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Technology Stocks : Commerce One Inc - (CMRC) -- Ignore unavailable to you. Want to Upgrade?

To: bob zagorin who wrote (1660)	1/22/2001 11:52:32 AM
From: bob zagorin	Read Replies (2) \| Respond to of 1938

more detail from Epoch 01/18/01 Commerce One – Queen Takes Rook, Check By Mark Verbeck Managing Director and Senior Analyst David Trainer, Timothy Madda Associate Analyst, Associate Commerce One delivered a stellar fourth quarter, soundly beating expectations and, more importantly, raising guidance for 2001. Previously we recommended caution to investors because of our concerns over an unproven strategy. We now have higher confidence in the company's "Control the Center" strategy and believe today's license customers will be parlayed into the recurring network revenues that investors are looking for. Today Commerce One's stock presents an attractive entry point for those who want to get into this market ahead of the inflection point in network revenues that we see happening in late 2001. For this reason, we are making a positive action call on Commerce One shares. The Numbers Commerce One beat consensus expectations for both 4Q00 revenues and earnings per share (EPS). Its $191 million in revenues soared over Street expectations of $176 million and our estimate of $173 million. EPS of ($0.05) beat our estimate, which matched consensus, by $0.02. The company also materially raised revenue guidance for 1Q01 and FY01, bringing the 1Q01 range to $205-$210 million from $180-$185 million and FY range to $900-$925 million from $820-$825 million -- an increase of $100 million. Network services revenues were up 50% sequentially at $15 million. Days sales outstanding (DSOs) came in at a respectable 73 days, up slightly from last quarter's 69 days. Commerce One now has received cumulative mandates for 141 marketplaces, of which 67 are live, with broad geographic representation across Europe, Asia and the Americas. In the quarter, the company added 34 new marketplaces to its roster of 107 at the end of September. Time to Make a Move In our opinion, right now is an attractive time to purchase Commerce One stock. The risk we perceive in its strategy has been significantly reduced and the company's shares are a compelling value relative to those of its peers, considering the market opportunity open to it. Previously, we recommended caution to investors because of our concerns over an unproven business model. We now have higher confidence in the company's "Control the Center" strategy because its execution is proven and because our industry research indicates an increased acceptance of the value proposition for participants. We see a valuation disconnect between Commerce One and its peers. Over the past week, Ariba has counseled the street on its transition to upfront revenue recognition. This now makes for ready comparison between the two. Ariba still has some superior financial characteristics -- namely positive cash flow and healthy operating margins. However, we believe that Ariba's 30% relative premium on its license revenue multiple is unjustified. Moreover, Commerce One has appreciably more services revenue that should earn it some points. What would you buy with $100 million? The biggest surprise is Commerce One's positive forward guidance for revenues in 2001. While many of its competitors have dampened expectations for the year, Commerce One fired up its full-year guidance by $100 million to $900-$925 million which puts the company within easy striking distance of the $1 billion revenue milestone. Consistent with the company's strategy to invest incremental revenues to accelerate growth, the additional income will be spent on marketing and product development and not delivered to the bottom line. We hope that in 2002 the company will begin to leverage its size to deliver substantial operating profits. Sprechen Sie Deutsch? The early returns on Commerce One's partnership with German software and services provider SAP indicate meaningful synergies that are delivering results. In 4Q00, 40% of license revenue was generated alongside partners and SAP accounted for a majority of it. We believe that this is only the beginning --- new integrated products to be delivered over the next few quarters will drive further upside.