Commerce One sees sales shortfall

Commerce One said Wednesday that it expects to post a loss of 11 cents per share for the quarter, excluding nonoperating charges, with revenue coming in around $170 million.

Analysts had expected the company to report a loss of 6 cents per share and sales of about $198 million, according to First Call.

Commerce One makes software that helps buyers and suppliers connect over the Internet. In addition to developing product catalogs from suppliers, it hosts electronic marketplaces--vertical trading communities where buyers and suppliers can hook up.

It's been a rough week for companies in the sector. On Tuesday, Ariba warned of a disastrous loss, with revenue coming in at about half of what Wall Street had expected. i2 Technologies warned Monday that it will miss first-quarter expectations and likely will lay off 10 percent of its staff.

But Commerce One's news didn't seem to scare investors, who likely were expecting a warning. Shares were up 81 cents, or almost 15 percent, to $6.42 in morning trading.

"Commerce One's 15 percent revenue shortfall compares favorably to the crushing 49 percent shortfall reported by Ariba, but compares less favorably to the 2 percent shortfall posted by i2 for the quarter," said Lehman Brothers analyst Patrick Walravens.

Commerce One had actually upped sales estimates for the first quarter in January, saying then that it expected 45 percent of its first-quarter sales to come from licensing sales to private and public marketplaces.

The company said Wednesday that $70 million of first-quarter revenue will come from licenses and $100 million from services. In the fourth quarter, the company posted revenue of $89 million from licensing sales and $101 million from services sales.

CEO Mark Hoffman said Wednesday that the first-quarter slowdown was primarily due to "today's generally challenging macroeconomic issues," adding that customers are stretching out the time it takes them to make decisions and complete projects.

"In general, customers have become increasingly cautious in light of current economic conditions," he said.

A few analysts speculated that Commerce One's partnership with German software giant SAP may have helped it survive the current economic downturn with only minor bruises. The two companies have developed joint offerings, MarketSet and Enterprise Buyer, that combine Commerce One's e-marketplace infrastructure and B2B technology with e-procurement, supply-chain, product planning and analysis applications from SAP.

"People are moving into more complex, collaborative types of transactions," Hoffman said. "This is particularly why our relationship with SAP is so important."

Analysts speculated that the SAP relationship has helped enormously.

"We believe the Commerce One/SAP partnership continues to compete effectively, in particular seeing good traction on SAP's home turf in Europe," Deutsche Banc analyst James Moore wrote in a research note Tuesday.

Moore downgraded the stock Tuesday from "buy" to "market perform" in light of Ariba's warning.