The past eight days have held significant highs and lows for Commerce One . The high for the provider of B2B ecommerce solutions
was apparent last week when the company forged a billion-dollar partnership
with Covisint, the online auto parts exchange.
Lows began Tuesday when Commerce One lost a $108 million deal with
Converge, which publicly selected VerticalNet Solutions to provide the
technology backbone for its trading operations.
The deal is a major coup for VerticalNet since it is their first major
exchange win, according to a research report from Goldman Sachs.
“We believe [this decision] will put pressure on CMRC shares,” according
to the Goldman report. “The loss of the deal is worth about $108
million, split roughly two-thirds software, one-third services. Also, CMRC
will not have any revenue sharing agreements with Converge since they are
being displaced.”
The report speculates that Commerce One was not displaced because of
product functionality, but because of the expertise VerticalNet has in the
spot market for electric components.
It noted that the Commerce One’s displacement will not affect the
company in the long term. “We do not think this will affect results for the
quarter since there hadn’t been a formal agreement between CMRC and
Converge. Therefore we are not lowering numbers for this quarter or 2001,”
according to the report. “However, we believe that since CMRC will not be
involved in the exchange it tightens their wiggle room to meet or exceed
estimates in future quarters.
“The Converge relationship would have contributed roughly 4 percent ($35
million) of CMRC revenues in 2001. However, CMRC is still working with
Converge and some of its members for nice applications. We believe the
revenue from this work will be minimal.”
Salomon Smith Barney analyst Gretchen Teagarden also believes that
Commerce One will not be adversely affected by the loss of business.
“There was never a signed definitive agreement between the two companies,”
Teagarden said, noting that she is cautious of any large deal without a definitive agreement signed.
Teagarden added she, too, has no plans to change her projections
for Commerce One and is comfortable with her Q4 EPS estimates of 6 cents per
share on revenue of $177 million.
The reaction on Wall Street is not as confident. Commerce One’s stock
price fell by nearly 10 percent yesterday, with an after-trade close price
of $29 15/32. On Wednesday, the price continued to fall and, at press time, stood at
$24 13/16.
A spokesperson for Commerce One could not be reached at the time of this
writing.