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Commerce One misses reduced estimates

The business-to-business software developer posts a wider-than-expected loss in the second quarter.

Business-to-business software developer Commerce One posted a wider-than-expected loss in its second quarter Thursday, losing $70.2 million, or 31 cents a share, excluding one-time charges, on sales of $101.3 million.

First Call consensus pegged the Pleasanton, Calif.-based company for a loss of 21 cents a share on sales of $111.9 million.

The $101.3 million in sales marks a 62 percent improvement from the year-ago quarter, when it lost $16.2 million, or 10 cents a share, on sales of $62.7 million.

The company's shares gained 40 cents to $4.89 ahead of the earnings report before slipping to $4.41 in after-hours trading.

"We were affected by the same factors that have plagued the entire technology industry this quarter," said Chief Executive Mark Hoffman during a conference call with analysts. "We still believe our vision is on target."

Earlier this quarter, Commerce One warned that it would fall well short of analysts' estimates. At the time, executives told investors to expect sales to be between $110 million and $120 million in the quarter, well below the original estimate of $162 million.

The company posted a net loss of more than $2 billion, or $9.02 a share, compared with a net loss of $43.1 million, or 28 cents a share, in the year-ago quarter. Most of that loss was attributed to a one-time cash charge of $1.7 billion from the impairment of intangible assets and equity investments.

It also absorbed a one-time restructuring charge of $62 million in the quarter.

"Commerce One is struggling with a cost structure that's way out of balance with its market opportunities," said Steve Bowen, an analyst at First Analysis. "Companies like Commerce One and Ariba now find themselves in a flat-to-shrinking marketplace. I don't think they've hit their bottom yet."

Ahead of the earnings report, Bowen pegged Commerce One for a loss of 27 cents a share on sales of $110 million.

"These guys are doing a lot of finger-crossing, hoping that these big deals will come in," he said. "But companies are reluctant to spend significant dollars on software in this environment."

Commerce One added 33 new customers in the quarter, bringing its total customer count to 600.

Chief Financial Officer Peter Pervere said the company is still on track to break even by the second quarter of 2002.

Looking ahead, Commerce One expects third-quarter sales to come in just above $100 million. Sales in the fourth quarter are expected to improve "modestly" from the third quarter.

Competitor Ariba posted a third-quarter loss of $26.1 million, or 10 cents a share, on sales of $85.3 million. It warned that it expects sales to fall about 25 percent in its fourth quarter to between $60 million and $70 million.

Ariba also announced that Chief Executive Larry Mueller resigned for personal reasons. Chairman Keith Krach will assume the post on an interim basis until a successor is found.

Ariba shares closed off 44 cents to $4.37 in Thursday trading.

Commerce One shares rallied up to a 52-week high of $84.13 in September before plummeting to a low of $2.99 in June.

Eighteen of the 30 analysts following the stock maintain a "hold" recommendation.