Commerce One Looks to Buy Its Way Out of New Year's Tech Blues

SAN FRANCISCO -- Commerce One (CMRC Quote) is hoping a buying spree can ward off the evil spirits and interest-rate worries that bloodied other tech highfliers Tuesday.

It worked Tuesday, amid the turmoil of the Nasdaq's worst-ever one-day point decline. The Walnut Creek, Calif., provider of business-to-business electronic commerce solutions saw its shares rise 14 7/8, or 7%, to 218 1/2 after it acquired Mergent Systems for $190 million in stock and $10 million in cash. Meanwhile, fellow 1999 highfliers such as Qualcomm (QCOM Quote) and JDS Uniphase (JDSU Quote) saw their shares fall some 10% as the Nasdaq dropped 5.6%.

Commerce One: TSC Message Boards.

Some of Commerce One's gains came after General Motors (GM Quote), a top customer of Commerce One, pulled its business-to-business auctions from FreeMarkets (FMKT Quote), which promptly tanked. Investors read the news as a sign that GM's relationship with Commerce One would strengthen.

What Mergent Brings

The Mergent purchase could bring even more good news to Commerce One, whose shares had fallen some 40% in the week leading up to yesterday after hitting a window-dressing-induced high of 331 on Dec. 28. Commerce One's software and services help businesses connect with suppliers on the Net. With Mergent's technology, Commerce One can help users identify products from different suppliers even when the various descriptions don't match.

"We've had tools, but they still need a significant amount of human intervention," says Chuck Donchess, vice president of marketing and business development. Mergent's automated technology will speed the process and help people find the right product, says Mergent CEO Amos Barzilay.

Mergent's technology will be available this quarter on Commerce One's B2B portals such as MarketSite. By the second quarter of 2000, the technology will be fully integrated with all its product lines. The company hopes the technology will help users surmount the problem of gathering product information in real time from far-flung sources: manufacturers, distributors, vendors, content aggregators and Internet market makers.

Mergent will be the basis of a new Commerce One business unit, under Barzilay, which will operate from Mergent's current headquarters in Mountain View, Calif. Founder and CTO Michael Genesereth, a computer science professor at Stanford University, will also join Commerce One. The new unit will provide product information management services for buyers, suppliers and Internet market-makers using their technology dubbed iMerge.

Why Buy?

Meanwhile, the buying binge is just getting under way. In November, Commerce One bought auction company CommerceBid for about $230 million in stock and cash. Commerce One says it believes it must move quickly to maintain its strength in a rapidly evolving marketplace. "Our goal is to build the global trading Web very rapidly," Donchess says. "And we do not intend to build all of the technology ourselves."

The company's high-profile deal with GM is leading to a lot of these announcements, says the manager of a fund that holds a "significant" stake in Commerce One, who asked not to be identified. "I see them making continued acquisitions," the manager says. "Things are turning at lightning speed. And if you don't do it, someone else will."