Commerce One Lands B2B Deal with Aerospace Giants

Just weeks after announcing an online business exchange with America’s big three automakers, Commerce One, Inc. has announced a similar deal with four aerospace industry giants.

Together with Boeing Co., BAE Systems PLC, Raytheon Co. and Lockheed Martin Corp., Commerce One will create a Web-based marketplace to transact goods and services with one another and also with their 37,000 suppliers worldwide, hundreds of airlines and many national governments.

“This is a huge deal for Commerce One that I expect to be in the magnitude of the auto exchange,” said Bill Epiphanio, an analyst at J.P. Morgan Securities Co. in New York.

Open Platform

Company executives for all participants emphasized that the exchange is an open platform for the industry, and invited all industry participants to join in.

“Our industry has always been identified with innovation and the exploitation of innovative ideas,” said Sir Richard Evans, chairman of BAE. “I believe this exchange to be a good example of that foresight. It embraces established concepts but develops them, capturing the essence of future global trading by bringing together the principals of our industry to serve the market in a truly integrated, global context.”

The four aerospace and defense companies have signed a memorandum of understanding to form the new venture. A mid-year launch is anticipated.

Changing Basic Business Models

Following the example set by the big three automakers, the aerospace industry leaders apparently agreed that the wisest business move for sustained growth would be to combine resources in a joint venture rather than operate separate marketplaces.

The automaker deal has yet to be fully approved by the Federal Trade Commission (FTC), but would significantly alter the way the auto industry conducts business.

Similarly, the aerospace deal is designed to help all enterprises compete globally in the new economy.

Who Benefits Most?

The new deal puts the spotlight on the increasingly heated competition among Commerce One, Oracle Corp. and Ariba, Inc. among others, to be the software company of choice in B2B electronic commerce.

Online marketplaces are helping companies decrease operating costs and pair suppliers and new customers, while they enjoy lucrative new revenue streams from transaction fees.

According to Epiphanio, this particular deal is a tremendous coup for Commerce One, calling it a “loss for Ariba and Oracle.”

Investors React Swiftly

As usual, the real story of any major deal can be readily told from the numbers on Wall Street.

Monday, before any official announcement, Commerce One’s stock quickly went up 9.1 percent to $223.69, and shares of Ariba fell 2.2 percent to $259.56. Oracle held the course, rising 13 cents to $87.

Much of Commerce One’s stellar showing has to do with a record month, in which it also teamed with steel manufacturer Ispat International to form an online trading exchange for the metals industry.

Corporate Rivals Come Together Online

The new economy would appear to be bringing bitter rivals together. In recent weeks, International Paper, Weyerhaeuser and Georgia-Pacific announced plans to jointly sell paper and forest products online.

At the same time, as reported in the E-Commerce Times, five of the largest U.S. home builders unveiled plans to jointly sell homes online, while 50 major consumer products companies have banded together for their own online hub.

Industry observers note that many of the newest exchanges include names of companies that have done business offline for decades. For every new dot-com that starts up with rapidly ascending stock market valuations, older businesses are struggling to find a way to match the momentum.

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