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Asia, mergers cited in Open Market fall

Declining sales in Asia and difficulties in absorbing acquisitions are blamed for a weak earnings report from the pioneering e-commerce firm.

Declining sales in Asia and difficulties in absorbing acquisitions are being blamed for a weak earnings report from pioneering e-commerce software company Open Market, which will furloughing up to 100 of its 480 employees, or nearly 20 percent.

While competition is heating up, analysts don't see Open Market's performance as a prelude to a bloodbath in the sector, citing rival BroadVision's recent report of its second consecutive profitable quarter.

"You can't say that everything is going down the drain here," said Shanta Puchtler, a Forrester Research analyst. "I don't think this is a first-domino-to-fall kind of scenario, although over time it's inevitable that we would see some stumbling or realignments of companies in this space."

Open Market's stock fell only modestly today, largely because it took a big hit three weeks ago when the company warned Wall Street that its revenues would come in under analyst estimates. The stock fell to around 4, recovering to 7 yesterday and closing the week at 6.25 today. (See related story)

Jay Somaney, who follows the stock for New York brokerage Loewenbaum & Company, E-commerce software thinks the whole sector may be hurting because some customers are focused on solving Year 2000 problems instead of jumping into e-commerce.

Somaney began covering Open Market in August with a buy recommendation, then downgraded the rating after the company's warning early this month. But he remains bullish on the sector.

"I'm more convinced than ever that the overall e-commerce market will be incredibly large," he said.

Erica Rugullies, e-commerce analyst with Giga Information Group, thinks Open Market's aggressive acquisitions strategy may be hurting the company.

Open Market acquired publishing software firm Folio and catalog software company Waypoint last year. In May, it bought ICentral, which markets tools for building storefronts.

"BroadVision doesn't have the problem of swallowing acquisitions, and it's profitable now," Rugullies noted, adding that overall economic conditions may be affecting the sector too.

"Spending has tightened in corporations all over the country, so companies may have put off purchases from Open Market because of belt-tightening," she added.