Covisint Running Out of Excuses to Deliver on Its B2B Promise
By Joe Bousquin
Staff Reporter
9/13/00 9:09 AM ET
URL: http://www.thestreet.com/tech/internet/1076377.html
Uh-oh. Covisint can't blame it on the government anymore.
When word came Monday that the Federal Trade Commission had green-lighted the
Big Three automakers' Internet exchange, the business-to-business world
breathed a collective sigh of relief. That huge cloud of uncertainty, known
as government intervention, had been lifted.
Which means Covisint can't blame its state of disarray on the policy wonks
anymore. Instead, the company will have to execute on its B2B promise -- soon
-- for positive momentum to continue in the B2B sector.
The influence of the mega exchange, in which Ford (F:NYSE), General Motors
(GM:NYSE) and DaimlerChrysler (DCX:NYSE) plan to buy materials and supplies
on the Internet, has already affected the performance of business-to-business
stocks. Just look at Commerce One (CMRC:Nasdaq) on Monday, when Covisint's
FTC clearance was made public. It shot up $3.75, or 5.3%, to close at $75.13,
though it had traded as high as $78.13. But Tuesday, after the initial impact
of Covisint's clearance had waned, so did Commerce One's stock price. It
closed down $6, or 8%, at $69.12.
Similarly, when the antitrust issues started creeping onto the B2B scene, and
the government made known that it was looking at the exchange over antitrust
concerns, B2B stocks swooned. Now, going forward, how Covisint executes on
making B2B a reality, and not just the substance of a press release, will
surely play itself out on B2B stocks.
Right now, though, the company's prospect for swift and flawless execution of
its vision doesn't look good. It hasn't named a CEO. It hasn't finalized yet
where its headquarters will be. And perhaps most important, it has yet to
hammer out exactly what technology it will run on.
"Covisint doesn't have a crutch or an excuse anymore," says Scott Crompton,
vice president for global automotive practices at consultant SeraNova.
"Before, they could lean on the FTC as to why they weren't going forward, but
now, they're going to have to show some meaningful progress."
To date, there has been anything but. In its first few months, the company
stumbled about nameless, until Covisint was decided upon. That moniker, which
is meant to evoke the ideals of communication, vision and integration,
instead elicited visions of corporate wonks sitting around a triangular table
white-boarding their separate goals.
All the while, the company had four interim co-CEOs and two competing
technologies to run on. Because Oracle (ORCL:Nasdaq) had worked with Ford and
Commerce One with GM before Covisint was announced, the two software firms
were both brought into the deal. But ever since then, speculation has run
rampant over whether one firm would push the other out of the picture.
On Monday, Commerce One's CEO told TheStreet.com that the technology question
still hadn't been settled, even if the FTC's antitrust ones had.
Combine all those things and what you've got is the picture of a joint
venture between three highly competitive companies that's going nowhere fast.
Or, as Crompton puts it, Covisint is "three different companies, two
different technologies and everyone talking about whether there's a lot of
arguing and infighting."
But Covisint's already come up with someone else to blame. Now that the FTC
has passed, the company says that it's waiting for approval from the
Bundeskartellamt, or the German equivalent to the FTC. Covisint insists it
can't even begin operations in the U.S. until it gets the go-ahead from that
agency.
"If you were a supplier and I was a manufacturer, both located in San
Francisco, we could not do business because the Bundeskartellamt still holds
this control over Covisint," says Thomas Hill, a Covisint spokesman.
"Everyone at Covisint is anxious to start this business. Once the
Bundeskartellamt gives its blessing, we expect to see Covisint up and running
in 30 days."
Hill concedes that might sound like another excuse for justifying its lack of
actual operations.
"Sure, that might seem like another convenient excuse to delay a launch,"
Hill said. "I would say if people could work 25 hours a day to get this done,
they would. ... Everyone at Covisint is focused on launching in a really
timely fashion."
The company hasn't settled on a headquarters, in part, because it expects its
yet-to-be-named CEO to have some input into that decision. And as far as that
CEO goes, Covisint is still looking for one. Again, Hill said it was hard to
fill the spot when the FTC was probing the endeavor because of the
uncertainty that it brought with it.
"If you're a CEO, why would you leave your current job and take the Covisint
job before the FTC approved it?" Hill offered. "And on the other hand, if
you're the FTC and you see the company you're reviewing hiring people, that
might make you look a little more closely at what they're doing."
Both good points. But the fact remains that Covisint still has a lot more
work to do to get up and running, and these kinds of challenges tend to take
more time than expected, not less. And if those challenges become problems
for the company, the company could become a problem for the entire B2B
sector, as investors realize all over again how hard it will be to make B2B
work.
So the FTC's approval, while good for the ideal of B2B in general, might have
come a bit early for Covisint and the public B2B companies now trying to show
real results going forward.
"My perspective is that this approval from the FTC is very important for the
industry as a whole, but it shouldn't be a suggestion that Covisint has
anything wonderful in the works," says Ben Smith, a consultant with A.T.
Kearney. (His firm is a subsidiary of EDS, which formerly was a part of
General Motors.) "Now we can move on to execution. But this doesn't suggest
that Covisint has moved to that stage."
Which means investors in B2B should watch the performance of this exchange
closely.