Commerce One Becomes China Web Player

By JONAH GREENBERG

(Virtual China News -- Mar. 16) Commerce One (ticker: CMRC), a leading international e-commerce solutions provider based in the U.S., said Wednesday it will team up with Hong Kong and mainland partners to form a China-focused business-to-business Web portal. The move is the most recent indication that the Internet will play a significant role in developing China's commercial economy.

A handful of companies representing some of Hong Kong's most powerful conglomerates in both traditional and new media industries have signed a letter of intent with Commerce One to invest as much as US$40 million in an Internet-based "consortium."

Future partner companies listed in the press release include SUNeVision, a high-tech subsidiary of Hong Kong's monolith Sun Hung Kai Properties; New World China Enterprises Projects, a subsidiary of the Hong Kong giant New World Development, Beijing Enterprises Holdings Limited, iCABLE, Swire Pacific, Jardine Internet, and W.I. Harper. The deal reflects the trend of well established media players in Hong Kong moving into Internet ventures as a fresh way to compete in China.

Necessary Software

The portal, which is temporarily called the "Hong Kong Consortium," will be added to the Global Trading Web, Commerce One's already existing stable of e-commerce Web portals around the world. The site will be a platform where licensed buyers can browse inventories posted by suppliers in the region.

Buyers hoping to shop on the "consortium" platform will be required to use two software products developed by Commerce One, BuySite and MarketSite. The Walnut Creek, California-based company will earn revenue from the sales of the necessary software to members of the consortium, according to Mark Biestman, senior vice president of worldwide sales at Commerce One.

Partner companies can expect to earn profit from transaction fees, subscription fees, and commission fees, which come from auction and reverse auction sales, Biestman said.

The deal came together in Hong Kong with uncharacteristic speed, showing how eager businesses in the region are to establish commercial operations on the Internet, Biestman said.

"Previously, it would have taken months, if not years, to get these seven companies together," Biestman said. In stark contrast to the forgotten days when there was no such thing as e-commerce, the eight companies arrived at an agreement in less than three months.

"They were all insistent on moving quickly," Biestman said of the partner companies in Hong Kong.

Clarion Call

California-based Biestman, who was in Hong Kong on the day that Richard Li's company, Pacific Century CyberWorks, acquired Cable and Wireless Hong Kong Telecom, Hong Kong's largest telecommunications operator, said the landmark PCCW agreement was like a clarion call to Hong Kong business people to get in on the Internet craze.

"It was a very interesting time to be in Hong Kong. It got people on their toes," he said.

The partner companies, many of which are competitors in traditional sectors like retail, transportation, and property management, are likely to benefit from a group effort like the Hong Kong Consortium because they can make supply chains more efficient, Biestman said.

"They see the value of getting together in a consortium," he said, adding that some of the partners may be excited about taking an equity stake in a company that they hope will list on a stock exchange now experiencing a very bullish market. Hong Kong's GEM exchange, which focuses on Internet startups and other high technology ventures much like the "Hong Kong Consortium," has seen meteoric growth of its market capitalization since it launched earlier this year.

Key Ministries

Most of the transactions will initially take place in Hong Kong, Biestman said, although Commerce One has it's sights set on the substantially larger mainland China market.

"You're going to see Beijing and Shanghai take to this rather quickly," he said, pointing out that Beijing Enterprises, one of the partners in the "consortium," is an overseas holding company backed by the Beijing municipal government.

"In my time in China, I have seen high interest in figuring out how to use the Internet to add value to business," said Biestman, adding that the government sees business-to-business e-commerce as a priority for mainland China.

Commerce One's entrance to the PRC should happen sooner rather than later. According to Biestman officials at key mainland Ministries have already agreed to make a public endorsement of the "consortium" in the beginning of April.

To reach Jonah Greenberg: jgreenberg@virtualchina.net