Bulliness on Amazon.con??
>>SAN FRANCISCO, July 1 (Reuters) - Companies that turn corporations into "e-corporations" are scoring big gains in initial public offerings on the stock market this week as investors look for ways to cash in on the e-commerce boom.
But even though there is huge demand for their services, the new wave of Internet players will find profit elusive for the foreseeable future. That follows the pattern of Amazon.com Inc. <AMZN.O>, E-Trade Group <EGRP.O> and others that made up the first wave of Web startups. For now, though, the "e-commerce enablers" are the stocks du jour, rocketing to big gains as they make their debuts on Wall Street.
Among them, Commerce One Inc.<CMRC.O>, a Walnut Creek, Calif-based Internet procurement firm, tripled in value Thursday on its first day of trading, ending $40 higher at $61. It's drawn a following because it provides technology for the hot area of procurement, the buying and sell corporate supplies. As an information-intensive, time-consuming activity that runs on costly transactions, it's considered a natural for the Internet.
Still, Commerce One is far from spinning off huge profits. In fact, it showed losses of $12.3 million the first quarter of this year, and revenue of just $2.1 million.
Another procurement player, Sunnyvale, Calif-based Ariba Inc.<ARBA.O>, which sells a system for buying and selling corporate supplies over the Internet, has seen its stock soar to $105 from its $23 initial offer last week, and it is now valued at $4.3 billion. Just as month ago, underwriters were valuing it at $12 a share, or $500 million.
Ariba, too, forecasts "significant losses into the foreseeable future." But investors are focusing on the upside potential, as an early entry into the e-commerce field. Indeed, the company's demonstrated powerful growth. Its revenue soared to $16.3 million in the first half of this year from less than $2 million in the prior year's first half.
Ariba lost $8.3 million so far this year and, in a Securities and Exchange Commission filing, conceded that it "may not be able to sustain that kind of growth." For now investors are betting that it can.
"Business-to-business -- that's the buzz word. People can't get enough of it," said Steven Tuen, an analyst at IPO Value Monitor.
The business-based Web players are growing in attractiveness as doubts arise about retail-oriented sites that require heavy marketing dollars.
In the latest such example, CNet Inc.<CNET.O>, a pioneer in putting technology news and services on the Internet, said Thursday it would spend $100 million this year on advertising -- sending its stock into a nosedive as analysts calculated the negative impact on earnings. CNet stock dropped $5.875 to $51.75. E-Trade and Amazon.com have made similar decisions to chase market share and forego profits.
Investors have sought the relative security of commerce sites, where big-budget ads are not a requirement, and where the market appears to be at least as large the consumer market.
"The bigger companies are more focused on their core businesses," said Daniel Rimer, Hambrecht & Quist's managing director for Internet research, "and they are going to be more likely to outsource for whatever they need to do business on the Internet."
Growth is expected to come from major corporations trying to move quickly onto the Internet, and paying outsiders like Ariba and Commerce One for services rather than creating their own. Forrester Research recently estimated e-commerce would total more than $1 trillion by 2003, and companies are gearing up quickly to capture a piece of it.
"All of the companies in this sector are investing very heavily in grabbing market share," said Michael Hilton of e-commerce company Concur Technologies Inc. "A relatively few companies will survive, so everybody wants to get onto the (corporate) desktop and stay there before the window closes."
Concur, which has a suite of Web-based services to corporations, ranging from human resources to expense forms, has doubled in size each year. Still it probably won't report a profit until the end of next year, said Hilton, chairman and chief technology officer of the Redmond, Wash.-based company.
But Hilton added that the payoff for the business-to-business sites will not take as long as it has for the more consumer-oriented sites. "We are obviously on a radical growth curve -- we're roughly doubling our business each year. To say we're turning away business would be an exaggeration, but we are hitting the mainstream corporations and the business is exploding." <<
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