PartsBase.com Up Despite Commerce One Reports
By KEVIN MAX
NYTimes.com/TheStreet.com
hares of PartsBase.com, a newly public business-to-business company in the aviation industry, rose Friday despite reports that giant Commerce One would create a huge online marketplace for the big aerospace and military-contracting companies.
Commerce One is expected to extend its B2B services to Boeing , Lockheed Martin , Raytheon and British Aerospace much in the same way as it strode into the auto industry and immediately dominated smaller competitors in the fragmented business.
The prospect seemed daunting, but investors seemed unfazed Friday by the implications for other companies that develop online exchanges for specific industries.
Shares of Commerce One rose 18 11/16, or 9.12 percent, to close at 223 11/16, while PartsBase.com gained 1 7/16, or 11.44 percent, to 14, just two days after its unenthusiastic debut on the stock market.
"Our sources say that this deal is very likely to happen," said William Epifanio, an analyst at JP Morgan who rates Commerce One a buy. His firm has not done any underwriting for Commerce One.
None of the companies in the possible deal had returned phone calls for comment by Friday afternoon.
Epifanio said he expected the deal to be announced very soon. "It should be at least the size of the auto exchange," he said, referring to a transaction that put Commerce One and Oracle in charge of the multibillion-dollar online exchange for parts and services for General Motors , Ford Motor and DaimlerChrysler.
In February, the Big Three automakers agreed to form an independent company that will combine their purchasing networks under Oracle and Commerce One.
When investors realized that GM had hired Commerce One to handle its parts exchange, they yanked the rug out from underneath FreeMarkets , a Commerce One rival which had come public less than a month before. Shares tumbled 63 3/8, or 18 percent to 278 1/2 on that news.
GM and Ford spend a combined $166 billion in parts and services annually. One estimate puts the total U.S. aerospace/defense market alone at $187 billion in 2000 and $219 billion by 2004. Within four years, 35 percent, or $77 billion, of those sales is predicted to be conducted exclusively over the Internet.
"But it's not like the auto deal where Oracle and Commerce One had to split the business," Epifanio said. "Right now, it seems that Commerce One is the only player, at least the at the exchange level."
That assessment excludes PartsBase.com, which is a pure Internet player that enables companies to buy and sell new, used and overhauled aviation parts, perform auctions and sell aircraft through its online marketplace. The Boca Raton, Fla.-based company gets virtually all its revenues from the aviation industry. It lists Boeing as a customer.
PartsBase.com asserts on its Web site that it is to be the world's largest online marketplace in aviation, with more than 13,000 members in 115 countries, and a database of 1,200 suppliers.
In its registration with the Securities and Exchange Commission, the company said its direct competitors included AV Support and Inventory Locator Service, a subsidiary of Availl. But it made no mention of Commerce One, which has been moving aggressively into any fragmented industries with a large number of buyers and suppliers.
"I think there's a risk for smaller players," Epifanio said. "The key is volume, volume, volume. It's a situation where the small guy is challenged. Unless they bring some unique technology to the table, they'll have trouble."
Epifanio casts a shadow on the future of competitors within the aviation B2B marketplace. "If this exchange is real, these suppliers don't want to have to maintain a presence and an awareness of multiple sites," he said. After all, Epfanio said, business-to-business ventures are attractive to industry giants because they can find everything they need in one spot.
One such smaller player in the aerospace B2B market is First Aviation , a reseller of gas turbine engines and re-manufacturer of engine components and parts for aircraft.
Aaron Hollander, First Aviation's chairman, said the future holds room for just three or four B2B companies. First Aviation will be among them, he asserted, as it has an established record as a reseller with original equipment manufacturers and the technology that can be integrated using a company's existing computer system.
"We're positive in that the [possible Commerce One deal] will drive the consolidation among people that are trying to build networks," Hollander said in an interview. "We believe there are going be people that are going to survive that are focusing on the end customer, like the military and the airlines. But it's not going to be the pure Internet players."
Shares of First Aviation were untraded at 4 3/4 on Friday. |
