Connect raises cash, buys time
Buying more time, cash-strapped e-commerce software vendor Connect will raise $10 million in a private placement to offset its continuing financial losses.
Connect also announced a bigger-than-expected loss for the last quarter, joining the sea of red ink currently drowning competing e-commerce companies.
"It's bad news, baby," said Vernon Keenan, an e-commerce analyst with Zona Research. "Connect got another year to live, and hopefully sales will pick up in the next quarter, but these earnings are quite disappointing."
Connect reported a loss of $3.2 million, or 17 cents a share, for the quarter ended September 30, compared with $4 million, or 23 cents a share, a year ago. Connect's performance was somewhat worse than the 15 cents a share Wall Street analysts had expected, according to First Call's consensus of analysts' estimates.
In addition, Connect has reduced its employee count from 150 to under 100, according to chief financial officer Joe Girata.
"The financial viability issue, which our competitors use very aggressively against us, is affecting us in the marketplace," Girata said.
Two of Connect's competitors, BroadVision (BVSN) and Open Market (OMKT), also reported losses last month.
Keenan rates BroadVision's results--it trimmed its losses while more than doubling revenues to $7.2 million--as the best among the "pure play" e-commerce companies. The company's positive figures stem largely from the strength of BroadVision's international sales.
But all three pure play firms must succeed in convincing customers to pay $250,000-plus to buy their packaged software and consulting services rather than create their own applications.
Those prices may drive potential customers toward cheaper approaches from Intershop or iCat, Keenan said, but such solutions don't link as easily to legacy systems in Connect, BroadVision, or Open Market.
Other vendors in the e-commerce software market include Actra, IBM, Oracle, and Microsoft, and Interworld Technologies. But profitability for these vendors isn't available for their e-commerce lines, either because they are privately held or because they are so large that e-commerce revenue doesn't affect earnings.