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.