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JUNE 27, 2002 NEWSMAKER Q&A A GE B2B Faces Life on Its Own GXS CEO Harvey Seegers says now that the unit is being spun off, it'll have more chances to grow, especially via acquisitions
GXS CEO Harvey Seegers has a different take. He maintains that the sale will free GXS to acquire down-and-out B2B players and experiment with new technologies, which will help GXS's customers -- including GE -- in the long run. The conglomerate represents 5%, or $31 million, of GXS's annual revenue. As part of the deal, GE has promised to maintain that spending level for the next two years. Francisco Partners, which is buying 90% of GXS, is the right outfit to help implement the strategy, says Seegers. The $2.5 billion fund specializes in helping large companies divest information-technology divisions and turning those divisions into successful stand-alone companies. On June 25, BusinessWeek Online's Jane Black spoke to Seegers about the deal and what it means for GXS and GE. Edited excerpts of the interview follow: Q: GE says it's selling GXS because it's not a core service. But a lot of speculation says the sale was prompted by slipping revenues, from $640 million in 2000 to $602 million in 2001. Is that true? A: The dip in sales isn't a reflection of a revenue shortfall but a divestiture [on GSX's part] of nonstrategic product lines that reduced top-line revenues. As for GE, I think that as Jeff Immelt [GE's new CEO] was evaluating the portfolio, one of the things he tried to evaluate was whether he had some assets that would be more valuable as a free-standing company than as a small part of a large public company. The fact that GE is retaining a 10% ownership in GXS is a reflection of the confidence GE has in the business and its ability to grow and prosper. It was by no means a jettisoning of an asset that was somehow not attractive. Q: What does leaving the GE fold mean for GXS? GE's brand was key to opening doors and getting GE's own e-commerce business. A: It's an opportunity to establish ourselves as an independent company worthy of our customers' business, even though we may not share the GE meatball. The feedback we're getting from customers is very positive. They're excited about the fact we're connected to an investment fund that's 100% focused on technology. And they're hopeful that by being more aggressive on the acquisition route, we can put together a company here that's in a position like none other to build out the future of e-commerce. It's not without its challenges, but I think it's a huge opportunity for the business not to have to tug on the safety blanket of GE. Q: What does the deal say about GE's much vaunted e-commerce strategy? Is the deal indicative of Immelt's commitment -- or lack of it -- to digitization? A: No. GE has been an extremely satisfied customer of Global eXchange Services. I've been here for six years. Though we have the regular give and take of a customer-supplier relationship, we have very satisfied customers out of GE. Given that we intend to maintain that relationship, this gives Jeff the opportunity to accelerate the digitization efforts to the extent that we're successful in acquiring new technology and capabilities we can [offer] to GE. So I strongly disagree that this transaction is a signal in any way that Jeff is deemphasizing the digital initiative. He took a bold step by letting us go private. Q: What are the plans now that GXS is going to be an independent company? Will there be any layoffs? A: There are absolutely no layoffs as part of the transaction. We see this as a pretty attractive opportunity to be an aggressive acquirer since market valuations are now back down to reasonable levels -- at least compared to valuations of 12 to 24 months ago. There are a number of companies that are seeking to be acquired. Obviously, we're going to exercise the utmost prudence to make sure we get the right company or companies. But we certainly will be expending management time and effort into evaluating acquisitions in a way we probably wouldn't if we had a long-term objective to be part of the corporate parent. Q: Which types of B2B companies are you interested in acquiring? A: Broadly speaking, we're looking for acquisitions that could enhance our product and service lines. We look for opportunities with promising new technology developed outside our company. We look at companies that have the potential to strengthen our installed base in some vertical industries. The key criterion is that it's a B2B e-commerce company. We will not venture outside B2B on my watch. The B2B market is broad and deep. And that's where I want to focus the company.  Edited by Patricia O'Connell Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | JUNE |
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