FreeMarkets tops 4Q estimates

FreeMarkets, Inc. (Nasdaq: FMKT) on Monday reported a fourth quarter loss of 26 cents a share, a nickel less than First Call's expected loss of 31 cents a share. The business-to-business online auctioneer also reassured investors that the departure of customer General Motors won't impact revenue or operations in 2000.

Shares closed at 271 13/16 Friday, having recovered from the dip they took earlier this month. FreeMarkets fell when the company announced one of its largest customers, General Motors (NYSE: GM), was bailing out.

The company, which creates customized business-to-business online auctions for buyers of industrial parts, raw materials and commodities, made a 483 percent gain in its December IPO.

Net loss for the quarter was $8.3 million, or 26 cents per pro-forma diluted share. Operating loss, excluding stock-based expense, was $8.6 million, or 27 cents per pro-forma diluted share.

Revenue for the fourth quarter was $7.8 million, up 161 percent over $3 million in 1998's fourth quarter. It also rose 46 percent over the third quarter.

For the year, the company said auction volume topped $2.7 billion, an increase of 178 percent over 1998. Net loss for 1999 was $21.8 million, or 79 cents a share, on sales of $20.9 million. Operating loss for the year ended December 31, excluding stock-based expense, was $17.5 million, or 63 cents a share, compared to a break-even amount in 1998.

Other good metrics for the quarter include the addition of 20 new supply verticals and over 900 new suppliers to its online auctions, bringing the total number of supplier participants to more than 3,000. The number clients using the marketplace grew from 18 to 34, diversifying the company's revenue base for growth in 2000, the company said.

FreeMarkets seems to have learned its lesson from General Motors' departure. In the fourth quarter, the percentage of revenue from United Technologies and General Motors decreased to 22 percent and 10 percent, respectively. For the year, revenue from United Technologies Corporation and General Motors had been 34 percent and 15 percent, respectively, of total revenues.

The company also reassured investors that the General Motors departure won't have a material impact on its revenue or operations in 2000, due in part to a new agreement with Delphi Automotive Systems Corporation.

More than 60 percent of the General Motors revenue came from services to Delphi, which were included under FreeMarkets' 1999 agreements with General Motors. On January 20, after General Motors announced the termination of its agreement with Freemarkets, Delphi signed a new agreement, under which FreeMarkets will continue to serve it through 2000.