba began fighting efforts by Nasdaq to delist its stock. And as if all this didn't look bad enough, insiders managed to sell $1.24 billion worth of stock while investors appeared to take a bath.

Suddenly, the former golden boy had become the poster child for the era's excess.

"It was a state of chaos," Calderoni said. "This was not the company I thought I was joining."

Despite the dire situation, Calderoni remain convinced that the core idea of Ariba remained powerful.

So while bailing water, he began implementing a new strategy. Rather than try to get whole industries to create supply marketplaces, Ariba focused on selling software to individual companies to put their purchasing and supply systems online. Ariba made enough sales to continue to limp along for several years.

Then, taking advantage of the rise of "cloud" computing, Ariba in 2006 created its own online marketplace where the companies it had helped get online could connect to each other to buy and sell supplies. Called the Ariba Network, it launched the company like a rocket, only this time for real.

Except no one was paying attention. Even Williams, the Cross analyst, was skeptical. "Having experienced the dot-com era, I had a hard time buying it," Cross said.

Believe it. Over the past three years, even in the face of a rough economy, Ariba's revenues have almost doubled, catching the eye of SAP, which announced May 22 it would buy the company for $45 a share, or about $4.3 billion.

And Calderoni, with plenty of justification, expresses enormous satisfaction that a decade-long battle against long odds has been rewarded.

"We've got a team of people here who stuck with something that wasn't obvious," Calderoni said. "It's a good story for American business, where too many people try to manage companies for the next 90 days.

"Ariba has been an overnight success almost 12 years in the making."

Contact Chris O'Brien at 415-298-0207 or cobrien@mercurynews.com. Follow him on Twitter at obrien and read his blog posts at www.siliconbeat.com.