From: Linda (joelinda1@home.com)
Date: Thu Sep 14 2000 - 14:43:54 PDT
http://www.thestreet.com/tech/internet/1076377.html
Covisint Running Out of Excuses to Deliver on Its B2B Promise
By Joe Bousquin
Staff Reporter
9/13/00 9:09 AM ET
Uh-oh. Covisint can't blame it on the government anymore.
When word came Monday that the Federal Trade Commission had
green-lighted the Big Three automakers' Internet exchange, the
business-to-business world breathed a collective sigh of relief.
That huge cloud of uncertainty, known as government intervention,
had been lifted.
Which means Covisint can't blame its state of disarray on the
policy wonks anymore. Instead, the company will have to execute on
its B2B promise -- soon -- for positive momentum to continue in the
B2B sector.
The influence of the mega exchange, in which Ford (F:NYSE - news),
General Motors (GM:NYSE - news) and DaimlerChrysler (DCX:NYSE - news)
plan to buy materials and supplies on the Internet, has already
affected the performance of business-to-business stocks. Just look at
Commerce One (CMRC:Nasdaq - news) on Monday, when Covisint's FTC
clearance was made public. It shot up $3.75, or 5.3%, to close at
$75.13, though it had traded as high as $78.13. But Tuesday, after
the initial impact of Covisint's clearance had waned, so did Commerce
One's stock price. It closed down $6, or 8%, at $69.12.
Similarly, when the antitrust issues started creeping onto the B2B
scene, and the government made known that it was looking at the
exchange over antitrust concerns, B2B stocks swooned. Now, going
forward, how Covisint executes on making B2B a reality, and not just
the substance of a press release, will surely play itself out on B2B
stocks.
Right now, though, the company's prospect for swift and flawless
execution of its vision doesn't look good. It hasn't named a CEO.
It hasn't finalized yet where its headquarters will be. And perhaps
most important, it has yet to hammer out exactly what technology it
will run on.
"Covisint doesn't have a crutch or an excuse anymore," says
Scott Crompton, vice president for global automotive practices at
consultant SeraNova. "Before, they could lean on the FTC as to why
they weren't going forward, but now, they're going to have to show
some meaningful progress."
To date, there has been anything but. In its first few months, the
company stumbled about nameless, until Covisint was decided upon.
That moniker, which is meant to evoke the ideals of communication,
vision and integration, instead elicited visions of corporate wonks
sitting around a triangular table white-boarding their separate goals.
All the while, the company had four interim co-CEOs and two competing
technologies to run on. Because Oracle (ORCL:Nasdaq - news) had worked
with Ford and Commerce One with GM before Covisint was announced, the
two software firms were both brought into the deal. But ever since
then, speculation has run rampant over whether one firm would push
the other out of the picture.
On Monday, Commerce One's CEO told TheStreet.com that the technology
question still hadn't been settled, even if the FTC's antitrust ones
had.
Combine all those things and what you've got is the picture of a
joint venture between three highly competitive companies that's going
nowhere fast. Or, as Crompton puts it, Covisint is "three different
companies, two different technologies and everyone talking about
whether there's a lot of arguing and infighting."
But Covisint's already come up with someone else to blame. Now that
the FTC has passed, the company says that it's waiting for approval
from the Bundeskartellamt, or the German equivalent to the FTC.
Covisint insists it can't even begin operations in the U.S. until it
gets the go-ahead from that agency.
"If you were a supplier and I was a manufacturer, both located in
San Francisco, we could not do business because the Bundeskartellamt
still holds this control over Covisint," says Thomas Hill, a Covisint
spokesman. "Everyone at Covisint is anxious to start this business.
Once the Bundeskartellamt gives its blessing, we expect to see
Covisint up and running in 30 days."
Hill concedes that might sound like another excuse for justifying
its lack of actual operations.
"Sure, that might seem like another convenient excuse to delay a
launch," Hill said. "I would say if people could work 25 hours a day
to get this done, they would. ... Everyone at Covisint is focused
on launching in a really timely fashion."
The company hasn't settled on a headquarters, in part, because it
expects its yet-to-be-named CEO to have some input into that
decision. And as far as that CEO goes, Covisint is still looking
for one. Again, Hill said it was hard to fill the spot when the FTC
was probing the endeavor because of the uncertainty that it brought
with it.
"If you're a CEO, why would you leave your current job and take
the Covisint job before the FTC approved it?" Hill offered. "And
on the other hand, if you're the FTC and you see the company
you're reviewing hiring people, that might make you look a little
more closely at what they're doing."
Both good points. But the fact remains that Covisint still has a
lot more work to do to get up and running, and these kinds of
challenges tend to take more time than expected, not less. And
if those challenges become problems for the company, the company
could become a problem for the entire B2B sector, as investors
realize all over again how hard it will be to make B2B work.
So the FTC's approval, while good for the ideal of B2B in general,
might have come a bit early for Covisint and the public B2B
companies now trying to show real results going forward.
"My perspective is that this approval from the FTC is very
important for the industry as a whole, but it shouldn't be a
suggestion that Covisint has anything wonderful in the works,"
says Ben Smith, a consultant with A.T. Kearney. (His firm is a
subsidiary of EDS, which formerly was a part of General Motors.)
"Now we can move on to execution. But this doesn't suggest that
Covisint has moved to that stage."
Which means investors in B2B should watch the performance of this
exchange closely.
______________________
More on challenges facing these online trading hubs in Red Herring,
August issue:
http://www.redherring.com/mag/issue81/mag-revenge-81.html
[snip]
The best articulation of that challenge were the comments of an unnamed
supplier who was quoted in a white paper on B2B exchanges written by
Morgan Stanley Dean Witter (Nasdaq: MWD) Internet analyst Mary Meeker:
"Let's see, you want me to put all my products and prices online so my
customers can beat me about the head and shoulders. Then I can
commoditize myself even more to take my razor-thin margins down to
microscopic levels. Finally, I get to pay transactions fees for this
privilege... What am I missing?"
Linda
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