Briefing.com on B2B
14:43 ET ******
B2B Paper : Following the lead of the Big 3 auto-makers, the Big 3 of the paper industry announced at midday that they are establishing a B2B exchange. International Paper (IP +2 7/16), Georgia Pacific (GP +7/8), and Weyerhaeuser (WY +2 11/16) are establishing the exchange, which will be a separate entity that they ultimately hope to take public. Unlike the auto-makers, these paper giants are not as far along in the process and have not yet selected technology partners for the venture. But you can bet that when they do, the stock(s) of the company or companies involved will benefit from participating in a B2B exchange covering a $200 bln/year marketplace. The usual suspects probably have the best shot at being selected: Commerce One (CMRC), Oracle (ORCL), Ariba (ARBA), and i2 (ITWO). But aside from the obvious benefits to the winning tech firms, there are mixed indications for the B2B sector from this announcement. The clear positive is that adoption of B2B marketplaces has been occurring at a faster pace than most had expected, and perceived dinosaurs such as auto and paper companies are leading the way. The cautionary note is that the old economy companies are taking ownership of the exchanges in both the auto and paper examples. Their technology partners will clearly benefit from being included in these projects, but the largest financial benefits will accrue to the owners of the exchanges. In industries where market power is concentrated in the hands of a few companies, those companies will likely follow the auto/paper model and establish the exchange themselves, whereas industries with more dispersed market power might see exchanges established either jointly or wholly by the B2B companies. Current market valuations for the aforementioned marketplace leaders do not require that all exchanges be owned by the B2B companies, but this is a trend worth watching, as the equity stake and recurring transactional revenues that go to the exchange owners will more valuable than the licensing and service fees that go to technology partners that develop the exchanges. - GJ |
