Updated from 4:04 p.m. EST

Shares of

PartsBase.com

(PRTS) - Get Report

, a newly public business-to-business company in the aviation industry, rose Friday despite reports that giant

Commerce One

(CMRC)

would create a huge online marketplace for the big aerospace and military-contracting companies.

Commerce One is expected to extend its B2B services to

Boeing

(BA) - Get Report

,

Lockheed Martin

(LMT) - Get Report

,

Raytheon

and

British Aerospace

much in the same way as it strode into the auto industry and immediately dominated smaller competitors in the fragmented business.

The prospect seemed daunting, but investors seemed unfazed Friday by the implications for other companies that develop online exchanges for specific industries.

Shares of Commerce One rose 18 11/16, or 9%, to close at 223 11/16, while PartsBase.com gained 1 7/16, or nearly 11%, to close at 14, just two days after its

unenthusiastic debut on the stock market.

"Our sources say that this deal is very likely to happen," said William Epifanio, an analyst at

JP Morgan

who rates Commerce One a buy. His firm has not done any underwriting for Commerce One.

Hugh Burns, a corporate spokesman for Lockheed Martin, had no comment on Commerce One's intentions.

But Burns noted that Lockheed, the largest military contractor, currently did a lot of business through e-commerce, Burns said."Our parts are in Boeing planes and they use our parts in their products and Raytheon, too," he said in an interview. "But the next day we are competing against each other on bids. So an electronic marketplace makes perfect sense to us."

None of the other companies had returned phone calls for comment by Friday evening.

Epifanio said he expected the deal to be announced very soon. "It should be at least the size of the auto exchange," he said, referring to a transaction that put Commerce One and

Oracle

(ORCL) - Get Report

in charge of the multibillion-dollar online exchange for parts and services for

General Motors

(GM) - Get Report

,

TheStreet Recommends

Ford Motor

(F) - Get Report

and

DaimlerChrysler

(DCX)

.

A person close to the companies said they would make a major announcement on Tuesday in New York.

In February, the Big Three automakers agreed to form an independent company that will combine their purchasing networks under Oracle and Commerce One.

When investors realized that GM had hired Commerce One to handle its parts exchange, they

yanked the rug out from underneath

FreeMarkets

(FMKT)

, a Commerce One rival which had come public less than a month before. Shares tumbled 63 3/8, or 18% to 278 1/2 on that news.

GM and Ford spend a combined $166 billion in parts and services annually. One estimate puts the total U.S. aerospace/defense market alone at $187 billion in 2000 and $219 billion by 2004. Within four years, 35%, or $77 billion, of those sales is predicted to be conducted exclusively over the Internet.

"But it's not like the auto deal where Oracle and Commerce One had to split the business," Epifanio said. "Right now, it seems that Commerce One is the only player, at least the at the exchange level."

That assessment excludes PartsBase.com, which is a pure Internet player that enables companies to buy and sell new, used and overhauled aviation parts, perform auctions and sell aircraft through its online marketplace. The Boca Raton, Fla.-based company gets virtually all its revenues from the aviation industry. It lists Boeing as a customer.

PartsBase.com asserts on its Web site that it is to be the world's largest online marketplace in aviation, with more than 13,000 members in 115 countries, and a database of 1,200 suppliers.

In its registration with the

Securities and Exchange Commission

, the company said its direct competitors included

AV Support

and

Inventory Locator Service

, a subsidiary of

Availl

. But it made no mention of Commerce One, which has been moving aggressively into any fragmented industries with a large number of buyers and suppliers.

"I think there's a risk for smaller players," Epifanio said. "The key is volume, volume, volume. It's a situation where the small guy is challenged. Unless they bring some unique technology to the table, they'll have trouble."

Epifanio casts a shadow on the future of competitors within the aviation B2B marketplace. "If this exchange is real, these suppliers don't want to have to maintain a presence and an awareness of multiple sites," he said. After all, Epfanio said, business-to-business ventures are attractive to industry giants because they can find everything they need in one spot.

One such smaller player in the aerospace B2B market is

First Aviation

, a reseller of gas turbine engines and re-manufacturer of engine components and parts for aircraft.

Aaron Hollander, First Aviation's chairman, said the future holds room for just three or four B2B companies. First Aviation will be among them, he asserted, as it has an established record as a reseller with original equipment manufacturers and the technology that can be integrated using a company's existing computer system.

"We're positive in that the

possible Commerce One deal will drive the consolidation among people that are trying to build networks," Hollander said in an interview. "We believe there are going be people that are going to survive that are focusing on the end customer, like the military and the airlines. But it's not going to be the pure Internet players."