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9/23/2004
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Bleeding Red Ink, Commerce One Mulls Bankruptcy

The once high-flying E-marketplace that tried unsuccessfully to reinvent itself is now contemplating bankruptcy, closing its doors, or selling off its assets.

After suffering through the dot-com bust and attempting to reinvent its business around Web services, Commerce One Operations Inc., a provider of supplier relationship-management technology, said it's considering filing for bankruptcy under Chapter 11 or Chapter 7 of the United States Bankruptcy Code.

The company said in Wednesday's SEC filing that its operating expenses continue to exceed its cash flow, and that it has an unrestricted cash balance of approximately $700,000. "We're currently considering our alternatives, including a significant reduction or discontinuation of our operations, other expense reductions, and/or a sale of all or a portion of our assets. We are currently pursuing discussions with potential buyers of our assets, including our supplier-relationship-management business," Commerce One said in the filing.

Meta Group supply-chain-management analyst Bruce Hudson predicted that the company won't be able to meet its debts and will file for bankruptcy under Chapter 11. Hudson said he expects someone to buy the company's intellectual property "and whoever does that will be getting quite a bargain."

Hudson said Commerce One's failure follows attempts to change its business model and resize the company to compete in the E-commerce market. "At one point they changed course and developed a very nice Web-services platform, but they couldn't generate sales for the platform, regardless of how good the technology was," Hudson says.

Founded in 1994, Commerce One experienced early success in E-marketplaces, but it began losing revenue as the Internet boom went bust. Hudson says it should have followed the example of its competitor, Ariba Inc. "Ariba also experimented with the E-marketplace model, but quickly realized that it wasn't the right way to run a business," he says. "The company went down the software vendor route and, consequently, it's still around."

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