The B2B Analyst April 20, 2001; Volume 2, Number 16

Apr 20, 2001, 01:00 ET from U.S. Bancorp Piper Jaffray Inc.

    MINNEAPOLIS, April 20 /PRNewswire Interactive News Release/ -- The
 following is being issued by U.S. Bancorp Piper Jaffray:
     Did you know that nose prints are used to identify dogs, just like humans
 use fingerprints?  Did you also know that Jon Ekoniak wrote a feature article
 in the May issue of Upside Magazine on the health and future of the e-business
 sector?
 
     In This Week's B2B Analyst:
 
     I.   INDEX -- U.S. Bancorp Piper Jaffray B2BEC Index
     II.  Grabbing Market Share In This Down Market -- Tough market conditions
          can create opportunities for major changes in market share, removing
          weaker competitors from the landscape.
     III. Getting To The Source In Slow Adoption For Strategic Sourcing --
          Economic environment may serve as a catalyst for technology to
          improve the sourcing process and remove costs out of the direct spend
          category.
     IV.  Weekly News
 
     I.  INDEX -- U.S. Bancorp Piper Jaffray B2BEC Index
     Close:                     27.91            Past Week:   +3.55  (+14.6%)
     Year To Date:             -40.42  (-59.2%)  Past Month:  +1.91   (+7.3%)
     Since Inception (7/1/99): -72.09  (-72.1%)  Past Year:  -86.77  (-86.8%)
 
     II. Grabbing Market Share In This Down Market
     The current economic environment is negatively impacting nearly all
 companies, to some extent.  While rising and falling tides often lift and
 lower all boats, in our view an economic downturn is likely to result in
 meaningful changes within an industry's competitive landscape.  The e-business
 software space's first quarter performance seems to support this theory, with
 several vendors delivering quite poor results, but a select few seeming to be
 much less negatively impacted.  While a tough market may reduce the absolute
 results of nearly all companies, it can also create opportunities for major
 changes in market share.  Moreover, such market share changes can permanently
 remove weaker competitors from the landscape, while boosting others to more
 clear leadership positions.
     Of course, grabbing market share is easier said than done.  While far from
 a panacea, in our view there are a variety of CRM (customer relationship
 management) software solutions that can help.  And increasingly, it seems that
 corporate CEOs are in agreement with this view.
     The financial results posted by e-business software vendors during the
 past few weeks were full of disappointments.  But one impressive standout was
 Siebel (#).  The Company not only met its earnings estimates, but did so while
 decreasing DSOs (days sales outstanding) and increasing its ASP (average sales
 price); thus, the Company clearly did not meet estimates by cutting price or
 offering liberal payment terms.  These facts speak highly of Siebel's
 execution capabilities, but also to the strategic nature of, and value
 attached to, CRM software investments.  Whether a company's customer
 challenges involve better organization of its direct sales force, a complete
 overhaul of its customer call center, or the development of online
 self-service modules, there is a wide range of CRM software products that can
 help.
     Again, we do not claim that CRM software is a panacea to a corporation's
 shortcomings in the eyes of customers.  But in order to be effective they do
 not need to be, because in tight contests for customer business, incremental
 improvements can make the difference.  Perhaps a potential buyer is impressed
 that the supplier's sales force and customer service representatives seem to
 be on the same page, and know everything about his needs.  Perhaps an engineer
 is able to find product information quickly and easily on a supplier's Web
 site, and even obtain a real-time quote.  Or perhaps a consumer only receives
 phone calls and mailers at home with relatively customized and well
 thought-out product offerings.  None of these examples are earth shattering.
 But, as we all know, they represent service that is far too uncommon.
 Additionally, CRM software can provide a company with real-time, actionable
 information that can be used more effectively to manage operations.
     We do not profess to know how long the current economic downturn will
 last.  But we are confident that it will result in meaningful changes within
 the competitive landscapes of many industries.  And while having CRM software
 will certainly not ensure that a company comes out on the winning end, we
 believe that all things being equal, it could put some companies over the goal
 line.
 
     III. Getting To The Source In Slow Adoption For Strategic Sourcing
     The weakness in the economy creates a much greater focus on costs across
 the board, whether those expenses are related to direct or indirect
 categories.  In many cases, companies are just refusing to spend on new
 initiatives, but that relates mostly to the more discretionary indirect
 expense categories than the direct categories.  While direct expenses will
 decline with revenue, buyers of direct materials are also pushing back on
 suppliers to get better pricing.  This is where strategic sourcing plays such
 an integral role, which is in the negotiation of new supplier agreements,
 particularly in direct spend categories, which make up the bulk of a
 manufacturer's expenses.  Consequently, this economic environment could
 potentially create something of a catalyst for technology to improve the
 sourcing process and remove costs out of the direct-spend category.
     There are a number of solutions that address various components of the
 issues with strategic sourcing, but the two main types include the
 service-based approach versus the technology solution approach.  ICG Commerce
 and FreeMarkets (#) typify the service-oriented offerings that help companies
 with a hybrid consulting and technology offering.  Moving across the spectrum
 would include eBreviate as a hybrid, but with less of a service focus, all the
 way to technology only solutions from Ariba (#), Atlas Commerce, CommerceOne
 (#@), Frictionless Commerce, and i2 Technologies (#).  FreeMarkets has
 recently acknowledged the need for a technology-only offering market with its
 new QuickSource product and additionally through its Adexa acquisition.
     Despite the growing presence of technology vendors, adoption of these
 sourcing solutions have not yet exploded.  This seems particularly difficult
 to understand because of the potentially very significant and very quick
 return that can be achieved through lower prices.  Percentage savings from
 these solutions can average in the mid-teens, which is real value to
 industries with 2%-3% margins.
     Such a value proposition has not yet been enough to overcome what is a
 very challenging environment of entrenched legacy behavior and decentralized
 control.  On the behavioral side, there are a number of skeptics in the
 procurement industry that do not believe any system can improve processes that
 they have been fine tuning for decades.  There is also a strong belief that
 sourcing is a people business meaning that buyers rely on highly priced,
 experienced sourcing professionals to manage the manual, people-intensive
 sourcing processes.
     As for the topic of centralization, many of the benefits of strategic
 sourcing come from the implementation of common technologies and processes.
 However, in large industrial organizations with many divisions, procurement in
 each division can act as its own fiefdom and the lack of strong centralized
 control over procurement to mandate changes is definitely slowing adoption
 across organizations.
     So when will strategic sourcing technology solutions take off?  The answer
 is unclear.  One small change we sense is a focus more on technology and tools
 than services.  The logic for this is a desire from companies to leverage
 their existing procurement professionals who often have 10-plus years of
 experience with Web-based desktop tools to automate the process.  We believe
 that both technology and service-based solutions will continue to be in
 demand, but the larger question is when will the category hit an inflection
 points.  Part of technology's expanding role will be the expansion to manage
 more completely the processes associated strategic sourcing beyond just the
 popular auction concept to include collaborative engineering, spend analysis,
 and contract development among other functions.  Driving this expansion will
 be the combination of procurement with supply-chain management as seen in the
 FreeMarkets/Adexa and i2/RightWorks mergers.
     Arguably, FreeMarkets is the bellwether firm in Internet-based strategic
 sourcing, but its December quarter results showed some softness in new
 customer wins, lower-than-expected volumes due to the economy, and a slightly
 lower pilot conversion rate.  Because of its recurring revenue model, the
 Company should meet Street estimates for the March quarter, but the real issue
 will be if it can improve in those softer categories.  Given its strong value
 proposition, it would appear to have as much of a counter-cyclical appeal as
 any company.  Also, the Company has produced a solid stream of press releases
 regarding customer wins and renewals lately, so the trend appears to be moving
 in the right direction.
     At the end of the day we are confident that the Internet will change the
 way Companies conduct their strategic sourcing function and that companies
 like FreeMarkets have the potential to play a significant role in driving this
 change.  So while we have fewer questions regarding the "if" of strategic
 sourcing solutions, the "when" is the bigger question with which we will have
 to be patient.
 
     IV. WEEKLY NEWS
     -- Covisint named Kevin English, a former investment banker and publisher,
        as the Company's chairman, president, and CEO, effective May 1.
     -- Manugistics Group (#) announced that Archstone Communities, one of the
        nation's largest developers, owners, and operators of apartment
        communities, has implemented the Manugitics NetWORKS Lease/Rent
        Optimizer, a revenue optimization solution developed for the apartment
        industry.
 
     Some or all of the following hedges may pertain: (#)U.S. Bancorp Piper
 Jaffray Inc. makes a market in the company's securities. (~)A U.S. Bancorp
 Piper Jaffray Inc. officer, director, or other employee is a director and/or
 officer of the company. (@)Within the past three years, U.S. Bancorp Piper
 Jaffray Inc. was managing underwriter of an offering of, or dealer manager of
 a tender offer for, the company's securities or securities of an affiliate.
 (*) A registration statement relating to these securities has been filed with
 the Securities and Exchange Commission but has not yet become effective. These
 securities may not be sold nor may offers to buy be accepted prior to the time
 the registration statement becomes effective. This communication shall not
 constitute an offer to sell or the solicitation of an offer to buy nor shall
 there be any sale of these securities in any state in which such offer,
 solicitation or sale would be unlawful prior to registration or qualification
 under the securities laws of any such state. ** These companies have conducted
 initial public offerings of their securities and are currently in the "Quiet
 Period." As a result, there is no research available on these companies. This
 communication shall not constitute an offer to sell or the solicitation of an
 offer to buy any securities of these companies. (~)This is not an offer to
 sell or a solicitation of an offer to buy these securities.  The offering is
 made only by the Prospectus, copies of which may be obtained from the
 undersigned in any State that lawfully offers these securities.  Additional
 information is available upon request.
 
             Not FDIC Insured     No Bank Guarantee     May Lose Value
 
     This material is based on data obtained from sources we deem to be
 reliable; it is not guaranteed as to accuracy and does not purport to be
 complete.  This information is not intended to be used as the primary basis of
 investment decisions.  Because of individual client requirements, it should
 not be construed as advice designed to meet the particular investment needs of
 any investor.  It is not a representation by us or an offer or the
 solicitation of an offer to sell or buy any security.  Further, a security
 described in this publication may not be eligible for solicitation in the
 states in which the client resides.  U.S. Bancorp (NYSE:   USB) and its
 affiliated companies, and their respective officers or employees, or members
 of their families, may own the securities mentioned and may purchase or sell
 those securities in the open market or otherwise.  In the United Kingdom, this
 report may only be distributed or passed on to persons of the kind described
 in Article 11(3) of the Financial Services Act 1986 (Investment
 Advertisements) (Exemptions) Order 1996 (as amended by the Financial Services
 Act 1986 (Investment Advertisements) (exemptions) Order 1997).  Securities
 products and services offered through U.S. Bancorp Piper Jaffray Inc., member
 of SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp.
 
     U.S. Bancorp Piper Jaffray Inc. is a member of the National Association of
 Securities Dealers, CRD number 665.
 
                     MAKE YOUR OPINION COUNT -- Click Here
                http://tbutton.prnewswire.com/prn/11690X13374277
 
 

SOURCE U.S. Bancorp Piper Jaffray Inc.
    MINNEAPOLIS, April 20 /PRNewswire Interactive News Release/ -- The
 following is being issued by U.S. Bancorp Piper Jaffray:
     Did you know that nose prints are used to identify dogs, just like humans
 use fingerprints?  Did you also know that Jon Ekoniak wrote a feature article
 in the May issue of Upside Magazine on the health and future of the e-business
 sector?
 
     In This Week's B2B Analyst:
 
     I.   INDEX -- U.S. Bancorp Piper Jaffray B2BEC Index
     II.  Grabbing Market Share In This Down Market -- Tough market conditions
          can create opportunities for major changes in market share, removing
          weaker competitors from the landscape.
     III. Getting To The Source In Slow Adoption For Strategic Sourcing --
          Economic environment may serve as a catalyst for technology to
          improve the sourcing process and remove costs out of the direct spend
          category.
     IV.  Weekly News
 
     I.  INDEX -- U.S. Bancorp Piper Jaffray B2BEC Index
     Close:                     27.91            Past Week:   +3.55  (+14.6%)
     Year To Date:             -40.42  (-59.2%)  Past Month:  +1.91   (+7.3%)
     Since Inception (7/1/99): -72.09  (-72.1%)  Past Year:  -86.77  (-86.8%)
 
     II. Grabbing Market Share In This Down Market
     The current economic environment is negatively impacting nearly all
 companies, to some extent.  While rising and falling tides often lift and
 lower all boats, in our view an economic downturn is likely to result in
 meaningful changes within an industry's competitive landscape.  The e-business
 software space's first quarter performance seems to support this theory, with
 several vendors delivering quite poor results, but a select few seeming to be
 much less negatively impacted.  While a tough market may reduce the absolute
 results of nearly all companies, it can also create opportunities for major
 changes in market share.  Moreover, such market share changes can permanently
 remove weaker competitors from the landscape, while boosting others to more
 clear leadership positions.
     Of course, grabbing market share is easier said than done.  While far from
 a panacea, in our view there are a variety of CRM (customer relationship
 management) software solutions that can help.  And increasingly, it seems that
 corporate CEOs are in agreement with this view.
     The financial results posted by e-business software vendors during the
 past few weeks were full of disappointments.  But one impressive standout was
 Siebel (#).  The Company not only met its earnings estimates, but did so while
 decreasing DSOs (days sales outstanding) and increasing its ASP (average sales
 price); thus, the Company clearly did not meet estimates by cutting price or
 offering liberal payment terms.  These facts speak highly of Siebel's
 execution capabilities, but also to the strategic nature of, and value
 attached to, CRM software investments.  Whether a company's customer
 challenges involve better organization of its direct sales force, a complete
 overhaul of its customer call center, or the development of online
 self-service modules, there is a wide range of CRM software products that can
 help.
     Again, we do not claim that CRM software is a panacea to a corporation's
 shortcomings in the eyes of customers.  But in order to be effective they do
 not need to be, because in tight contests for customer business, incremental
 improvements can make the difference.  Perhaps a potential buyer is impressed
 that the supplier's sales force and customer service representatives seem to
 be on the same page, and know everything about his needs.  Perhaps an engineer
 is able to find product information quickly and easily on a supplier's Web
 site, and even obtain a real-time quote.  Or perhaps a consumer only receives
 phone calls and mailers at home with relatively customized and well
 thought-out product offerings.  None of these examples are earth shattering.
 But, as we all know, they represent service that is far too uncommon.
 Additionally, CRM software can provide a company with real-time, actionable
 information that can be used more effectively to manage operations.
     We do not profess to know how long the current economic downturn will
 last.  But we are confident that it will result in meaningful changes within
 the competitive landscapes of many industries.  And while having CRM software
 will certainly not ensure that a company comes out on the winning end, we
 believe that all things being equal, it could put some companies over the goal
 line.
 
     III. Getting To The Source In Slow Adoption For Strategic Sourcing
     The weakness in the economy creates a much greater focus on costs across
 the board, whether those expenses are related to direct or indirect
 categories.  In many cases, companies are just refusing to spend on new
 initiatives, but that relates mostly to the more discretionary indirect
 expense categories than the direct categories.  While direct expenses will
 decline with revenue, buyers of direct materials are also pushing back on
 suppliers to get better pricing.  This is where strategic sourcing plays such
 an integral role, which is in the negotiation of new supplier agreements,
 particularly in direct spend categories, which make up the bulk of a
 manufacturer's expenses.  Consequently, this economic environment could
 potentially create something of a catalyst for technology to improve the
 sourcing process and remove costs out of the direct-spend category.
     There are a number of solutions that address various components of the
 issues with strategic sourcing, but the two main types include the
 service-based approach versus the technology solution approach.  ICG Commerce
 and FreeMarkets (#) typify the service-oriented offerings that help companies
 with a hybrid consulting and technology offering.  Moving across the spectrum
 would include eBreviate as a hybrid, but with less of a service focus, all the
 way to technology only solutions from Ariba (#), Atlas Commerce, CommerceOne
 (#@), Frictionless Commerce, and i2 Technologies (#).  FreeMarkets has
 recently acknowledged the need for a technology-only offering market with its
 new QuickSource product and additionally through its Adexa acquisition.
     Despite the growing presence of technology vendors, adoption of these
 sourcing solutions have not yet exploded.  This seems particularly difficult
 to understand because of the potentially very significant and very quick
 return that can be achieved through lower prices.  Percentage savings from
 these solutions can average in the mid-teens, which is real value to
 industries with 2%-3% margins.
     Such a value proposition has not yet been enough to overcome what is a
 very challenging environment of entrenched legacy behavior and decentralized
 control.  On the behavioral side, there are a number of skeptics in the
 procurement industry that do not believe any system can improve processes that
 they have been fine tuning for decades.  There is also a strong belief that
 sourcing is a people business meaning that buyers rely on highly priced,
 experienced sourcing professionals to manage the manual, people-intensive
 sourcing processes.
     As for the topic of centralization, many of the benefits of strategic
 sourcing come from the implementation of common technologies and processes.
 However, in large industrial organizations with many divisions, procurement in
 each division can act as its own fiefdom and the lack of strong centralized
 control over procurement to mandate changes is definitely slowing adoption
 across organizations.
     So when will strategic sourcing technology solutions take off?  The answer
 is unclear.  One small change we sense is a focus more on technology and tools
 than services.  The logic for this is a desire from companies to leverage
 their existing procurement professionals who often have 10-plus years of
 experience with Web-based desktop tools to automate the process.  We believe
 that both technology and service-based solutions will continue to be in
 demand, but the larger question is when will the category hit an inflection
 points.  Part of technology's expanding role will be the expansion to manage
 more completely the processes associated strategic sourcing beyond just the
 popular auction concept to include collaborative engineering, spend analysis,
 and contract development among other functions.  Driving this expansion will
 be the combination of procurement with supply-chain management as seen in the
 FreeMarkets/Adexa and i2/RightWorks mergers.
     Arguably, FreeMarkets is the bellwether firm in Internet-based strategic
 sourcing, but its December quarter results showed some softness in new
 customer wins, lower-than-expected volumes due to the economy, and a slightly
 lower pilot conversion rate.  Because of its recurring revenue model, the
 Company should meet Street estimates for the March quarter, but the real issue
 will be if it can improve in those softer categories.  Given its strong value
 proposition, it would appear to have as much of a counter-cyclical appeal as
 any company.  Also, the Company has produced a solid stream of press releases
 regarding customer wins and renewals lately, so the trend appears to be moving
 in the right direction.
     At the end of the day we are confident that the Internet will change the
 way Companies conduct their strategic sourcing function and that companies
 like FreeMarkets have the potential to play a significant role in driving this
 change.  So while we have fewer questions regarding the "if" of strategic
 sourcing solutions, the "when" is the bigger question with which we will have
 to be patient.
 
     IV. WEEKLY NEWS
     -- Covisint named Kevin English, a former investment banker and publisher,
        as the Company's chairman, president, and CEO, effective May 1.
     -- Manugistics Group (#) announced that Archstone Communities, one of the
        nation's largest developers, owners, and operators of apartment
        communities, has implemented the Manugitics NetWORKS Lease/Rent
        Optimizer, a revenue optimization solution developed for the apartment
        industry.
 
     Some or all of the following hedges may pertain: (#)U.S. Bancorp Piper
 Jaffray Inc. makes a market in the company's securities. (~)A U.S. Bancorp
 Piper Jaffray Inc. officer, director, or other employee is a director and/or
 officer of the company. (@)Within the past three years, U.S. Bancorp Piper
 Jaffray Inc. was managing underwriter of an offering of, or dealer manager of
 a tender offer for, the company's securities or securities of an affiliate.
 (*) A registration statement relating to these securities has been filed with
 the Securities and Exchange Commission but has not yet become effective. These
 securities may not be sold nor may offers to buy be accepted prior to the time
 the registration statement becomes effective. This communication shall not
 constitute an offer to sell or the solicitation of an offer to buy nor shall
 there be any sale of these securities in any state in which such offer,
 solicitation or sale would be unlawful prior to registration or qualification
 under the securities laws of any such state. ** These companies have conducted
 initial public offerings of their securities and are currently in the "Quiet
 Period." As a result, there is no research available on these companies. This
 communication shall not constitute an offer to sell or the solicitation of an
 offer to buy any securities of these companies. (~)This is not an offer to
 sell or a solicitation of an offer to buy these securities.  The offering is
 made only by the Prospectus, copies of which may be obtained from the
 undersigned in any State that lawfully offers these securities.  Additional
 information is available upon request.
 
             Not FDIC Insured     No Bank Guarantee     May Lose Value
 
     This material is based on data obtained from sources we deem to be
 reliable; it is not guaranteed as to accuracy and does not purport to be
 complete.  This information is not intended to be used as the primary basis of
 investment decisions.  Because of individual client requirements, it should
 not be construed as advice designed to meet the particular investment needs of
 any investor.  It is not a representation by us or an offer or the
 solicitation of an offer to sell or buy any security.  Further, a security
 described in this publication may not be eligible for solicitation in the
 states in which the client resides.  U.S. Bancorp (NYSE:   USB) and its
 affiliated companies, and their respective officers or employees, or members
 of their families, may own the securities mentioned and may purchase or sell
 those securities in the open market or otherwise.  In the United Kingdom, this
 report may only be distributed or passed on to persons of the kind described
 in Article 11(3) of the Financial Services Act 1986 (Investment
 Advertisements) (Exemptions) Order 1996 (as amended by the Financial Services
 Act 1986 (Investment Advertisements) (exemptions) Order 1997).  Securities
 products and services offered through U.S. Bancorp Piper Jaffray Inc., member
 of SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp.
 
     U.S. Bancorp Piper Jaffray Inc. is a member of the National Association of
 Securities Dealers, CRD number 665.
 
                     MAKE YOUR OPINION COUNT -- Click Here
                http://tbutton.prnewswire.com/prn/11690X13374277
 
 SOURCE  U.S. Bancorp Piper Jaffray Inc.

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