Sources inform “Globes” that VerticalNet (VERT) has decided to shut down its Israeli branch in Jerusalem. The closure of the branch, set up after VerticalNet bought Israeli company Tradeum for $474 million in March 2000, is due to the difficulties experienced by the US parent company, which supplies B2B e-commerce software packages.
VerticalNet COO David Kostman said that the parent company had decided to concentrate its development activity in its branches in Palo Alto and San Francisco, and therefore had to shut down the Israeli development branch. VerticalNet will also shut down some of its offices around the world, but has not yet announced the move. “The step was necessary following the company’s decision to restructure, due to the market situation, although the company’s products still enjoy customer confidence,” Kostman said.
Some of VerticalNet Israel’s workers were offered development jobs in the US, and they are now considering the proposal. “Products based on Tradeum’s technologies are important for the company, and the high-quality manpower in the Israeli branch is important as well,” Kostman said. “Now we’re waiting for the rough period to be over.”
Kostman ruled out the possibility that the present decision might result in a merger with one of the global companies operating in the field, such as Arriba, Commerce One, or i2.
VerticalNet’s stock has fallen from $119 at the time of its deal with Tradeum to $0.38, reflecting a company value of only $37 million. A few months ago, VerticalNet laid off about 50% of its employees, and today it decided to dismiss the remaining 35. VerticalNet Israel manager Doron Gez confirmed the report.
In the quarter ending June 30, the company’s revenue was $69.7 million, but it had a tremendous, $394 million loss. The company issued a profit warning for the quarter that ended last week, saying that its revenue would amount to $31-33 million, and its revenue for the last quarter of the year would be $35-37 million. The company’s revenue for the whole year is expected to be only $136-140 million.
VerticalNet was set up by Zvi Schreiber and Ilan Grobman set up Tradeum in 1998. In August 1999, Tradeum raised $3 million at a company value of $7 million. Investors included venture capital funds Israel Seed Partners 3, Vertex Israel 3, and Benny Steinmetz (both as a private investor and through STI and Scorpio). The company was sold six months after the financing round.
Published by Israel's Business Arena on 3 October, 2001