E-Commerce Takes Brunt of Tech Beating

E-commerce stocks, not long ago the tech sector’s darlings, got hit particularly hard in the tech downdraft on Tuesday.

Shares of Commerce One Inc., I2 Technologies Inc. and other software firms that create online marketplaces tumbled after an analyst cut his rating on Commerce One, saying sales growth at such firms may be slowing.

Commerce One (ticker symbol: CMRC) fell $13.69 to $58.88 after analyst Richard Williams at brokerage Jefferies Group Inc. reduced his rating to “hold” from “accumulate.”

Williams said sales growth could slow down because large business-to-business exchanges are taking longer than expected to commence.

I2 (ITWO) followed Commerce One lower, sliding $17.88 to $152. Ariba Inc. (ARBA), another e-commerce software firm, fell $14.58 to $112.48.

Williams said he wasn’t ringing an alarm bell. “It’s just a slowing of the momentum” for otherwise sound companies, he said.

Still, a key concern is that major firms wanting to run online marketplaces--which let businesses buy and sell among themselves--will want full-scale demonstrations of operating exchanges before they commit. Yet few such exchanges exist, he said. “They want to see a working product before they put their money on the barrel head,” Williams said.

I2 has suffered setbacks recently that include the loss of a contract for a health-care exchange and an executive’s departure, Williams said.

The market has already pulled these stocks down dramatically from their peaks. Commerce One reached $165.50 in spring. I2 traded as high as $223.50 and Ariba reached $183.31.

I2 is already profitable, while Ariba and Commerce One are expected to near break-even in 2001.

E-commerce stock chart: C9