B-to-B vendors suffer another bad quarter

A spring thaw didn't follow a harsh winter for B2B software vendors. Many companies last week reported that their revenues are still plummeting.

Commerce One Inc., i2 Technologies Inc. and BroadVision Inc. all announced that they expect quarter-to-quarter revenues to tail off at least 30 percent.

It marks the second straight quarterly regression for these companies. Analysts said that they believe the slide will continue and that it shows how companies are investing in IT more conservatively.

Kimberly Knickle, an analyst at Boston-based AMR Research Inc., said that implementations of software for buying and selling goods electronically can be lengthy and involved projects, costing US$500,000 or more. "I'm not sure companies are willing to take that on right now," she said. "Nobody wants to be in charge of the project that keeps growing."

It has also become common for IT projects to require a higher level of executive approval than they once did, according to Laurie Orlov, an analyst at Forrester Research Inc. in Cambridge, Mass. B2B procurement has also lost some of its luster, she added.

"The [enterprise resource planning] guys are savvy about procurement now," Orlov said. "You can get procurement from PeopleSoft, SAP and Oracle now, and it works, unlike some of their earlier releases. For the B2B vendors, that means it's not differentiation through newness anymore."

SAP AG actually rushed to the aid of Pleasanton, Calif.-based Commerce One about two weeks ago, with a $225 million investment worth approximately 20 percent of Commerce One's stock. Many analysts viewed the investment as a major step toward SAP's eventual purchase of its smaller partner.

"Long term, the marriage will take place, but probably just for the technology and nothing else," said Hari Srinivasan, an analyst at Banc of America LLC in San Francisco. "It doesn't look like there's a lot of revenues to be had from Commerce One."

However, in a conference call, SAP CEO and co-founder Hasso Plattner called Commerce One's marketplace software a key in SAP's attempts to break free from its back-office supply chain moorings. In particular, he said, joint development efforts with Commerce One would help SAP gain a foothold in private procurement exchanges and help with B2B integration.

He insisted that two down quarters in a slow economy isn't reason to abandon a company that has proved to be a valuable technological partner. "We make a major investment here because we see a huge business opportunity," Plattner said.

Redwood City, Calif.-based BroadVision saw its revenue tumble from an all-time high of $136.9 million in the final quarter of 2000 to $91.1 million in the first quarter of 2001, and to an estimated $54 million to $60 million last quarter. Likewise, Dallas-based i2 saw its numbers drop from $357 million in the first quarter of 2001 to an estimated $235 million to $240 million this past quarter.

Both companies said they were hurt by general slowness in the economy.

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