Four Aerospace Giants Plan B2B Exchange
by Matt Paolucci

This morning, the world's four largest aerospace companies announced that they were planning to launch a business-to- business online marketplace. Aircraft giant Boeing Co. (BA) will lead the venture, along with Lockheed Martin Corp. (LMT), Raytheon Co. (RTNa) and British Aerospace Plc. The venture will provide an online exchange for items ranging from aircraft and weapons parts to data services.

As you probably know, the aerospace industry has gone through major consolidation, in just the last five years or so. Due to the Cold War, defense spending has decreased from roughly 25 percent of the U.S. Government's overall budget to just around 18 percent, forcing these companies to cut costs and find other means for their revenues. That's a drop of almost 30 percent.

The potential of this deal is enormous. According to some of the leading research firms, the size of the B2B arena is expected to grow from $2.7 trillion to $7.3 trillion by 2004. Adding to that statistic, over 50 percent of all business trade will be conducted via online exchanges such as the one being set up by these four industry titans.

For this venture, in particular, the revenues will be monstrous. The combined 1999 annual revenues of Lockheed, Raytheon, Boeing and British Aerospace were in excess of $115 billion. The average profit margin of the four players is around 4 percent. The new B2B marketplace should help all four companies by creating operating efficiencies on many fronts. For its customers, it will provide a competitively priced one- stop shop. Planes, missiles, and radar systems... oh my.

For Commerce One (CMRC), the company who was chosen to facilitate the online defense marketplace, this is quite a coup. Last month, Commerce One was also was chosen, along with Oracle Corp, to facilitate the enormous yet-to-be-named automotive online exchange announced by General Motors (GM), Ford (F) and DaimlerChrysler (DCX). As big as this aerospace market will be, GM currently buys $87 billion a year from its suppliers, Ford buys about $80 billion and DaimlerChrysler purchases about $80 billion worldwide. All in all, it's another feather in Commerce One's cap, who is in a fierce battle with Oracle Corp. (ORCL), Cisco Systems (CSCO) and Ariba (ARBA) in a cyber-landgrab for B2B supremacy.

Look for an official announcement sometime next week. Officials for the companies had no further comments Friday morning.