Commerce One Lays Off 500 More as Sales Plummet

Against a backdrop of solid earnings news from some bellwether tech companies, e-commerce software maker Commerce One reported sharply lower sales for the first quarter and said it will slash its workforce by another 30 percent.

Commerce One said the latest round of layoffs will leave it with about 1,100 workers worldwide. Combined with a 50 percent staff reduction announced last October, the Pleasanton, California-based software firm’s workforce is about one-third its year-ago size.

CEO Mark Hoffman said the job cuts will preserve the company’s research and development unit, where 400 people work.

“I feel strongly that against competitors that slash engineering in favor of marketing spend, our investment will pay off long-term,” Hoffman said in a conference call.

Sales Dry Up

Commerce One’s first-quarter sales plummeted to US$31.8 million compared with $170.3 million in the same period a year ago and $56 million in the fourth quarter. The company posted a net loss of $220.6 million, compared with $228.5 million a year ago.

“The IT spending environment remains challenging,” Hoffman said, though he noted that the company saw an uptick in adoption of its newest software suite.

Indeed, Commerce One is far from alone. Although positive earnings news from tech giants Intel and Yahoo! has provided a basis for optimism, software firms continue to struggle.

I2 Technologies said Tuesday its first-quarter revenue fell 54 percent compared with last year, forcing the firm to post a loss of $31.5 million compared with last year’s profit of $7.5 million. I2 also lost its longtime CEO this week.

And struggling PurchasePro recently reported that revenue in its fourth quarter plummeted to $2.4 million, compared with $33.6 million a year ago.

Digestive Mode

The results underscore what analysts say is a long-range slowdown in enterprise software spending as companies digest and implement the massive quantities of information technology they have acquired in recent years.

Giga Information Group analyst Andrew Bartels told the E-Commerce Times that while some sectors of the software industry probably will grow quickly, most sectors are not focused on commerce.

“Enterprises are more interested in applications that help them cut costs in this environment,” Bartels said. “The focus is more on improving what’s in place than adopting disruptive new technologies.”

Uncertain Outlook

Further clouding the outlook for the coming quarter and the rest of the year, Commerce One said it would not issue additional revenue guidance. The company said it expects licensing revenue will be flat or increase slightly in the second quarter while service, consulting and maintenance revenue will continue to drop.

One bright spot was the company’s royalties on sales through partner SAP, which made up a substantial majority of all licensing revenue. The firm said it expects its cash reserves to be no lower than $150 million by year-end.

Commerce One shares rose slightly Wednesday to $1.41 on the news.

On a pro forma and per-share basis, the company did slightly better than analysts had forecast, reporting a net loss of 19 cents per share or $55 million. Analysts had expected a loss of 20 cents per share.

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