The business-to-business software market has been brutal. Industry leaders, such as Ariba (NASDAQ:ARBA), have experienced difficulty. Last year, CommerceOne, the onetime highflier, went bust.
One company that stumbled along with Commerce One was Verticalnet (NASDAQ:VERT). In fact, prospective customers avoided dealing with Verticalnet because of concerns with its financial viability.
However, the company engaged in tough restructuring. For example, management greatly reduced its customer concentration. Two customers that had represented more than 80% of the company's revenues now make up just 30%. A year ago, the company had only eight total customers; now it has 65.
Verticalnet's software was based on a licensing model, and that posed another problem. Customers increasingly want on-demand solutions, which fast-growing companies such as Salesforce.com (NASDAQ:CRM) and RightNow (NASDAQ:RNOW) are pioneering. Consequently, VerticalNet bought several companies to add on-demand solutions.
Yesterday, Verticalnet released its earnings report. In the fourth quarter, revenues surged 157% to $5.6 million, although the company still suffered a loss of $2.8 million. Still, it aided its balance sheet by converting $4.2 million in debt into common stock and raising an additional $5.6 million during the quarter. In all, the company posted revenues of $22.9 million in 2004, up 138% from 2003.
B2B software will continue to be a significant need. After all, companies like Dell (NASDAQ:DELL) have been quite successful with supply-chain automation.
But Verticalnet is far from being profitable, and with only $9.4 million in the bank, it doesn't have much room to make a mistake.
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Fool contributor Tom Taulli does not own shares of companies mentioned in this article.
