The name of the sublease tenant was not revealed by Commerce One. Regardless, it will be covering only a fraction of Commerce One's financial commitment. The company says it expects to take a $3.1 million hit during the second quarter due to the difference.
Indeed, the Pleasanton-based maker of business-to-business electronic commerce software says it cannot assure investors that it will be able to continue operations beyond the end of 2003. In 2002, Commerce One experienced a net loss of $589 million.
In a regulatory filing late last week, the one-time employer of 3,000 did not say where it would relocate its remaining 350 employees, but did say it has stopped paying rent on some of its 430,000 sf of leaseholds in the United States as it tried to renegotiate with landlords. In response, some landlords have filed lawsuits.
As of March 31, Commerce One occupied office space in five locations throughout the United States, although much of that space is underutilized. In addition, it had lease commitments in seven other locations that it no longer uses. Collectively, the company's long-term cancelable obligations for future rents payable through March 2011 are approximately $73.8 million. As of March 31, Commerce One had $74.6 million in cash and short-term investments.
"Unless we achieve positive cash flow from our operations, we believe that our ability to renegotiate some or all of our lease obligations will materially impact our capability to fund our continuing operations," states the company in a recent filing. "In addition, if we are able to reach agreements with our various landlords to settle or reduce our real estate obligations, those agreements likely will require us to make significant cash payments to the landlords in the near term, which may have a material effect on our cash position."
During the first quarter, Commerce One says the landlords for three of its leases filed unlawful detainer actions to repossess the premises, and lawsuits to recover unpaid rent are expected. Last November, Marriott Plaza Associates L.P. filed a breach of lease action with regard to unoccupied space in Santa Clara.
On the strength of a new product to replace its internet auction software, Commerce One shares have doubled in the past two months to the $3 range. On Friday, shares ended the say up $0.10 (3.3%) at $3.15. The company conducted a 1-for-10 reverse stock split in September.
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