VerticalNet To Acquire E-Marketplace, Narrows Losses - InformationWeek
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2/23/2001
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VerticalNet To Acquire E-Marketplace, Narrows Losses

Just when you thought you had VerticalNet Inc. pegged, the troubled business-to-business E-commerce company makes another astonishing move. The company has agreed to acquire the E-marketplace PlasticsNet.com from Commerx Inc. The move, revealed Friday, contradicts the strategy the company laid out in December when it sold its electronics-parts exchange NECX.com to Converge, an online marketplace owned by Hewlett-Packard and Compaq. At that time VerticalNet said the sale of NECX would help it focus on its new mission: providing technology to trading exchanges rather than operating them.

That strategy, however, was developed under VerticalNet's former and short-lived CEO, Joseph Galli. After Galli's sudden departure early last month and slower-than-expected revenue growth in the company's fourth quarter, ended Dec. 31, VerticalNet may want to reverse its fortunes. But PlasticsNet is no NECX. The latter had generated $39.3 million in revenue in the third quarter, more than half of VerticalNet's total revenue. Meanwhile, Commerx has downplayed PlasticsNet in the last year as it moved to become an E-business application service provider to large manufacturers such as Nypro and Mitsubishi. The exchange generated only a small portion of Commerx's revenue, and the divestiture of the unit further underscores the business model that's evolved.

VerticalNet's business model, on the other hand, could be anyone's guess. The company reported fourth-quarter results Thursday, posting $40.7 million in revenue, an 18% increase from the third quarter and a 424% increase from a year ago. The company said it missed its internal forecasts because of lower-than-anticipated advertising sales, which it attributed to the slowing economy. For the year, the company reported $112.5 million in revenue, a 510% increase from 1999. The company's cash loss was $28.5 million, or 32 cents per share, compared with a cash loss of $29.9 million, or 35 cents per share in the third quarter. Its cash loss for the year was $97.6 million, or $1.17 per share.

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