Commerce One's second act
Published: 26 Jul 2002 20:34 BST
Two years ago, when everyone knew the creation of a huge business-to-business marketplace was a matter of destiny, Commerce One was sitting pretty. The biggest daily worry was whether the software maker could beat out Ariba for the next megadeal as the two rivals raced the clock to build the electronic future.
Two years later, that now feels like ancient history.
With so many customers shelving purchases until the economy picks up, Commerce One CEO Mark Hoffman faces grave challenges. Can he find new markets for the company's software? Can he revive Commerce One's battered stock price? And can he stay on the good side of wayward partner SAP?
No easy answers are there. Like most e-commerce application companies, Commerce One has suffered because of the downturn in the U.S. economy. But the company has also never managed to turn a profit, and its losses have grown since last fall despite cutting nearly 70 percent of its staff in successive rounds of layoffs. What's more, the company lost its president and chief operating officer, Dennis Jones, who left the company in May, and Chief Financial Officer Peter Pervere, who has since retired.
Meanwhile, a lucrative development and sales partnership with SAP, which buoyed the company last year, has since expired. (Earlier this month, SAP said it will take a $318.9 million charge in the second quarter to reflect losses for its 20 percent investment in Commerce One.)
Commerce One, which expanded its product line in March, has pared down its corporate mission to the more modest idea of helping businesses buy supplies more efficiently. It is also working on a new generation of applications incorporating Web services, expected to be released next year.
CNET News.com caught up with Hoffman to talk about the future of his company and the relevance of e-marketplaces in what are decidedly different times.
Q: Given the downturn in e-marketplaces and B2B e-commerce companies, is Commerce One still relevant?
A: Yes. I think one (reason) is that we have a great installed base. They are mostly Global 1000 companies, composed of people like General Motors, Ford, Daimler Chrysler, Boeing, Lockheed, BAE, Shell, British Petroleum, on and on and on around the world.
Second, we've refocused our efforts around enabling the enterprise to be able to buy and source products more easily. Our pipelines are building on that side of the equation. It's still slow because the economy is tough, but it is a growing market. Third, we've got a very good view of the future and where this market has to go to make electronic commerce as frictionless as possible. And that's the whole concept of Web services and being able to bring standards-based computing platforms into the market.
Commerce One stock is trading below a dollar. What are you doing to turn that around?
There are a couple of things that have affected it. One is the cash flow that we had going, and we've reduced headcount by 15 percent a quarter over the last several quarters. We have good cash on hand, so that helps. We need to start to show license revenue growth. We've got to perform against what we're saying in the marketplace. The market turning around a little bit would help. Everyone is just getting driven down in this market.
In May both your CFO and COO/president left. Why?
It didn't make sense to have a COO and chief executive office running a company that's 1,100 people. Dennis Jones (former COO and president) and I agreed that I am more suited to the start-up environment, which is much more of what we are today as we convert to the Web services strategy and rolling out those products into marketplace as a much smaller company.
What about the departure of your CFO? That's sort of considered a red flag, isn't it?
The CFO was Peter Pervere. Peter and I are good friends, and we have worked together for 17 years now. Peter had wanted to retire a couple of years ago, and I kept talking him into staying. He finally got to a point where he wanted to retire, which is what he has done. He's working for a nonprofit and some other organisations now. But I do want to assure you that it's not like anything else in the market. There are no accounting issues.
Do you see the market turning a corner?
I think it's going to be a pretty hard year through the end of 2002. It's better now than in the first two quarters because you can see a little more stability in the marketplace, but it's still a pretty tough market. Everyone is being so conservative and careful. Which is OK, so are we.
Even early on this year, I felt that this was going to be a tough year. I said, "Let's focus all our efforts to getting to 2003 so that in the first quarter we've got all our products rewritten and we've got everything built around the new Web services strategy so that we're poised if the market starts to take off in 2003." I think the market will start to adopt the new shift around Web services, and we'll be in a position to capitalise on that.
Do you have a target for profitability?
I do.
What is it?
We're not talking about it publicly. We've never given a target date. The good thing is we've got cash on hand. We've reduced our infrastructure significantly over the last several months. We won't have profitability this quarter or next quarter, but we cut the cash flow down and we can manage that for an extended period of time. We feel very good about that structure and the ability to manage ourselves until we are profitable.
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