(REUTERS) INTERVIEW-Freemarkets <FMKT.O> CEO upbeat on 2000
INTERVIEW-Freemarkets <FMKT.O> CEO upbeat on 2000
By Kevin Drawbaugh, European consumer goods correspondent
LONDON, Jan 13 (Reuters) - Glen Meakem, chief executive of
high-flying Internet auctioneer Freemarkets Inc <FMKT.O>, says
recent setbacks will not stop the company from meeting Wall
Street expectations this year.
But he wonders whether he is still a billionaire.
"I'm not sure if I am today," says the clean-cut 35-year-
old, whose road show includes a piston head, a circuit board and
a contagious certainty that e-commerce, and his firm, are not
near the top of a massive hype cycle.
"We are part of a macroeconomic force here that is
unstoppable and it's huge... Three years ago, people thought I
was crazy. They thought I was nuts. Now the largest industrial
companies in the world are trying to compete with me," he told
Reuters in a recent interview.
Freemarkets is expected to generate revenues of $40 million
or so this year. Revenues in the first nine months of 1999 were
$13 million. Although it was profitable in 1998, no profits are
expected this year or next as the company invests in expansion.
"We are going to meet analysts' expectations for 2000," said
Meakem, one of a handful of instant American Internet tycoons.
He was in London this week, opening a European office and
drumming up business in Britain and on the Continent.
Back home, markets were punishing his stock price, which
closed down $20.125 at $209.875 per share on Wednesday,
continuing a dizzying fall from more than $340 just 10 days ago.
SHARES SHOT TO $280 FROM $48 IN FIRST DAY
The company -- which conducts online auctions in industrial
supply markets -- went public on December 10. Its initial offer
was at $48, but it shot to $280 in its first day of trading.
Riding a wave of enthusiasm for business-to-business
Internet applications, Freemarkets kept climbing for three
weeks. But then key client General Motors Corp <GM.N> said on
January 4 that it was cancelling its contract. Freemarkets has
since lost 38 percent of its value, and Meakem a paper fortune.
"Obviously it was a big deal to the stock price," Meakem
said. But he said the GM pull-out would not have a material
financial impact on the company's performance.
"GM was incredibly important to us in 1998. But as our
business has grown and we've added clients like Emerson Electric
and Honeywell and Owens-Corning and SmithKline Beecham and other
companies ... GM has become much less important," he said.
GM provided 17 percent of Freemarkets' revenues in the first
nine months of 1999; 10 percent in the final quarter and was
expected to decline further this year, he said.
Four lawsuits have been filed against Freemarkets since
early January alleging that it knew its GM contract was in
trouble, but concealed it from the markets.
On the lawsuits, Meakem said, "They're completely without
merit. They're a misstatement of the facts. The latest one is
hysterical...We're fighting them vigorously."
PISTON HEADS AND CIRCUIT BOARDS
Freemarkets makes money by charging its clients to stage
online auctions for them for procuring industrial supplies, such
as piston heads or circuit boards. Hence the road show props.
One client, a major U.S. consumer goods manufacturer,
recently hired Freemarkets to auction off a contract to produce
shampoo bottle labels, Meakem said.
Meakem's staff studied the market, compiled a list of
qualified suppliers and invited them to bid for the job.
At a prearranged time and date, an online auction was held
in which suppliers wired in bids to Freemarkets and its client.
Over a frenetic hour or so, bids fell steadily until the client
found that its shampoo bottle label costs had fallen, too.
Attracted by Freemarkets' success, other companies have
begun crowding into the market for staging auctions, or writing
enterprise software allowing firms to stage their own auctions.
GM is now working with Commerce One <CMRC.O>. Others in the
field include Ariba Inc <ARBA.O> and the A.T. Kearney unit of
systems giant Electronic Data Systems <EDS.N>.
"The potential market for this is huge," Meakem said. "The
competition now is folks trying to sell auction technologies to
companies. We think the more rational economic play is to use a
third-party marketplace, not to create your own auctions."
MEAKEM GRADUATED FROM GE, GI BOOT CAMP
A veteran of General Electric Co and the U.S. Army, Meakem
founded Freemarkets five years ago on the strength of his idea
about online business-to-business auctions and with less than
$100,000 in investments, which he sold to raise cash.
Things were lean in the early years. "I've got kids. I've
got a family. I've been an entrepreneur for a long time. So we
ate peanut-butter and jelly and lived in an apartment because we
sold our house to raise money to put in the company," he said.
Employee ownership of company stock is high, and so is
Meakem's, which has paid off handsomely. "We have over 150 paper
millionaires at Freemarkets...We've had an employee stock
purchase program virtually since our founding," he said.
((European equities desk, 44-171-542-3207, fax
44-171-542-3722, kevin.drawbaugh@reuters.com))
REUTERS
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