Commerce One secures emergency loan


10 December 2002 E-marketplace software vendor Commerce One has secured a $25 million (€24.7m) loan and is cutting 350 more jobs in a bid to address its deep-seated financial difficulties.

Company executives now hope that these measures, along with a new focus on web services integration technology, will be enough to stabilise the company by the middle of 2003, when it hopes to be near or at break even. They stress that Commerce One’s blue chip customer base remain supportive of the company and its strategy.

Commerce One, which boomed during the late 1990s with its ‘e-marketplace’ technology, has been struggling to keep its revenues from falling since the beginning of 2001, a year in which it recorded a massive $2.58 billion (€2.54bn) net loss. In common with rivals such as Ariba, Commerce One’s repositioning and recovery has been hampered by the harsh economic conditions and scepticism over some B2B technologies.

The $25 million (€24.7m) credit facility is being provided by Santa Clara, California-based Silicon Valley Bank and is due for repayment by the end of November 2005.

Results in the third quarter to the end of September were dismal, with Commerce One reporting a net loss of $46.9 million (€46.3m) on revenues of just $26.4 million (€26.2m). More ominously, its cash pile had fallen to $110.7m (€109.7m) from the $192.5m (€190.8m) it had at the beginning of the year.

Compounding such difficulties, Commerce One’s partnership with enterprise applications giant SAP has now ended. This is likely to wipe out a large chunk of the e-marketplace vendor’s software licence revenues. SAP licensed and co-developed Commerce One’s software for two years, but their agreement has now ended and SAP has no plans to renew.

In the third quarter, SAP paid Commerce One $8.1 million (€8m) in software royalties. This accounted for 96% of the company’s third-quarter licence revenues and its ending will make Commerce One almost entirely dependent on services for its revenues. In the third-quarter it generated $17.9 million (€17.7m) from services.

After repeated rounds of cost-cutting, the company has just 700 staff left. According to Commerce One’s vice president of strategy Narry Singh, the company should eventually save $17 million (€16.8m) per quarter as a result of its latest round of job cuts.

Along with other restructuring efforts made this year, the company’s quarterly costs should be reduced to $40 million (€39.4m) per quarter, said Singh. This compares to $73.6 million (€72.6m) for the last quarter. Singh also said he expects the company to break-even some time between the middle and end of 2003.

Although some analysts will view these targets as optimistic, executives believe that the the cost-cutting will give Commerce One enough time to develop its new software product and services strategy, which goes beyond e-procurement and involves linking supply chain partners together using web services technology.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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