September 23, 2004 7:22 AM PDT
Commerce One melting down
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Commerce One, whose software helps companies purchase supplies and negotiate contracts with suppliers, said in the filing that its operating expenses continue to "significantly exceed" its income. The San Francisco-based company said that efforts to raise additional financing have failed, leaving it with about $700,000 in cash.
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Based on the situation, Commerce One said, it is considering a number of plans, including a "significant reduction or discontinuation" of its operations or a sale of its remaining assets. The software maker said that it in all likelihood, it expects to "wind down" its business and file for bankruptcy under Chapter 11 or 7 of the U.S. Bankruptcy Code. Commerce One indicated in the filing that it does not expect to have sufficient funds to meet its debts or make a payout to shareholders if it does declare bankruptcy.
Commerce One representatives did not immediately return calls.
The SEC document appears to signify the end of one of the early stars of the e-commerce market. Founded in 1994, Commerce One aimed to capitalize on the growth of wide-scale electronic networks, or e-marketplaces, where companies would conduct business over the Internet. By using such business-to-business trading networks, proponents argued, companies could save money on the cost of purchasing or selling materials.
Despite early success in generating interest in e-marketplaces, the sector never truly met expectations. Many other so-called B2B companies shut down after failing to get customers to fully embrace electronic trading hubs and finding that getting different companies' computing systems to communicate and exchange data was harder than originally predicted.
In an effort to revive its fortunes last year, Commerce One attempted to move into Web services, a technology arena that promises many of the same benefits of e-marketplaces. However, the strategy was unsuccessful, and the company's new business software, called Conductor, failed to take off. By October 2003, the company began cutting its remaining employees as its revenue again failed to meet expectations.
The company said it has found potential buyers for its software, specifically its supplier relationship management technology.
Bruce Hudson, a Meta Group analyst, said that Commerce One's Web services strategy never gained momentum because people associated the company so closely with electronic marketplaces. Whereas rival Ariba was able to jump into Web services relatively quickly, Hudson said, it was too hard for Commerce One to change perceptions.
"The technology concept behind exchanges remains strong and will continue to grow through Web services architecture," he said. "But Commerce One never got the attention it needed to survive. And after (former partner) SAP had essentially sucked the company dry of intellectual property, (Commerce One) had lost too much time and too many people to make a comeback."
Hudson pointed out the irony that Commerce One "set the stage" for much of today's Web services market with its exchange technology but most likely won't be around to watch the sector mature. A number of companies may attempt to purchase Commerce One's remaining assets, specifically its Conductor Web services software, Hudson said, and whoever buys the technology will likely get "great value for their investment."