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February 29, 2000

Sears, Carrefour Plan Web Supply Exchange

Staff Reporter of

Sears, Roebuck & Co. and Carrefour SA, joining the rush to the business-to-business electronic-commerce arena, said the two giant retailers plan to create the industry's largest supply exchange on the Internet.

The exchange would allow retailers and their suppliers to conduct transactions online and could "dramatically" lower purchasing and administrative costs, the companies said in a joint conference call. Carrefour is based in Paris and Sears is based in Hoffman Estates, Ill. The exchange is set to become operational within 30 days.

The venture, to be called GlobalNetXchange, is similar to last week's agreement among auto makers General Motors Corp., Ford Motor Co. and DaimlerChrysler AG to create a single online site for purchasing automotive parts from suppliers.

Key Element Is Missing

But unlike that venture, the retail version lacks as a partner the biggest player in the industry: Wal-Mart Stores Inc. Wal-Mart, the world's largest retailer, had sales last year of $165 billion -- more than those of Sears and Carrefour combined.

Mike Maher, a spokesman for Wal-Mart, said the retailer was approached about the exchange, but that it so far has no plans to participate. "We reviewed the software and will continue reviewing other new technology as it enters the market," Mr. Maher said. He added that Wal-Mart, based in Bentonville, Ark., already relies on its own Internet-based system to achieve efficient transactions with suppliers.

Even without Wal-Mart, some analysts figured the exchange would be appealing to suppliers. "This is one of the most dramatic changes in consumer-products distribution of the decade. It has very wide implications for cost savings," said Thomas Tashjian, a retail analyst with Banc of America Securities.

The venture would make money by charging fees to suppliers or retailers using the exchange. Sears, the nation's second-largest retailer, and Carrefour, the world's second-largest retailer, represent a combined $80 billion in supply-chain purchases. But that's a fraction of what would be needed to build a truly global exchange. Sears Chief Executive Arthur Martinez said Sears and Carrefour would begin approaching other retailers by Tuesday.

The venture would be set up as a separate entity with its own management, employees and financing. It is expected to lead to an initial public offering, but Sears and Carrefour initially would be the majority owners. Software provider Oracle Corp. would host the exchange and hold a minority stake.

Sears and Carrefour said they expect to eventually share ownership of the venture with other retail partners.

An Auto-Industry Lesson

"We would hope that the retail industry would learn from the auto-industry example," said Bruce Johnson, Carrefour's managing director for organizations and systems.

But most major retailers already have invested in electronic data interchange, or EDI, systems, which enable automated purchasing and information exchange with vendors. A core function of GlobalNetXchange would be to conduct transactions on existing supply agreements.

Both Sears and Carrefour said they hope to move most of their supply chain activities to the exchange. The retailers stressed that any company with a Web browser would be able to access the exchange, enabling suppliers that haven't invested in automated purchasing to do so very inexpensively.

Suppliers would be able to monitor retailers' sales and inventory levels and better plan manufacturing of products.

"It will allow us to move closer to a just-in-time inventory system," said Julian Day, chief operating officer of Sears. He said he couldn't quantify the potential savings.

In 4 p.m. composite trading on the New York Stock Exchange Monday, Sears rose $1.4375, or 5.5%, to $27.3125. In Paris, Carrefour closed at 150 euros, ($146.45), down 2.6 euros.

Carrefour, which has a presence in Europe, Latin America and Asia, operates supermarkets, discount stores and convenience stores.

March 1, 2000

SAP, DaimlerChrysler in Talks; May Partner in Online Venture

Staff Reporter of

SAP AG is striving to form an e-commerce joint venture with DaimlerChrysler AG in hopes of getting a coveted stake in a giant online marketplace for the automotive industry, people familiar with the situation said.

DaimlerChrysler last week joined forces with Ford Motor Co. and General Motors Corp. to create a single automotive-parts exchange on the Internet, but it is the only one of the Big Three auto makers that hasn't named a technology partner for the venture.

People familiar with DaimlerChrysler's plans said it has had "intensive" talks with SAP over the last several weeks about working together in electronic commerce. When DaimlerChrysler teamed up with Ford and GM, they began exploring ways to bring SAP into the automotive exchange as its ally.

Decision Expected Soon

"If [DaimlerChrysler] hadn't gone with Ford and GM, [SAP] probably would already have an agreement," one person said. A decision on a partnership could come within five or six days, he said.

DaimlerChrysler is talking to at least one other company, but insiders said SAP is trying to put together an attractive offer that would include giving the auto maker a stake in a new subsidiary. The new unit would provide the software and consulting services to help DaimlerChrysler move its purchasing operations to the exchange, they said.

Although SAP is the world's largest supplier of business management applications, it so far has been shut out from what could become the biggest e-commerce portal of them all. The exchange eventually is supposed to handle hundreds of billions of dollars in parts purchasing for the three companies and their suppliers. Wall Street analysts estimate the exchange could have a market capitalization of $30 billion to $40 billion (30.87 billion euros to 41.16 billion euros) within a couple of years.

Progress After Slow Start

Winning over Daimler would give SAP a big boost after getting off to a slow start in the e-commerce business, said Devika Malik, an analyst at J.P. Morgan & Co. in London, adding, "It would show that even though they are late to the game, they have got a foot in the door in a major auto marketplace."

In Frankfurt, SAP shares fell 6 euros to 860 euros. DaimlerChrysler shares gained 2.54 euros to 69.82 euros.

Industry analysts noted that SAP would be an appropriate partner for DaimlerChrysler, already one of SAP's largest customers. SAP would add another European element to an exchange already heavy with American players and would have connections to more than 1,000 automotive suppliers who also use SAP software.

Getting Personal

However, the auto makers' plans to begin transacting trades within 90 days may be difficult to pull off, if they have to get their partners to work together, analysts warned. SAP last year dropped Oracle as its preferred database supplier, even though Oracle is by far the market leader.

There is a personal element between SAP Co-Chief Executive Hasso Plattner and Oracle Chief Executive Larry Ellison, too. Once in a yacht race when Mr. Plattner's boat broke down, Mr. Ellison's boat sailed on, declining to offer help. Mr. Plattner then dropped his pants and "mooned" it.

The auto makers "could end up with the World Wrestling Federation on their hands instead of an exchange," said Bruce Richardson, an analyst at AMR Research in Boston, which follows the business applications market.

But a Daimler executive who spoke on the condition of anonymity said the auto makers would force the companies to cooperate. "We expect the software companies to support us. We will drive the bus," he said.

Some Cooler Reactions

The picture could become even more complicated if other auto makers join and bring still more partners.

Toyota Motor Corp. said it will probably join the Big Three exchange, but others have had cooler reactions. Honda Motor Co. hasn't made up its mind.

At the Geneva auto show, Volkswagen AG board member Jens Neumann said he's not ruling out linking up with or joining Ford, GM and DaimlerChrysler, although VW plans to develop its own online procurement system. VW, a customer of SAP, is talking to SAP and Oracle about its plans, he said.

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