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THE DAY AHEAD: B2B execs upbeat

Business-to-business companies did their best "What me worry?" routines with Internet Capital Group (Nasdaq: ICGE) leading an upbeat cast of players.

A host of B2B execs gathered at the Lehman Brothers B4B Industrial eMarketplace conference in New York Thursday. Just in case you were wondering, "B4B" isn't a typo. It's business-for-business. The distinction is slight, but Lehman cooked up a new acronym, since there were a bunch of old economy, consortium-happy companies presenting.



B2B stocks: Ready to rocket?



ICG Managing Director Douglas Alexander was among the more upbeat execs. Of course, his company is sitting on more than $1 billion in cash, and he's buying stakes of companies that have been knocked down a few valuation pegs.

Alexander said as of Dec. 31, it had two public companies in its portfolio -- Breakaway Solutions (Nasdaq: BWAY) and VerticalNet (Nasdaq: VERT) -- with a market value of $2.6 billion. By May 10, well after the B2B correction, ICG had six public companies with a market value of $3.4 billion. Alexander noted that the portfolio went up, but we think it's interesting four companies -- eMerge Interactive (Nasdaq: EMRG), Onvia.com (Nasdaq: ONVI), US Interactive (Nasdaq: USIT) and Universal Access (Nasdaq: UAXS) -- went public and could only add $800 million to the market cap pie.

The days when entrepreneurs received a $100 million valuation with an executive summary are over, but Alexander said the shakeout is a positive. ICG has invested in a bunch of early-stage companies -- 36 to be exact. Seven companies are registered for an initial public offering, and 14 are developing.

"We're getting more ownership and much better pricing," he said. "As prices have come down our cash is more valuable."

Alexander said the company is focused on Europe and Asia. Europe is getting the most play -- ICG invested in 15 European B2B companies. The company only planned on investing in five. Europe is about two years behind the U.S. in the B2B market.

Given ICG's penchant to invest and $200 million-a quarter cash burn, we're told the cash question was a hot one in the company's breakout session. ICG can operate through the first quarter of 2001 with its current cash position, but what happens after that? One big possibility is that ICG would sell holdings in companies where it doesn't have a big ownership stake. That would leave US Interactive as a prime cash generator in the future -- ICG only holds 3 percent of the company.

VerticalNet rolls along

VerticalNet (Nasdaq: VERT) CEO Mark Walsh said investors can expect a few more spinoffs, where the company dishes off one of its verticals to an old-economy partner. The primary example is VerticalNet's PaintandCoatings.com vertical.

In March, VerticalNet created a new company and gave Eastman Chemical (NYSE: EMN) a majority stake. Walsh said VerticalNet provides the platform for the site, and Eastman layers in e-commerce and aggregates small customers. "I wouldn't say you can expect a lot more of these, but there will be a few more," said Walsh.

On other topics, Walsh reiterated that VerticalNet will be the first profitable B2B Internet company, and said VerticalNet UK will launch this quarter. The company is also working to "Webify" NECX, an electronic component exchange. Walsh said the NECX margins should improve from the current 8 percent over the next six to 18 months. NECX did wonders for VerticalNet's first quarter results.

CommerceOne jabs Oracle

CommerceOne (Nasdaq: CMRC) financial chief Peter Pervere took a few jabs at Oracle (Nasdaq: ORCL). Pervere is a former Sybase (Nasdaq: SYBS) exec and is used to competing with Oracle and its outspoken chief, Larry Ellison.

Pervere said CommerceOne is beating Oracle in the field because it has open standards. "Oracle's one-size-fits-all approach won't work," he said. "Not all companies are running on Oracle." Ellison likes to boast the Internet world runs on Oracle.

However, CommerceOne is seeing a lot of Oracle in the field. On the big deals, Pervere said Oracle and IBM (NYSE: IBM) have been aggressive. For regional and smaller partnerships, CommerceOne squares off with Ariba (Nasdaq: ARBA).

Pervere also said he sees revenue sharing and transaction fees kicking in next year. Currently, CommerceOne relies on licensing for most of its revenue. Pervere also noted that CommerceOne doesn't compete with i2 Technologies (Nasdaq: ITWO). He said i2 has good supply chain software, but "just is not credible" when it comes to offering a full e-commerce package.

Of course, you'd never know i2 wasn't credible by listening to i2 Vice President Jeff Bodenstab. He said i2 has expanded into e-business and can manage all the core management functions, including marketplaces. Maybe they can arm-wrestle over it.

Old economy plays

We've been skeptical of the old economy consortium crowd and a few execs did sound a bit clueless on Thursday. But Honeywell (NYSE: HON) was impressive.

Russ McMeekin, president of Honeywell's e-business unit, laid out the goals and stats for myplant.com, myaircraft.com and myfacilities.com. All are e-hubs focused on Honeywell's core businesses. Usage has jumped at myplant.com, myaircraft.com is waiting for Europe regulators to give it the OK, and myfacilities.com launches this month.

The only big question was whether myaircraft.com, a marketplace venture with i2 and United Technologies (NYSE: UTX), would report a profit. McMeekin said "there's debate around that and how to do that.

"We haven't passed that hurdle -- whether it should be profitable," he said. Let's hope they won't bicker over splitting up the dough.


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