B2B exchanges: What happens now?

Mounting losses and declining revenues from Commerce One paint a sorry picture for the one-time darling of the e-marketplace world.

The company has watched revenues fall from $191m in Q4 2000 to $56m in the same quarter of 2001. Equally bad is the company's pro forma loss, which has ballooned from $13.3m to $466.5m.

The figures don't bode well for the company which last week suffered a humiliating public blow to its relationship with SAP. Although the German ERP vendor has a 20 per cent stake in Commerce One, it has now ended a licensing agreement which saw the companies jointly market the Enterprise Buyer product.

Little more than a year ago, Commerce One stood tall with its then fellow e-marketplace star Ariba. But both companies suffered terrible blows as the predicted market for public exchanges failed to materialise.

Now Ariba has walked away from that e-marketplace repositioning itself as a 'spend management' company. It has subsequently managed to halve its losses in stark contrast with Commerce One.

Andrew Ball, analyst with Frost and Sullivan research company explained that SAP is now moving in on Commerce One's territory making the relationship redundant.

Ball added: "Ariba walked away from e-marketplaces, which was humiliating. But, they are further down the line than Commerce One and their story is one of financial stabilisation - the company says things won't get any worse than this."

David Metcalf, an analyst at Forrester Research explained that both companies did shockingly bad in 2001 because of their big cost bases and the shrinking IT budgets of customers.

He added: "But they're still in business and have relatively big cash on the balance sheets. You have to be careful about writing-off Commerce One. Its technology is exceedingly good and it has really gone for the modular approach, which matches the demand of the market."

Metcalf concludes that 2002 will, however be an extremely tough year for Commerce One with little volume running across public marketplaces and the demand for private marketplaces still not particularly strong.

Patrick Meyer, director of communications at Commerce One said that the results are a reflection of the economic environment of 2001.

"It's been a pretty tough environment. But, the team here are feeling positive about 2002 and we'll be gunning hard for the sourcing arena."