VerticalNet (an ICGE partner Co) Sees Revenue of $221 Mln Under Microsoft Agreement
3/6/00 2:18:00 PM
Source: Bloomberg News
New York, March 6 (Bloomberg) - VerticalNet Inc., which manages Internet sites where businesses buy and sell goods from one other, expects at least $221 million in revenue over three years from an agreement with Microsoft Corp.
The revenue would come as transaction fees and advertising from more than 80,000 free Web storefront sites the two companies expect to sign up by 2003, said Mark Walsh, the company's president and chief executive.
'Both of our internal targets are for more' Walsh said after a speech at a Paine Webber Group Inc. Internet conference in New York. 'But liquidity of supply is what matters, the more storefronts, the more liquid our marketplaces become.'
VerticalNet shares have risen more than thirty-fold since the company's initial public offering in February 1998 as investors bet online commerce among businesses will be more profitable than Web retailing.
The first revenue from the agreement, announced in January, should be booked by April, said Walsh. Microsoft is responsible for signing up more than half the new storefronts under the agreement, which would result in a twenty-seven-fold increase in the company's base of 3,000 suppliers.
As part of the agreement, Microsoft bought 2 percent of Horsham, Pennsylvania-based VerticalNet for $100 million, a stake now worth $140 million. Microsoft also has warrants to buy another $104 million in VerticalNet, which, if exercised, would give the Redmond, Washington software company a 3 percent stake.
VerticalNet agreed to help sell Microsoft products to its clients and will use Microsoft software to add electronic-commerce services to its sites.
VerticalNet runs 55 industry-specific online communities, ranging from machinetoolsonoline.com to meatandpoultryonline.com, featuring news, chat boards, catalogs, auctions and other information aimed at boosting company-to-company trading of goods and services. The company is also building an online exchange for electronics parts, where multiple buyers can meet multiple sellers.
On the other hand, one-to-many online industrial auctions, like those run by VerticalNet or FreeMarkets Inc., can only cut prices to a point before reputable suppliers stop participating, so it's dangerous to build a business model on auctions alone, Walsh said.
'FreeMarkets' model proves that purchasing guys were lazy,' Walsh said. 'But what happens in Year Two? Pretty soon, only crappy vendors will be willing to participate in FreeMarkets' 'hammer-the-vendors' contest.' |
