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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 000-26453

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COMMERCE ONE, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

68-0322810(IRS Employer Identification Number)


4440 Rosewood Drive
Pleasanton, CA 94588(Address of principal executive offices including zip code)

(925) 520-6000(Registrant's telephone number, including area code)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [  ],

As
of May 7, 2001, there were 196,973,605 shares of the registrant's Common Stock outstanding.

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COMMERCE ONE, INC.  TABLE OF CONTENTS

|                                                                                                                |                                                                                                     | Page No.
|--------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------
|PART I. Financial Information                                                                                   |                                                                                                     |         
|Item 1. Financial Statements (unaudited):                                                                       |                                                                                                     |         
|                                                                                                                | Condensed Consolidated Balance Sheet as of March 31, 2001 and December 31, 2000.                    |         
|                                                                                                                | Condensed Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000. |         
|                                                                                                                | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000. |         
|                                                                                                                | Notes to Condensed Consolidated Financial Statements                                                |         
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and Risk Factors |                                                                                                     | 10      
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                              |                                                                                                     | 29      
|PART II. Other Information                                                                                      |                                                                                                     |         
|Item 1. Legal Proceedings                                                                                       |                                                                                                     | 31      
|Item 2: Changes in Securities and Use of Proceeds                                                               |                                                                                                     | 31      
|Item 3: Defaults Upon Senior Securities                                                                         |                                                                                                     | 31      
|Item 4: Submission of Matters to a Vote of Security Holders                                                     |                                                                                                     | 31      
|Item 5: Other Information                                                                                       |                                                                                                     | 31      
|Item 6. Exhibits and Reports on Form 8-K                                                                        |                                                                                                     | 31      
|Signatures                                                                                                      |                                                                                                     | 32      

2

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Commerce One, Inc.  Condensed Consolidated Balance Sheets(In thousands, except share data)

|                                           |                                                                                                                                                                                                                                                                                                                                                       | March 31,
2001 |           | December 31,
2000 |  
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | --------- | ----------------- | -
|
|ASSETS                                     |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Current assets:                            |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|                                           | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                             |                | $         | 130,699           |  
|                                           | Short term investments                                                                                                                                                                                                                                                                                                                                |                |           | 118,674           |  
|                                           | Accounts receivable, net                                                                                                                                                                                                                                                                                                                              |                |           | 167,869           |  
|                                           | Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                             |                |           | 20,739            |  
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Total current assets                       |                                                                                                                                                                                                                                                                                                                                                       |                | 437,981   |                   |  
|Property and equipment, net                |                                                                                                                                                                                                                                                                                                                                                       |                | 114,566   |                   |  
|Goodwill and other intangible assets, net  |                                                                                                                                                                                                                                                                                                                                                       |                | 2,251,444 |                   |  
|Investments and other assets               |                                                                                                                                                                                                                                                                                                                                                       |                | 38,213    |                   |  
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Total assets                               |                                                                                                                                                                                                                                                                                                                                                       | $              | 2,842,204 |                   | $
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Current liabilities:                       |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|                                           | Accounts payable                                                                                                                                                                                                                                                                                                                                      |                | $         | 42,144            |  
|                                           | Accrued compensation and related expenses                                                                                                                                                                                                                                                                                                             |                |           | 34,893            |  
|                                           | Current portion of notes payable                                                                                                                                                                                                                                                                                                                      |                |           | 4,510             |  
|                                           | Deferred revenue                                                                                                                                                                                                                                                                                                                                      |                |           | 51,684            |  
|                                           | Other current liabilities                                                                                                                                                                                                                                                                                                                             |                |           | 85,381            |  
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Total current liabilities                  |                                                                                                                                                                                                                                                                                                                                                       |                | 218,612   |                   |  
|Notes payable                              |                                                                                                                                                                                                                                                                                                                                                       |                | 19,000    |                   |  
|Stockholders' equity:                      |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|                                           | $0.0001 par value, Preferred Stock 50,000,000 shares authorized; $0.0001 par value, Common Stock 950,000,000 shares authorized; 196,639,641 and 194,894,434 issued and outstanding at March 31, 2001 and December 31, 2000,
respectively, excluding 28,800,000 to be issued under contractual obligations as of December 31, 2000 and March 31, 2001. |                |           | 3,410,634         |  
|                                           | Deferred stock compensation                                                                                                                                                                                                                                                                                                                           |                |           | (129,432          | )
|                                           | Note receivable from stockholder                                                                                                                                                                                                                                                                                                                      |                |           | (129              | )
|                                           | Accumulated other comprehensive loss                                                                                                                                                                                                                                                                                                                  |                |           | (444              | )
|                                           | Accumulated deficit                                                                                                                                                                                                                                                                                                                                   |                |           | (676,037          | )
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Total stockholders' equity                 |                                                                                                                                                                                                                                                                                                                                                       |                | 2,604,592 |                   |  
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  
|Total liabilities and stockholders' equity |                                                                                                                                                                                                                                                                                                                                                       | $              | 2,842,204 |                   | $
|                                           |                                                                                                                                                                                                                                                                                                                                                       |                |           |                   |  

See
notes to condensed consolidated financial statements.

3

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Commerce One, Inc.        Condensed Consolidated Statements of Operations  (unaudited)(In thousands, except per share data)

|                                                                   |                                                      | Three Months Ended
March 31, |         
|------------------------------------------------------------------ | ---------------------------------------------------- | ---------------------------- | --------
|
|Revenues:                                                          |                                                      |                              |         
|                                                                   | License fees                                         |                              | $       
|                                                                   | Services                                             |                              |         
|                                                                   |                                                      |                              |         
|Total revenues                                                     |                                                      |                              | 170,273 
|                                                                   |                                                      |                              |         
|Costs and expenses:                                                |                                                      |                              |         
|                                                                   | License fees                                         |                              |         
|                                                                   | Services                                             |                              |         
|                                                                   | Sales and marketing                                  |                              |         
|                                                                   | Product development                                  |                              |         
|                                                                   | General and administrative                           |                              |         
|                                                                   | Purchased in-process research and development        |                              |         
|                                                                   | Restructuring costs                                  |                              |         
|                                                                   | Amortization of deferred stock compensation          |                              |         
|                                                                   | Amortization of goodwill and other intangible assets |                              |         
|                                                                   |                                                      |                              |         
|Total costs and expenses                                           |                                                      |                              | 399,012 
|                                                                   |                                                      |                              |         
|Loss from operations                                               |                                                      |                              | (228,739
|Interest income, net                                               |                                                      |                              | 2,805   
|                                                                   |                                                      |                              |         
|Net loss before income taxes                                       |                                                      |                              | (225,934
|Provision for income taxes                                         |                                                      |                              | 2,600   
|                                                                   |                                                      |                              |         
|Net loss                                                           |                                                      | $                            | (228,534
|                                                                   |                                                      |                              |         
|Basic and diluted net loss per share                               |                                                      | $                            | (1.02   
|                                                                   |                                                      |                              |         
|Shares used in calculation of basic and diluted net loss per share |                                                      |                              | 223,820 
|                                                                   |                                                      |                              |         

See
notes to condensed consolidated financial statements.

4

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Commerce One, Inc.        Condensed Consolidated Statement of Cash Flows  (unaudited)(In thousands)

|                                                                                          |                                                                                                       | Three Months Ended
March 31,                                                                                       |         
|----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | --------
|
|Operating activities:                                                                     |                                                                                                       |                                                                                                                    |         
|Net loss                                                                                  |                                                                                                       | $                                                                                                                  | (228,534
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                                                                       |                                                                                                                    |         
|                                                                                          | Depreciation and amortization                                                                         |                                                                                                                    |         
|                                                                                          | Purchased in-process research and development                                                         |                                                                                                                    |         
|                                                                                          | Amortization of Technology Agreement                                                                  |                                                                                                                    |         
|                                                                                          | Amortization of deferred stock compensation                                                           |                                                                                                                    |         
|                                                                                          | Amortization of goodwill and other intangible assets                                                  |                                                                                                                    |         
|                                                                                          | Loss on investments                                                                                   |                                                                                                                    |         
|                                                                                          | Reclassification of deal costs to goodwill and common stock                                           |                                                                                                                    |         
|                                                                                          | Change in assets and liabilities:                                                                     |                                                                                                                    |         
|                                                                                          |                                                                                                       | Accounts receivable, net                                                                                           |         
|                                                                                          |                                                                                                       | Prepaid expenses and other current assets                                                                          |         
|                                                                                          |                                                                                                       | Accounts payable                                                                                                   |         
|                                                                                          |                                                                                                       | Accrued compensation and related expenses                                                                          |         
|                                                                                          |                                                                                                       | Other current liabilities                                                                                          |         
|                                                                                          |                                                                                                       | Deferred revenue                                                                                                   |         
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Net cash provided by (used in) operating activities                                       |                                                                                                       |                                                                                                                    | (89,334 
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Investing activities:                                                                     |                                                                                                       |                                                                                                                    |         
|                                                                                          | Purchase of property and equipment, net                                                               |                                                                                                                    |         
|                                                                                          | Purchase of short term investments                                                                    |                                                                                                                    |         
|                                                                                          | Proceeds from the maturity of short term investments                                                  |                                                                                                                    |         
|                                                                                          | Proceeds in connection with Technology Agreement                                                      |                                                                                                                    |         
|                                                                                          | Business combinations, net of cash acquired                                                           |                                                                                                                    |         
|                                                                                          | Other investments                                                                                     |                                                                                                                    |         
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Net cash used in investing activities                                                     |                                                                                                       |                                                                                                                    | (15,078 
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Financing activities:                                                                     |                                                                                                       |                                                                                                                    |         
|                                                                                          | Proceeds from issuance of common stock, net                                                           |                                                                                                                    |         
|                                                                                          | Payments on notes payable                                                                             |                                                                                                                    |         
|                                                                                          | Proceeds from notes payable                                                                           |                                                                                                                    |         
|                                                                                          | Payments on capital lease obligations                                                                 |                                                                                                                    |         
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Net cash provided by financing activities                                                 |                                                                                                       |                                                                                                                    | 19,607  
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Effect of foreign currency translation on cash and cash equivalents                       |                                                                                                       |                                                                                                                    | 315     
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Net increase (decrease) in cash                                                           |                                                                                                       |                                                                                                                    | (84,490 
|Cash at beginning of period                                                               |                                                                                                       |                                                                                                                    | 215,189 
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Cash at end of period                                                                     |                                                                                                       | $                                                                                                                  | 130,699 
|                                                                                          |                                                                                                       |                                                                                                                    |         
|Supplemental disclosures:                                                                 |                                                                                                       |                                                                                                                    |         
|                                                                                          | Interest paid                                                                                         |                                                                                                                    | $       
|                                                                                          | Noncash investing and financing activities:                                                           |                                                                                                                    |         
|                                                                                          |                                                                                                       | Deferred compensation related to stock option grants and options assumed in business combinations                  |         
|                                                                                          |                                                                                                       | Issuance of preferred stock, common stock and assumption of stock options in connection with business combinations |         
|                                                                                          |                                                                                                       |                                                                                                                    |         
|                                                                                          | Issuance of common stock related to contingent consideration in connection with business combinations |                                                                                                                    |         
|                                                                                          | Deferred compensation related to stock option grants                                                  |                                                                                                                    |         

See notes to condensed consolidated financial statements.

5

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Commerce One, Inc.  Notes to Condensed Consolidated Financial Statements

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management all adjustments consisting of normal recurring
adjustments, considered necessary for a fair presentation, have been included. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire year ending December 31, 2001.

We
have one business segment which provides business-to-business electronic commerce solutions that use the Internet to link buyers and sellers of business
goods and services into real-time trading communities.

For
further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2000.

2. BASIC AND DILUTED NET LOSS SHARE

Basic and diluted net loss per share information for all periods is presented under the requirements of FASB Statement No. 128, "Earnings per Share"
("FAS 128"). Basic earnings per share has been computed using the weighted-average number of shares of common stock outstanding during the period, less shares that may be repurchased, and
excludes any dilutive effects of options, warrants, and convertible securities. Potentially dilutive issuances have also been excluded from the computation of diluted net loss per share, as their
inclusion would be antidilutive.

The
calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):

| |                                                                                                            | Three Months Ended
March 31, |  
| | ---------------------------------------------------------------------------------------------------------- | ---------------------------- | -
|
| | Net loss                                                                                                   |                              | $
| |                                                                                                            |                              |  
| | Weighted average shares of common stock outstanding                                                        |                              |  
| | Less: Weighted average shares that may be repurchased                                                      |                              |  
| |                                                                                                            |                              |  
| | Weighted average shares of common stock outstanding used in computing basic and diluted net loss per share |                              |  
| |                                                                                                            |                              |  
| | Basic and diluted net loss per share                                                                       |                              | $
| |                                                                                                            |                              |  

3. COMPREHENSIVE INCOME (LOSS)

Financial Accounting Standards Board (SFAS) No. 130, "Reporting Comprehensive Income," establishes standards of reporting and display of comprehensive
income and its components of net income and "Other Comprehensive Income." "Other Comprehensive Income" refers to revenues, expenses and gains and losses that are not included in net income but rather
are recorded directly in

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stockholders' equity. The components of comprehensive loss for the three months ended March 31, 2001 and 2000 were as follows (in thousands):

|                                        |  | Three Months Ended
March 31, |         
|--------------------------------------- |  | ---------------------------- | --------
|
|Net loss                                |  | $                            | (228,534
|Unrealized loss on investments          |  |                              | 56      
|Foreign currency translation adjustment |  |                              | 314     
|                                        |  |                              |         
|Comprehensive loss                      |  | $                            | (228,164
|                                        |  |                              |         

4. RESTRUCTURING COSTS

We have incurred costs associated with our efforts to optimize and streamline our business. These costs include severance pay, outplacement services, benefits
continuation, office closure expenses, and retention bonuses for key employees.

On
February 15, 2001 the Company committed to closing one of its offices and accrued approximately $9.4 million for the difference between the remaining payments under
this operating lease and projected sub-lease receipts. As of March 31, 2001 nothing has been charged against this accrual.

The
Company has also been rationalizing its business through a reduction in headcount. The related severance costs, consisting primarily of separation payments, outplacement services,
benefits continuation, and retention bonuses were approximately $4.7 million.

5. INVESTMENTS

The Company has made several strategic investments in privately held companies and one publicly traded company. The Company holds less than a 5% interest in
each of these companies and does not have a significant influence over these companies. Investments in private companies are recorded at cost. Investments in publicly traded companies are carried at
fair value, based on quoted market prices, with unrealized gains and losses recorded in equity. These investments are periodically evaluated for
declines in value which are considered other than temporary. During the quarter ended March 31, 2001 the Company recorded investment losses of approximately $1.5 million related to
declines in value considered other than temporary.

6. MICROSOFT ALLIANCE

Microsoft Alliance

On March 15, 2001, the Company entered into an alliance agreement with Microsoft Corporation pursuant to which we will develop new product offerings to
showcase Microsoft.NET platform and Framework. The parties also agreed to engage in joint engineering, sales and marketing of the products. In addition, Microsoft has extended to Commerce One a
two-year, interest-free loan of $25 million from which the Company can draw upon as necessary to fund the development of our e-marketplace solutions for the
Microsoft.NET platform. As of March 31, 2001 the Company has borrowed $19 million against this facility.

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7. SUBSEQUENT EVENTS

Stock Option Exchange Program

On March 5, 2001, we announced a voluntary stock option exchange program for our employees. Under the program, our employees were given the opportunity
to elect to cancel outstanding stock options held by them in exchange for an equal number of replacement options to be granted at a future date. The elections to cancel options were effective on
April 6, 2001. The exchange resulted in the voluntary cancellation by 2,307 employees of 24,585,051 employee stock options with varying exercise prices in exchange for the same number of
replacement options. The replacement options will have the same terms and conditions as each optionee's cancelled options, including the vesting schedule and expiration date of the cancelled options,
except that: (1) the replacement options will be granted no earlier than October 8, 2001 and no later than December 7, 2001, (2) the replacement options will have an
exercise price equal to the fair market value of our common stock on the date of the grant, (3) the replacement options will be nonstatutory stock options, and (4) the optionee must be
an employee of Commerce
One or a subsidiary on the date of grant of the replacement options in order to receive replacement options. Employees were eligible to participate in the program, although Board members and
consultants were ineligible. We believe it will not incur any compensation charge for accounting purposes in connection with the program.

Stockholders' Rights Agreement

In March 2001, the Board of Directors of the Company approved a Stockholders' Rights Plan. Under the plan, Commerce One will issue a dividend of one
right for each share of common stock of the Company held by stockholders of record as of the close of business on April 30, 2001. The rights will initially trade with Commerce One's common
stock. Each right will entitle stockholders to purchase a fractional share of Commerce One's preferred stock for an exercise price of $70. However, the rights are not immediately exercisable and will
generally become exercisable if a person or group acquires beneficial ownership of 15 percent or more of Commerce One's common stock or commences a tender or exchange offer upon consummation of
which such person or group would beneficially own 15 percent or more of Commerce One's common stock. The rights will become exercisable by holders, other than the unsolicited third party
acquiror, for shares of Commerce One or of the third party acquiror having a value of twice the right's then-current exercise price. The rights are redeemable by Commerce One and will
expire on April 30, 2011. The Rights Plan was not adopted in response to any effort to acquire control of the Company.

Acquisition of Exterprise, Inc.

On March 20, 2001, we signed definitive agreements to acquire Exterprise, Inc., ("Exterprise") a provider of platform solutions that enable the
rapid development and deployment of new e-commerce applications for e-marketplaces. The acquisition is structured as a merger and will be accounted for as a purchase
transaction. The agreement provides that the Company will issue up to 7.5 million shares of our common stock for all outstanding equity securities of Exterprise. The acquisition is subject to
Exterprise stockholder approval, regulatory approval and other customary closing conditions.

Covisint Agreements

In December 2000, Commerce One, Ford Motor Company (Ford), General Motors Corporation (GM), DaimlerChrysler AG, Renault S.A. and Nissan Motor
Co., Ltd. entered into several agreements relating to the formation of Covisint, LLC ("Covisint"), a Delaware limited liability company. Covisint is a
business-to-business e-marketplace for procurement of goods and services by automakers, their suppliers and others. In connection with the formation of Covisint,
the parties entered into a Technology Agreement pursuant to which Commerce One will indirectly license software and provide

8

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professional services and support and maintenance services to Covisint in exchange for cash compensation and a share of Covisint's e-marketplace revenue over a ten-year period.
The Technology Agreement also includes certain exclusivity commitments of Covisint and Commerce One.

In
connection with the formation of Covisint, under the terms of a Formation Agreement, Commerce One agreed to undergo a corporate restructuring into a holding company. The holding
company restructuring is subject to the approval of the stockholders of Commerce One. If the restructuring is approved, all of Commerce One's outstanding shares of common stock will automatically be
converted into shares of common stock of the holding company at a one-for-one conversion rate. As a result, Commerce One will become a wholly owned subsidiary of the new
holding company. The holding company will continue the business of Commerce One and become the publicly traded entity. Subject to certain conditions relating to stockholder approval of the
transaction, the holding company will receive a two percent equity interest in Covisint. Commerce One's agreements relating to Covisint generally replace Commerce One's agreements relating to GM
TradeXchange. Upon the execution of the Formation Agreement, the Commerce One holding company issued 14.4 million shares of its common stock to Ford and 14.4 million shares of its common
stock to GM. Half of each of Ford's and GM's shares will be held in escrow and will be released to Ford and GM in December 2002, unless certain conditions under the Formation Agreement are not
satisfied, in which case the shares will be released in June 2004.

In
addition, pursuant to a Standstill and Stock Restriction Agreement entered into between Commerce One, the new holding company, Ford and GM, all of the shares of stock issued to
Ford and GM will generally be subject to transfer restrictions for three years subject to certain exceptions. Ford and GM have also agreed to certain "standstill" restrictions that will generally
limit their ability to acquire individually more than 9.95%, or collectively more than 19.9%, of Commerce One's outstanding common stock for three years, and individually 12.5% and collectively 25%
thereafter. In addition, for a period of three years, Ford and GM generally agreed to vote their shares in accordance with the recommendations of Commerce One's Board of Directors with respect to
nominees to the Board of Directors and increases in Commerce One authorized capital stock and amendments to stock option plans and employee stock purchase plans approved by Commerce One's Board of
Directors. Under a Registration Rights Agreement entered into between Commerce One, Ford and GM, Ford and GM are entitled to registration rights generally beginning after three years, subject to
certain exceptions.

If
the restructuring is not approved by Commerce One's stockholders, the Covisint agreements will remain in place. Commerce One will in that case remain a publicly traded entity and
will issue a total of 28.8 million shares of Commerce One common stock directly to Ford and GM in exchange for the 28.8 million shares of the holding company common stock currently held
by them. In either event, the shares of Commerce One common stock issued to Ford and GM will be subject to similar escrow, standstill and voting provisions, and will be entitled to the same
registration rights described above whether or not the corporate restructuring takes place.

Commerce
One has recorded in stockholders' equity the fair value of its contractual obligation to issue 28.8 million shares of common stock to GM and Ford (either through the
restructuring transaction or
directly) in the amount of $880,200,000. This amount was determined based on the fair value of the underlying Commerce One common shares on the date the agreements were entered into, less a discount
for the escrow and transfer restrictions described above. This amount was allocated to rights under the Technology Agreement ($849,350,000) and the rights to obtain an equity interest in Covisint
($30,850,000). In addition the Company incurred $1,582,000 in transaction related costs. The amounts allocated to the Technology Agreement and the related transaction costs are included in intangible
assets and are being amortized by charges to operating costs and expenses by the straight-line method over the ten-year term of the agreement. The amount allocated to the
rights to obtain an equity interest in Covisint is included in investments and other assets.

9

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Form 10-Q and the documents incorporated by reference into this Form 10-Q contain
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements
that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the market leadership
of Commerce One as a provider of e-commerce solutions, the growth of our business and related matters, the necessity of investing in product development for future success, the expectation
that product development expenses will increase in future periods whereas sales, marketing and administrative expenses will not, the quarterly charges we expect to incur from amortizing goodwill and
other intangible assets as a result of our acquisitions and in the event of future acquisitions, and the anticipated increase in capital expenditures in connection with the expected growth of
operations, infrastructure and personnel. The words "believe," "expect," "intend," "plan," "project," "will" and similar phrases as they relate to Commerce One also identify forward-looking
statements. Such statements reflect the current views and assumptions of Commerce One and are not guarantees of future performance. These statements are subject to various risks and uncertainties. Our
actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors described in this Quarterly Report.

OVERVIEW

Background

Commerce One is a leading provider of business-to-business electronic commerce solutions that link buyers and suppliers of goods and
services into trading communities over the Internet.

Source of Revenues

We generate revenues from multiple sources. License fees are generated from licensing our products to end-user organizations and from royalties
received from our third party product distributors and resellers. Services revenues are generated from professional consulting, product maintenance, application hosting, transaction and subscription
fees, revenue sharing arrangements with partners, and other related services. Revenues from transactions and subscription fees have not been a significant portion of total services revenues to date.
However, our revenue growth in the future will depend upon realizing significant revenues from these sources.

Revenue Recognition

Revenues from license agreements for our software products are recognized upon delivery and acceptance of the software if there is persuasive evidence of an
arrangement, collection is probable and the fee is fixed or determinable. If an acceptance period is required, license revenues are recognized upon the earlier of customer acceptance or the expiration
of the acceptance period. We generally recognize only our portion of revenues under revenue sharing arrangements for the license to customers of software developed jointly with strategic partners.
When software is licensed through indirect sales channels, license fees are recognized as revenue when the software is sold by the reseller to an end user customer and the criteria described above
have been met.

Revenues
from professional services under time and materials contracts are recognized based on fixed hourly rates for direct labor hours expended. Revenues from fixed-price contracts
are recognized on the percentage-of-completion method, with costs and estimated profits recorded as work is performed. Revenues from
cost-plus-fixed-fee contracts are recognized on the basis of direct costs plus

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indirect costs incurred plus a fixed profit percentage. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in contract
performance and estimated profitability, including final contract settlements, may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.
Unbilled receivables on contracts are comprised of costs, plus earnings on certain contracts in excess of contractual billings on such contracts.

If
a customer transaction includes both software license and services elements or the rights to multiple software products, the total arrangement fee is allocated to each of the
elements using the residual method, under which revenue is allocated to undelivered elements based on vendor specific objective evidence of the fair values of such undelivered elements and the
residual amounts of revenue are allocated to the delivered elements.

Revenue
is recognized using contract accounting for arrangements involving customization or modification of the software or where professional services are considered necessary to the
functionality of the software. Revenue from these software arrangements is recognized using the percentage of completion method.

Software
maintenance revenues and subscription fees are recognized ratably over the term of the related contract, typically one year.

Network
service fees (transaction fees, revenue sharing and hosting), which have not been significant, are recognized as earned based on customer transactions.

Deferred
revenue consists of license fees for which revenue has been deferred and prepaid fees for services, subscription fees, and maintenance and support agreements.

Our
revenue recognition policies are consistent with Statement of Position 97-2 "Software Revenue Recognition," as modified by Statement of Position 98-9.

RECENT EVENTS

Stock Option Exchange Program

On March 5, 2001, we announced a voluntary stock option exchange program for our employees. Under the program, our employees were given the opportunity
to elect to cancel outstanding stock options held by them in exchange for an equal number of replacement options to be granted at a future date. The elections to cancel options were effective on
April 6, 2001. The exchange resulted in the voluntary cancellation by 2,307 employees of 24,585,051 employee stock options with varying exercise prices in exchange for the same number of
replacement options. The replacement options will have the same terms and conditions as each optionee's cancelled options, including the vesting schedule and expiration date of the cancelled options,
except that: (1) the replacement options will be granted no earlier than October 8, 2001 and no later than December 7, 2001, (2) the replacement options will have an
exercise price equal to the fair market value of our common stock on the date of the grant, (3) the replacement options will be nonstatutory stock options, and (4) the optionee must be
an employee of Commerce One or a subsidiary on the date of grant of the replacement options in order to receive replacement options. Employees were eligible to participate in the program, although
Board members and
consultants were ineligible. We believe it will not incur any compensation charge for accounting purposes in connection with the program.

Stockholders' Rights Agreement

In March 2001, the Board of Directors of Commerce One approved a Stockholders' Rights Plan. Under the plan, we issued a dividend of one right for each
share of common stock of Commerce One held by stockholders of record as of the close of business on April 30, 2001. The rights initially trade

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with Commerce One's common stock. Each right entitles stockholders to purchase a fractional share of Commerce One's preferred stock for an exercise price of $70. However, the rights are not
immediately exercisable and will generally become exercisable if a person or group acquires beneficial ownership of 15 percent or more of Commerce One's common stock or commences a tender or
exchange offer upon consummation of which such person or group would beneficially own 15 percent or more of Commerce One's common stock. The rights will become exercisable by holders, other
than the unsolicited third party acquiror, for shares of Commerce One or of the third party acquiror having a value of twice the right's then-current exercise price. The rights are
redeemable by Commerce One and will expire on April 18, 2011. The Rights Plan was not adopted in response to any effort to acquire control of us.

Microsoft Alliance

On March 15, 2001, we entered into an alliance agreement with Microsoft Corporation pursuant to which we will develop new product offerings to showcase
Microsoft.NET platform and Framework. The parties also agreed to engage in joint engineering, sales and marketing of the products. In addition, Microsoft has extended to Commerce One a
two-year, interest-free loan of $25 million from which we can draw upon as necessary to fund the development of our e-marketplace solutions for the
Microsoft.NET platform. As of March 31, 2001, we have borrowed $19 million against this facility.

Acquisition of Exterprise, Inc.

On March 20, 2001, we signed definitive agreements to acquire Exterprise, Inc., ("Exterprise") a provider of platform solutions that enable the
rapid development and deployment of new e-commerce applications for e-marketplaces. The acquisition is structured as a merger and will be accounted for as a purchase
transaction. The agreement provides that the Company will issue up to 7.5 million shares of our common stock for all outstanding equity securities of Exterprise. The acquisition is subject to
Exterprise stockholder approval, regulatory approval and other customary closing conditions. We expect to complete the acquisition of Exterprise in the second quarter of 2001.

Covisint Agreements

In December 2000, Commerce One, Ford Motor Company (Ford), General Motors Corporation (GM), DaimlerChrysler AG, Renault S.A. and Nissan Motor Co., Ltd.
entered into several agreements relating to the formation of Covisint, LLC ("Covisint"), a Delaware limited liability company. Covisint is a business-to-business e-marketplace for procurement of goods
and services by automakers, their suppliers and others. In connection with the formation of Covisint, the parties entered into a Technology Agreement pursuant to which Commerce One will indirectly
license software and provide professional services and support and maintenance services to Covisint in exchange for cash compensation and a share of Covisint's e-marketplace revenue over a ten-year
period. The Technology Agreement also includes certain exclusivity commitments of Covisint and Commerce One.

In
connection with the formation of Covisint, under the terms of a Formation Agreement, Commerce One agreed to undergo a corporate restructuring into a holding company. The holding
company restructuring is subject to the approval of the stockholders of Commerce One. If the restructuring is approved, all of Commerce One's outstanding shares of common stock will automatically be
converted into shares of common stock of the holding company at a one-for-one conversion rate. As a result, Commerce One will become a wholly owned subsidiary of the new holding company. The holding
company will continue the business of Commerce One and become the publicly traded entity. Subject to certain conditions relating to stockholder approval of the transaction, the holding company will
receive a two percent equity interest in Covisint. Commerce One's agreements relating to Covisint generally replace Commerce One's agreements relating to GM TradeXchange. Upon the execution of the
Formation Agreement, the Commerce One holding company issued 14.4 million shares of its common stock to Ford and 14.4 million shares of its common stock to GM. Half of

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each of Ford's and GM's shares will be held in escrow and will be released to Ford and GM in December 2002, unless certain conditions under the Formation Agreement are not satisfied, in which case the
shares will be released in June 2004.

In
addition, pursuant to a Standstill and Stock Restriction Agreement entered into between Commerce One, the new holding company, Ford and GM, all of the shares of stock issued to
Ford and GM will generally be subject to transfer restrictions for three years subject to certain exceptions. Ford and GM have also agreed to certain "standstill" restrictions that will generally
limit their ability to acquire individually more than 9.95%, or collectively more than 19.9%, of Commerce One's outstanding common stock for three years, and individually 12.5% and collectively 25%
thereafter. In addition, for a period of three years, Ford and GM generally agreed to vote their shares in accordance with the recommendations of Commerce One's Board of Directors with respect to
nominees to the Board of Directors and increases in Commerce One authorized capital stock and amendments to stock option plans and employee stock purchase plans approved by Commerce One's Board of
Directors. Under a Registration Rights Agreement entered into between Commerce One, Ford and GM, Ford and GM are entitled to registration rights generally beginning after three years, subject to
certain exceptions.

If
the restructuring is not approved by Commerce One's stockholders, the Covisint agreements will remain in place. Commerce One will in that case remain a publicly traded entity and
will issue a total of 28.8 million shares of Commerce One common stock directly to Ford and GM in exchange for the 28.8 million shares of the holding company common stock currently held by them. In
either event, the shares of Commerce One common stock issued to Ford and GM will be subject to similar escrow, standstill and voting provisions, and will be entitled to the same registration rights
described above whether or not the corporate restructuring takes place.

Commerce
One has recorded in stockholders' equity the fair value of its contractual obligation to issue 28.8 million shares of common stock to GM and Ford (either through the
restructuring transaction or directly) in the amount of $880,200,000. This amount was determined based on the fair value of the underlying Commerce One common shares on the date the agreements were
entered into, less a discount for the escrow and transfer restrictions described above. This amount was allocated to rights under the Technology Agreement ($849,350,000) and the rights to obtain an
equity interest in Covisint ($30,850,000). In addition the Company incurred $1,582,000 in transaction related costs. The amounts allocated to the Technology Agreement and the related transaction costs
are included in intangible assets and are being amortized by charges to operating costs and expenses by the straight-line method over the ten-year term of the agreement. The amount allocated to the
rights to obtain an equity interest in Covisint is included in investments and other assets.

RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 AND 2000

Revenue

Total revenues for the three months ended March 31, 2001, increased to approximately $170.3 million compared to $35.0 million in the three
months ended March 31, 2000. In the three months ended March 31 2001, no customer accounted for more than 10% of our revenue and in the three months ended March 31, 2000, two
customers accounted for approximately 16% and 12% of our revenue.

License
revenues for the three months ended March 31, 2001, increased to approximately $69.4 million compared to $27.1 million in the three months ended
March 31, 2000. The increase in license revenues primarily resulted from an increase in new customers who purchased and accepted our productsMarketSite, MarketSet,
Enterprise Buyer, CommerceOne.net, Auction Services, Content Services and Net Market Maker.

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Services revenues increased to approximately $100.9 million for the three months ended March 31, 2001 compared to $7.9 million for the three months ended
March 31, 2000. The increase in services revenues resulted from the acquisition of AppNet, Inc. in September 2000, an increase in consulting services provided at an increased number of
customer sites, as well as an increase in network services revenueprincipally revenue generated from the use of the auction product and subscription fees.

The
percentage of our revenues attributable to professional services increased significantly for three months ended March 31, 2001 compared to the three months ended
March 31, 2000. This increase resulted primarily from our acquisition of AppNet, Inc., a professional services company, in September 2000. Following our acquisition of AppNet, we consolidated
its operations into our Global Services division. Global Services provides services in connection with the formation of e-marketplaces powered by our solutions. The increase in the percentage of our
revenues attributable to professional services resulted in a decline in our overall gross margins because services revenues carry a significantly lower gross margin than license revenues. If this
percentage increases in the future, our gross margins will decline further.

Cost of Revenues

Cost of revenues, consisting of cost of services and cost of licenses, was approximately $104.9 million in the three months ended March 31, 2001,
compared to $11.9 million in the three months ended March 31, 2000.

Cost
of license fees for the three months ended March 31, 2001 was $23.9 million, compared to $1.1 million for the three months ended March 31, 2000. The
increase in cost of license fees resulted primarily from the amortization of the cost of the technology agreement with Covisint. Cost of license fees consists of royalties due to third parties of
approximately $1.8 million and amortization of cost of the Covisint technology agreement of approximately $22.1 million. Cost of license fees also includes software media and duplication
and software documentation costs, although these costs have not been material to date.

Cost
of services, which primarily consists of consulting, customer support and training costs, was $81.0 million compared to $10.8 million in the three months ended
March 31, 2001 and 2000, respectively. The increase in cost of services resulted primarily from an increase in personnel related expenses due to the hiring and training of consulting, support
and training personnel in the United States, Europe and Asia Pacific and personnel related expenses resulting from increased headcount due to the acquisition of AppNet on September 13, 2000. As
of March 31, 2001 the overall number of employees working in services was 1,775, up from 275 at March 31, 2000.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of employee salaries, benefits and commissions, costs of seminars, promotional materials, trade shows and other
sales and marketing programs. Sales and marketing expenses were approximately $59.2 million and $19.2 million for the three months ended March 31, 2001 and 2000, respectively. The
increase was primarily attributable to an overall increase in the number of sales and marketing personnel as well as an increase in marketing related activity. The number of employees engaged in sales
and marketing at March 31, 2001 increased to 684 from 233 at March 31, 2000. The increase in expense was also attributable to increased commission expense, travel related expense
resulting from increased sales activity and allocated overhead expenses. We do not expect that the absolute dollar amount of sales and marketing expenses will increase substantially over the next
three quarters.

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Product Development Expenses

Product development expenses consist primarily of personnel and related costs associated with our product development efforts. Product development expenses
were approximately $29.7 million and $14.2 million, for the three months ended March 31, 2001 and 2000, respectively. The increase in product development expenses was primarily
attributable to personnel and consulting-related expenses to support development of our products. As of March 31, 2001 the overall number of employees engaged in product development increased
to 552 from 310 at March 31, 2000. We believe that investments in product development are essential to our future success and expect that the dollar amount of product development expenses will
increase in future quarters.

General and Administrative Expenses

General and administrative expenses consist primarily of employee salaries and related expenses for executive, administrative and finance personnel. General
and administrative expenses were approximately $24.0 million and $3.7 million for the three months ended March 31, 2001 and 2000, respectively. The increase was primarily
attributable to an increase in personnel related expenses and additional legal costs primarily associated with our portal joint ventures. As of March 31, 2001 the number of employees engaged in
general and administrative functions increased to 608 from 118 at March 31, 2000. We do not expect general and administrative expenses to increase substantially over the next three quarters in
absolute dollars.

Amortization of Deferred Stock Compensation

Amortization of deferred stock compensation totaled approximately $24.3 million and $4.2 million in the three months ended March 31, 2001
and 2000, respectively. The increase in the amortization of deferred stock compensation in the current period is related to the vesting schedule for certain options assumed in the acquisitions of
Mergent and AppNet, as well as certain options granted to former employees of Mergent at exercise prices less than the deemed fair market value on the grant date. The deferred stock compensation is
being amortized over the vesting period of the related options using a graded vesting method. The vesting period of the options range from three to four years.

Amortization of Goodwill and Other Intangible Assets

When an acquisition of a business is accounted for using the purchase method, the amount of the purchase price is allocated to the fair value of tangible and
identified intangible assets acquired, and liabilities assumed. Any excess purchase price is allocated to goodwill. Identified intangibles and goodwill are amortized over the life of the asset
(typically two to five years). Under current accounting guidance, amortization of these intangibles will continue through 2004. In February 2001, the Financial Accounting Standards Board issued
a revision to a previously issued exposure draft covering business combinations proposing new accounting guidance related to goodwill that would change the amortization methodology from a ratable
basis over the useful life of the asset to a periodic assessment of impairment.

Amortization
of goodwill and other intangible assets was $142.8 million for the three months ended March 31, 2001 compared to $21.9 million for the three months
ended March 31, 2000. This amortization of goodwill and other intangible assets resulted from, the acquisitions of Veo Systems, Inc. and CommerceBid during 1999, and Mergent Systems and
AppNet, Inc. during 2000.

We
expect to incur quarterly charges through September 2003 related to amortization of goodwill and other intangible assets, from Veo Systems, Commerce Bid, Mergent Systems,
and AppNet of approximately $142.2 million related to these transactions. After December 2003, we expect to incur quarterly charges of approximately $7.1 million to amortization
of goodwill and other intangible assets,

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from the Veo Systems, Commerce Bid and Mergent Systems acquisitions. In the event of future acquisitions, we anticipate the amortization of goodwill and other intangible assets will increase.

LIQUIDITY AND CAPITAL RESOURCES

We have historically satisfied our cash requirements primarily through issuances of equity securities and lease and debt financing.

Net
cash used in operating activities totaled approximately $89.3 million for the three months ended March 31, 2001 as compared to net cash used in operating activities
of approximately $9.5 million in the three months ended March 31, 2000. Cash used in operating activities for the three months ended March 31, 2001 resulted primarily from the net
loss in the quarter and a decrease in deferred revenue which was partially offset by the amortization of goodwill and other intangible assets associated with the acquisitions of VEO Systems,
CommerceBid, Mergent Systems, AppNet, amortization of the Technology Agreement and amortization of deferred stock compensation. Net cash used in operating activities for the three months ended
March 31, 2000 resulted primarily from the net loss in the quarter and a decrease in deferred revenue partially offset by the amortization of goodwill, other intangible assets and deferred
compensation, and purchased in-process research and development associated with the Mergent Systems acquisition.

Net
cash used in investing activities totaled approximately $15.1 million for the three months ended March 31, 2001 as compared to approximately $41.1 million for
the three months ended March 31, 2000. The use in the current period resulted primarily from the acquisition of capital assets, primarily computer and office equipment. Net cash used in
investing activities during the three months ended March 31, 2000 resulted from the purchase of property and equipment and the acquisition of Mergent Systems.

Net
cash provided by financing activities totaled approximately $19.6 million for the three months ended March 31, 2001 as compared to approximately $22.9 million
provided by financing activities in the three months ended March 31, 2000. The cash provided in the three months ended March 31, 2001 resulted primarily from proceeds from notes payable,
as well as proceeds from the issuance of common stock upon the exercise of employee stock options. The cash provided in the three months ended March 31, 2000 resulted from proceeds from the
issuance of common stock upon the exercise of employee stock options.

As
of March 31, 2001, our principal sources of liquidity included approximately $249.4 million of cash, cash equivalents and short-term investments.

We
believe that our available cash resources will be sufficient to finance our presently anticipated operating losses and working capital expenditure requirements for at least the
next twelve months. Our future liquidity and capital requirements will depend upon numerous factors. The rate of expansion of our operations in response to potential growth opportunities and
competitive pressures will affect our capital requirements as will funding of continued net losses and substantial negative cash flows. Additionally, we may need additional capital to fund
acquisitions of complementary businesses, products and technologies. Our forecast of the period of time through which our financial resources
will be adequate to support operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially as a result of the factors described above. If we
require additional capital resources, we may seek to sell additional equity or debt securities or secure a bank line of credit. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. We cannot assure you that any financing arrangements will be available in amounts or on terms acceptable to us, if at all.

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NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" (Statement 133). Statement 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments
as well as other hedging activities. In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging ActivitiesDeferral of the Effective
Date of FASB Statement No. 133," which amended Statement No. 133 by deferring the effective date to the fiscal year beginning after June 30, 2000. In June 2000, the FASB
issued Statement No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activitiesan Amendment to FASB Statement No. 133" which amended Statement 133
with respect to four specific issues. We were required to adopt Statement 133 as amended, for the year beginning January 1, 2001. The adoption of Statement 133 did not have a material effect on
our consolidated financial position or results of operations.

RISK FACTORS

We Have A Limited Operating History, A History Of Losses And Have Yet To Achieve Profitability.

We incurred net losses of $344.9 million, $63.3 million and $24.6 million for the years ended December 31, 2000, 1999, and 1998,
respectively. We also incurred a loss of $228.5 million for the quarter ended March 31, 2001. As of March 31, 2001, we had an accumulated deficit of $676.0 million.

In
addition, we have a limited operating history that makes it difficult to forecast our future operating results. We will need to generate significant additional revenues to achieve
and maintain profitability in the future. We cannot be certain that we will achieve sufficient revenues for profitability.

The Quarterly Financial Results Of Companies In Our Industry Are Prone To Significant Fluctuations And This Could Cause Our Stock Price To Fall.

We believe that quarter-to-quarter comparisons of our revenues and operating results are not necessarily meaningful, and that such
comparisons may not be accurate indicators of future performance. The operating results of companies in the e-commerce industry have in the past experienced significant
quarter-to-quarter fluctuations which may adversely affect us. As with other companies in this industry, our operating expenses, which include sales and marketing, product
development, general and administrative expenses, cost of revenues, amortization of Technology Agreement and amortization of intangible assets and deferred stock compensation, are based on our
expectations of future revenues and are relatively fixed in the short term. Further, our revenues will decline if our existing service agreements with clients are terminated before engagements can be
completed, or if we (through our Global Services division) are unable to enter into new engagements. If our revenues for a quarter fall below our expectations and we are not able to quickly reduce
spending in response, our operating results for that quarter would be harmed. It is likely that in some future quarter our operating results may be below the expectations of public market analysts and
investors and, as a result, the price of our common stock may fall.

Our Future Success Depends Upon Our Global Trading Web Partners Developing And Operating Successful E-Marketplaces.

We have established strategic relationships with various companies that have licensed our products in order to create e-marketplaces. We cannot
assure you that these companies will be able to implement our products and services effectively, that they will develop and launch e-marketplaces or that buyers and suppliers will
participate in their e-marketplaces. These companies may encounter delays in launching their e-marketplaces, in fully deploying these e-marketplaces and in
achieving supplier participation in their e-marketplaces. Additionally, although our technology architecture is

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designed to support the development of trading communities that can operate with each other, these marketplaces may not in fact operate with each other. If these or any other
e-marketplaces are not successful, our business, operating results and financial condition will suffer.

If Our Joint Product Development Relationships Are Not Successful, Our Business Could Suffer.

We have entered into relationships with various companies to jointly develop new software products. In particular, we entered into agreements with SAP and
Microsoft to jointly develop and market comprehensive software solutions for the e-commerce marketplace. These joint development and
marketing relationships can be difficult to implement and may not succeed for various reasons, including:



We
cannot assure you that these joint development and marketing relationships will lead to successful new products, greater market penetration or increased revenues for us.

If Our Relationship With SAP Terminates Or Is Unsuccessful, Our Revenues and Product Development Efforts May Suffer.

We have an agreement with SAP to jointly develop, market and sell e-commerce solutions. In addition, development of our products has grown
increasingly interdependent with SAP. As a result, we expect a significant portion of our revenue to be derived from this relationship. We cannot assure you that this relationship will continue or be
beneficial to us. If the relationship is unsuccessful or terminates, our revenues may decline and our product development efforts may be hindered.

The Development Of Large, Industry Or Geographically Specific E-Marketplaces Or Exchanges Entails Certain Risk For Us.

Many of the e-marketplaces are intended to be very large and to include many of the most significant companies in the particular industry or region
they address. These marketplaces include Covisint, an automotive e-marketplace; Exostar, an aerospace and defense industry e-marketplace; Trade-Ranger, an energy and
petrochemical e-marketplace; Enporion, a North American utilities e-marketplace; and ForestExpress, a forest products industry e-marketplace. The development of
these large trading exchanges will entail significant risks for us. These risks include:



These
exchanges may not be successfully established or operated. If we are not able to manage the risks associated with the development of these exchanges, our business, results of
operations and financial condition will suffer.

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In addition, the establishment and operation of these exchanges may raise issues under U.S. and foreign antitrust laws. To the extent that U.S. or foreign antitrust regulators take
adverse action or establish rules or regulations with respect to any exchange or business-to-business e-commerce exchanges in general, the establishment and growth
of such exchanges may be delayed. Our revenues may suffer as a result.

General Economic Uncertainty May Reduce Our Revenues.

The revenue growth and profitability of our business depends significantly on the overall demand for Internet-based,
business-to-business e-commerce solutions. We believe that the market for these solutions may be negatively impacted by a number of factors, including:



The
above factors may, in turn, give rise to a number of market trends that may slow our revenue growth, including:



If
the current economic slowdown continues, the effects of the slowdown for e-commerce solutions could adversely affect our business, results of operations and financial
condition.

Pricing Pressures May Lead To Price Reductions Resulting In Lower License Revenues.

Intense competition in the various markets in which we compete may put pressure on us to reduce prices on certain products and services. Moreover, we have
recently changed our pricing model and this change could lead to a decline or delay in sales as our sales force and customers adjust to the new pricing policies. The bundling of products for
promotional purposes or as a long-term pricing strategy by some of our competitors could have the effect over time of significantly reducing the prices that we can charge for our products.
Any such price reductions and resulting lower license revenues could have a material adverse effect on our business and results of operations, if we cannot offset these price reductions with a
corresponding increase in sales volumes or lower spending.

Because Our Industry Is Highly Competitive And Has Low Barriers To Entry, We Cannot Assure You That We Will Be Able To Compete Effectively.

The market for Internet-based, business-to-business e-commerce solutions is extremely competitive. We expect competition to
intensify as current competitors expand their product offerings and new competitors enter the market. Because there are relatively low barriers to entry in the e-commerce market,
competition from other established and emerging companies may develop in the future. In addition, our customers and partners may become competitors in the future. Increased competition is likely to
result in price reductions, lower average sales prices, reduced margins, longer sales cycles and a decrease or loss of our market share, any of which could harm our business, operating results or
financial condition.

Our
competitors include i2, Ariba, Oracle, Vertical Net and PeopleSoft. Certain of these competitors jointly offer business-to-business e-commerce
solutions to potential customers. These joint efforts could intensify the competitive pressure in our market. Many of our competitors have, and new potential competitors may have, more experience
developing Internet-based software and end-to-end

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purchasing solutions, larger technical staffs, larger customer bases, more established distribution channels and customer relationships, greater brand recognition and greater financial, marketing and
other resources than we have. In addition, competitors may be able to develop products and services that are superior to our products and services, that achieve greater customer acceptance or that
have significantly improved functionality as compared to our existing and future products and services. The business-to-business e-commerce solutions offered by
competitors may be perceived by buyers and suppliers as superior to ours.

Our
Global Services division, whose business is largely the former business of AppNet, faces intense and growing competition in the professional services market. Its competitors
include e-business professional services providers, large information technology consulting services providers, e-commerce software and service providers, and Internet access
and service providers. Some of its competitors have longer operating histories and client relationships, greater financial, technical, marketing and public relations resources, larger client bases and
greater brand or name recognition than it has. Global Services' competitors may also be able to respond more quickly to technological developments and changes in clients' needs. In addition, there are
relatively low barriers to entry into its business. Global Services does not own any technologies that preclude or inhibit competitors from entering its markets. Its competitors may independently
develop and patent or copyright technologies that are superior or substantially similar to its technologies.

We Have Experienced Significant Growth In Recent Periods And Failure To Manage This Growth Could Strain Our Management And Other Resources.

Our ability to successfully offer products and services and implement our business plan in a rapidly evolving market requires an effective planning and
management process. Future expansion efforts could be expensive and put a strain on management and resources. We have increased, and plan to continue to increase, the scope of our operations. At
December 31, 2000, we had a total of 3,766 employees, and at December 31, 1999 we had a total of 594 employees. To manage future growth effectively, we must maintain and enhance our
financial and accounting systems and controls, integrate new personnel and manage expanded operations. We may not be able to do this effectively.

We May Not Be Able To Integrate Acquisitions Into Our Business Effectively.

As part of our business strategy, we have made and expect to continue to make acquisitions of businesses that offer complementary products, services and
technologies such as our recent acquisition of AppNet, a provider of end-to-end Internet professional services, and the pending acquisition of Exterprise, Inc., a
provider of platform solutions that enable the rapid development and deployment of new e-commerce applications for e-marketplaces. We have limited experience acquiring
businesses, and may not acquire such businesses on favorable terms or be able to integrate such organizations into our business successfully. Our acquisitions are and will be accompanied by the risks
commonly encountered in acquisitions of businesses, including, among other things:



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Further, our acquisitions and investments may have financial consequences such as:



In
addition, potential companies targeted by us may not have audited financial statements, detailed financial statements or any degree of internal controls. There can be no assurance
that an audit subsequent to any successful completion of an acquisition will not reveal matters of significance, including issues regarding revenues, expenses, liabilities, contingent or otherwise,
technology, products, services or intellectual property. There can be no assurance that we would be successful in overcoming these or any other significant risks and the failure to do so could have a
material adverse effect on our business, financial condition and results of operations.

We May Not Be Able To Hire And Retain Sufficient Sales, Marketing, Services And Technical Personnel That We Need To Succeed Because These Personnel Are Limited In Number And In
High Demand.

If we fail to hire and retain sufficient numbers of sales, marketing, services and technical personnel, our business, operating results and financial condition
will be harmed. Competition for qualified sales, marketing, services and technical personnel is intense as these personnel are in limited supply, and we may not be able to hire and retain sufficient
numbers of such personnel to grow our business. We need to substantially expand our sales operations and marketing efforts, both domestically and internationally, in order to increase market awareness
and sales of our products and the related services that we offer ourselves and jointly with SAP. We will also need to significantly increase our technical and services staff to support the growth of
our business and our increasing commitments to other parties. In particular, we will need to hire a significant number of technical personnel with
various skill sets to establish and operate the large industry specific exchanges. In addition, the market price of our common stock has fluctuated substantially since its initial public offering in
July 1999. Consequently, potential employees may perceive our equity incentives such as stock options as less attractive and current employees whose options are no longer attractively priced
may choose not to remain with our organization. In that case, our ability to attract and retain employees will be adversely affected.

Our Lengthy Sales Cycle Could Cause Delays In Revenue Growth.

The period between our initial contact with a potential customer and the purchase of our products and services is often long and may have delays associated
with the lengthy budgeting and approval process of our customers. Historically, our typical sales cycle has been approximately three to six months and potentially longer in the case of larger,
industry-focused exchanges. This lengthy cycle could have a negative impact on the timing of our revenues, especially our realization of any transaction-based revenues. Because our expenses are
generally relatively fixed in the short term, any shortfall from anticipated revenues could result in significant variations in our operating results from quarter-to-quarter.

We
believe that a customer's decision to purchase our products and services is discretionary, involves a significant commitment of resources, and is influenced by customer budgetary
cycles. To successfully sell our products and services, we generally must educate potential customers regarding the use and benefit of our products and services, which can require significant time and
resources. Many of

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our potential customers are large enterprises that generally take a long time to make significant business decisions. Any such delays could significantly harm our business.

Our Future Revenues Depend Upon Our Ability To Increase Business Service And Transaction Fee Revenue From Our E-Marketplaces.

To date, we have derived a substantial portion of our revenues from licensing our products to customers and providing related implementation, support and
maintenance services. A significant portion of these revenues have come from the recognition of one-time license fees from customers. Although our revenues from business services has grown
recently, our transaction-based revenue has been immaterial to date. Our business model calls for a significant portion of our revenues in the future to be derived from business services and
transaction-based fees. If such revenues do not materialize, our business will suffer.

If Suppliers Do Not Participate In The E-Marketplaces, Our Business May Be Adversely Affected.

E-marketplaces will be attractive to suppliers only if a significant number of buyers are willing to purchase goods and services through the
e-marketplaces. Suppliers incur costs making information relating to their goods and services available on these trading communities and thus must realize additional revenues to justify
their continued participation in these trading communities. Suppliers may not remain in the e-marketplaces or join these communities in sufficient numbers to make them successful.

We Depend Upon Continuing Our Relationship With Third-Party Systems Integrators Who Support Our Solutions.

Our success depends upon the acceptance and successful integration by customers and their suppliers of our products. Our current customers and potential
customers and their related suppliers often rely on third-party systems integrators such as Accenture, Computer Sciences Corporation, PricewaterhouseCoopers and Cap Gemini Ernst & Young and
others to develop, deploy and manage their Internet-based, business-to-business e-commerce platforms and solutions. We and our customers will need to continue to
rely on these systems integrators even as we increase the size of our Global Services division. If large systems integrators fail to continue to support our solution or commit resources to us, if any
of our customers or suppliers are not able to successfully integrate our solution or if we are unable to adequately train our existing systems integration partners, our business, operating results and
financial condition could suffer. In addition, we cannot control the level and quality of service provided by our current and future third-party integrators.

Our Strategy Of Strategic Reselling Through Partners May Not Be Successful.

We have established strategic relationships with companies that resell and distribute our products to our customers. These relationships are new and this
strategy is unproven. We cannot assure you that any of these companies, or those we may enter into a relationship with in the future, will be able to resell our product solution sets to a sufficient
number of customers, or that those customers will purchase our applications and more importantly, connect into e-marketplaces. Further, we may encounter disagreements from time to time
with companies concerning the terms of their reseller agreements. To date, a few of our partners have been unsuccessful in reselling our products. If our current or future strategic partners are not
able to successfully resell our products, our business will suffer.

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Our Executive Officers And Certain Key Personnel Are Critical To Our Business And These Officers And Key Personnel May Not Remain With Us In The Future.

Our future success depends upon the continued service of our executive officers and other key personnel, and none of our current executive officers are bound
by an employment agreement for any specific term. Any of our officers may leave our organization in the future. In particular, the services of Mark Hoffman, our Chief Executive Officer, Robert
Kimmitt, our President, and Dennis Jones, Chief Operating Officer would be difficult to replace. If we lose the services of one or more of our executive officers or key employees, or if one or more of
them decides to join a competitor or otherwise compete directly or indirectly with us, our business, operating results and financial condition would be seriously harmed.

We Intend To Continue To Expand Our International Operations And These Efforts May Not Be Successful In Generating Additional Revenues.

We have generated significant international revenues and are planning to increase our international operations and sales efforts. However, we may not be able
to continue to increase international revenues and the risks of international sales and operations may harm us.

International
business involves inherent risks, and we anticipate the risks that may affect us include:



In
addition, we have only limited experience in marketing, selling, implementing and supporting our products and services in foreign countries. This may be more difficult or take
longer than we anticipate especially due to international problems, such as language barriers or currency exchange issues, and the fact that the Internet infrastructure in such foreign countries may
be less advanced than the Internet infrastructure in the United States.

Our Market May Undergo Rapid Technological Change And This Change May Make Our Products And Services Obsolete Or Cause Us To Incur Substantial Costs To Adapt To These Changes.

Our market is characterized by rapidly changing technology, evolving industry standards and frequent new product announcements. To be successful, we must adapt
to the rapidly changing market by continually improving the performance, features and reliability of our products and services or else our products and services may become obsolete. We could also
incur substantial costs to modify our products, services or infrastructure in order to adapt to these changes. Our business, operating results

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and financial condition could be harmed if we incur significant costs without adequate results, or are unable to adapt rapidly to these changes.

Delays In Shipment Of New And/Or Enhanced Products May Result In Delay Or Loss Of Revenue.

Delays in the commencement of commercial shipments of new products or enhancements to existing products may result in client dissatisfaction and delay or loss
of product revenues. If we are unable, for technological or other reasons, to ship new products or enhancements of existing products in a timely manner in response to changing market conditions or
client requirements, or if new products or new versions of existing products do not achieve market acceptance, our business would be seriously harmed.

If We Release Products Containing Defects, We May Need To Halt Further Shipments Until We Fix The Defects, And Our Business And Reputation May Be Harmed.

Products as complex as ours often contain unknown and undetected errors or performance problems. Many defects are frequently found during the period
immediately following introduction and initial shipment of new products or enhancements to existing products. Although we attempt to resolve all errors that we believe would be considered serious by
our customers before shipment to them, our products are not error-free. These errors or performance problems could result in lost revenues or delays in customer acceptance and would be
detrimental to our business and reputation. In the past, defects in our products have delayed their shipments after those products have been commercially introduced. While these delays have not been
material to date, undetected errors or performance problems in our existing or future products may be discovered in the future and known errors currently considered minor may in the future be
considered serious by our customers. Any delays in releasing new products, due to defects, the need for further enhancements or otherwise, could adversely affect our revenues.

Security Risks Of E-Commerce May Deter Future Use Of Our Products And Services.

A fundamental requirement to conduct Internet-based, business-to-business e-commerce is the secure transmission of
confidential information over public networks. Failure to prevent security breaches of e-marketplaces, or well publicized security breaches affecting the Internet in general, could
significantly harm our business, operating results and financial condition. Advances in computer capabilities, new discoveries in the field of cryptography, or other developments may not be sufficient
to prevent a compromise or breach of the algorithms we use to protect content and transactions on e-marketplaces or proprietary information in our databases. Anyone who is able to
circumvent our security measures could misappropriate proprietary, confidential customer information or cause interruptions in our operations. We may be required to incur significant costs to protect
against security breaches or to alleviate problems caused by breaches. Further, a well-publicized compromise of security could deter people from using the Internet to conduct transactions
that involve transmitting confidential information.

Our
Global Services division provides e-business services that rely on encryption and authentication technology licenses from third parties to provide the security and
authentication needed to safely
transmit confidential information. Unauthorized access, computer viruses, or the accidental or intentional acts of Internet users, current and former employees or others could jeopardize the security
of confidential information and create delays or service interruptions at the Global Services e-business outsourcing centers. Such disruptions or breaches in security could result in
liability and in the loss of existing clients or the deterrence of potential clients.

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Failure To Expand Internet Infrastructure Could Limit Our Future Growth.

The recent growth in Internet traffic has caused frequent periods of decreased performance, and if Internet usage continues to grow rapidly, its infrastructure
may not be able to support these demands and its performance and reliability may decline. If outages or delays on the Internet occur frequently or increase in frequency, overall Internet usage,
including usage of our products and services, could grow more slowly or decline. Our ability to increase the speed and scope of our services to customers is ultimately limited by and depends upon the
speed and reliability of both the Internet and our customers' internal networks. Consequently, the emergence and growth of the market for our services depends upon improvements being made to the
entire Internet as well as to its individual customers' networking infrastructures to alleviate overloading and congestion. If these improvements are not made, the ability of our customers to utilize
our solution will be hindered, and our business, operating results and financial condition may suffer.

Continued Adoption Of The Internet As A Method Of Conducting Business Is Necessary For Our Future Growth.

The market for Internet-based, e-commerce products is relatively new and is evolving rapidly. Our future revenues and any future profits depend
upon the widespread acceptance and use of the Internet as an effective medium of business-to-business commerce, particularly as a medium to perform procurement and fulfillment
functions. The acceptance and use of the Internet for business-to-business commerce could be limited by a number of factors, such as the growth and use of the Internet in
general, the relative ease of conducting business on the Internet, the efficiencies and improvements that conducting commerce on the Internet provides, concerns about transaction security and taxation
of transactions on the Internet. The failure of the Internet to continue to develop as a commercial or business medium of significant numbers of buyers and suppliers to conduct
business-to-business commerce on the Internet would harm our business, operating results and financial condition.

If Our Potential Customers Are Not Willing To Switch To Or Adopt Our E-Commerce Solution, Our Growth And Revenues Will Be Limited.

The failure to generate a large customer base would harm our growth and revenues. This failure could occur for several reasons. Some of our
business-to-business e-commerce competitors charge their customers large fees upon the execution of customer agreements. Businesses that have made substantial
up-front payments to our competitors for e-commerce solutions may be reluctant to replace their current solution and adopt our solution. As a result, our efforts to create a
larger customer base may be more difficult than expected even if it is deemed to offer products and services superior to those of our competitors. Further, because the
business-to-business e-commerce market is new and underdeveloped, potential customers in this market may be confused or uncertain about the relative merits of each
e-commerce solution or which e-commerce solution to adopt, if any. Confusion and uncertainty in the marketplace may inhibit customers from adopting our solution, which could
harm our business, operating results and financial condition.

If Third Parties Claim That We Infringe Upon Their Intellectual Property, Our Ability To Use Certain Technologies And Products Could Be Limited And We May Incur Significant
Costs To Resolve These Claims.

Litigation regarding intellectual property rights is common in the Internet and software industries. We expect third-party infringement claims involving
Internet technologies and software products and services to increase. If an infringement claim is filed against us, we may be prevented from using certain technologies and may incur significant costs
to resolve the claim.

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We have in the past received letters alleging that we are infringing the intellectual property rights of others and we may from time to time encounter disputes over rights and
obligations concerning intellectual property. Although we believe that our intellectual property rights are sufficient to allow us to market our existing products without incurring liability to third
parties, our products and services may be found to infringe on the intellectual property rights of third parties.

In
addition, we have agreed, and may agree in the future, to indemnify customers against claims that our products infringe upon the intellectual property rights of others. We could
incur substantial costs in defending ourselves and our customers against infringement claims. In the event of a claim of infringement, we and our customers may be required to obtain one or more
licenses from third parties. We or our customers may not be able to obtain necessary licenses from third parties at a reasonable cost or at all.

Because The Protection Of Our Proprietary Technology Is Limited, Our Proprietary Technology Could Be Used By Others.

Our success depends, in part, upon our proprietary technology and other intellectual property rights. To date, we have relied primarily on a combination of
copyright, patent, trade secret, and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution to protect our proprietary technology. We have only one issued
patent to date. We may not be able to protect our intellectual property rights adequately in the United States or abroad.

Furthermore,
litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could harm our business, operating results and
financial condition.

We May Not Have Adequate Back-up Systems, And A Disaster Could Damage Our Operations.

We currently do not have a disaster recovery plan in effect and do not have fully redundant systems for service at an alternate site. A disaster could severely
harm our business because our service could be interrupted for an indeterminate length of time. Our operations depend upon our ability to maintain and protect our computer systems in our principal
facilities in Pleasanton and Cupertino, California, which exist on or near known earthquake fault zones. We also depend upon third parties to host most of their e-marketplaces and some of
these third parties are also located in the same earthquake fault zones. Although these systems are designed to be fault tolerant, they are vulnerable to damage from fire, floods, earthquakes, power
loss, telecommunications failures and similar events.

In
addition, our facilities in California are currently subject to electrical blackouts as a consequence of a shortage of available electrical power. Although we do have a backup
generator, which we would be able to utilize to maintain critical functionalities, this generator could fail. Furthermore, in the event these blackouts continue or increase in severity, they could
disrupt the operations of our affected facilities. In connection with the shortage of available power, prices for electricity have risen dramatically, and will likely continue to increase for the
foreseeable future. Such price changes will increase our operating costs, which could in turn hurt our profitability.

In
the event our Global Services division's hardware malfunctions and its back-up systems fail, it may not be able to maintain its standard of service to its customers. If
Global Services was unable to provide e-business outsourcing services at either of its e-business outsourcing centers, it would materially adversely impact its ability to
continue to provide the type of e-business outsourcing services processed through that center.

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We May Have Potential Liability To Clients Who Are Dissatisfied With Our Professional Services.

We design, develop, implement and manage e-commerce solutions that are crucial to the operation of their clients' businesses. Defects in the
solutions they develop could result in delayed or lost revenues, adverse customer reaction and negative publicity or require expensive corrections, any of which could have a material adverse effect on
our business, financial condition or results of operations. Clients who are not satisfied with these services could bring claims against us for substantial damages. Any claims asserted could exceed
the level of our insurance. There can be no assurance that the insurance we carry will continue to be available on economically reasonable terms, or at all. The successful assertion of one or more
large claims that are uninsured, exceed insurance coverage or result in changes to insurance policies, including premium increases, could have a material adverse effect on our business, financial
condition or results of operations.

Additional Government Regulations May Increase Our Costs Of Doing Business.

The laws governing Internet transactions remain largely unsettled. The adoption or modification of laws or regulations relating to the Internet could harm our
business, operating results and financial condition by increasing our costs and administrative burdens. It may take years to determine whether and how existing laws such as those governing antitrust,
intellectual property, privacy, libel, consumer protection and taxation apply to the Internet.

Laws
and regulations directly applicable to communications or commerce over the Internet are becoming more prevalent. We must comply with new regulations in both Europe and the United
States, as well as any other regulations adopted by other countries where we may do business. The growth and development of the market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, as well as new laws governing the taxation of Internet commerce. Compliance with any newly adopted laws may prove difficult and may harm our
business, operating results and financial condition.

Internet Related Stock Prices Are Especially Volatile And This Volatility May Depress Our Stock Price.

The stock market and specifically the stock prices of Internet related companies have been very volatile. This volatility is often not related to the operating
performance of the companies. This broad market volatility and industry volatility may reduce the price of our common stock, without regard to our operating performance. Due to this volatility, the
market price of our common stock could significantly decrease at any time.

In Connection With The Covisint Agreements, We May Not Obtain The Expected Benefits Of The Reorganization Into A Holding Company Structure And We May Incur Substantial Costs.

In connection with the formation of Covisint, we agreed to reorganize into a holding company structure, subject to stockholder approval. Although we expect to
obtain benefits from the reorganization in the form of facilitating the transactions with Covisint, obtaining greater flexibility and efficiency in new ventures and financing and insulation from
liabilities, we may not obtain some or all of the benefits of the reorganization into a holding company. In addition, if market conditions or other circumstances prevent us from expanding and
developing our business, we will incur the costs of the holding company structure without realizing the possible benefits. The holding company structure also may not be successful in insulating the
liabilities of our subsidiaries from each other or from the parent company, particularly if we do not observe corporate formalities or adequately capitalize our subsidiaries. In addition, the proposed
reorganization into a holding company structure will result in costs to us whether the reorganization is completed or not and may distract our management and employees from our business.

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If The Reorganization Into A Holding Company Is Not Completed, We Will Forfeit An Interest In Covisint And Lose The Right To Be Reimbursed For Our Expenses In The
Reorganization.

Under the formation agreement we entered with Ford, General Motors and DaimlerChrysler in connection with the formation of Covisint, Ford and GM agreed to
deposit into escrow an approximately two percent equity interest in Covisint. This equity interest will be released to our holding company if certain conditions are met. If Commerce One stockholders
do not approve the reorganization, the holding company will lose half of the interest in Covisint in escrow. In addition, if we do not mail the proxy statement relating to stockholder approval of the
reorganization within a certain time frame, and Commerce One's stockholders do not approve the reorganization, our holding company will lose the other half of the interest in Covisint in escrow. In
addition, if the reorganization is not completed for any reason by November 8, 2001, we will lose the right to be reimbursed by Ford, GM and DaimlerChysler for up to $1.25 million in
out-of-pocket expenses relating to the reorganization.

Failure To Protect Intellectual Property Rights Or Maintain Rights To Use Licensed Intellectual Property Could Have Adverse Effects.

In connection with its e-business professional services, our Global Services division develops intellectual property for its clients. Global
Services frequently assigns ownership of such intellectual property to the client and retains only a license for limited uses. Issues relating to ownership of and rights to use such intellectual
property can be complicated. Global Services may become involved in disputes that affect
its ability to resell or reuse this intellectual property. In addition, many projects involve the use of material that is confidential or proprietary client information. The successful assertion of
one or more large claims against Global Services by its clients or other third parties could have a material adverse effect on it.

We May Lose Money In Other Companies We Have Invested In.

We make investments in numerous technology companies usually in connection with license contracts and arrangements. In particular, we have invested in various
privately held companies, many of which are still in the start-up or development stage. These investments are inherently risky because the markets for technologies or products they have
under development are typically in the early stages and may never develop. We have incurred losses related to our investments in these companies. Due to the recent economic downturn, particularly in
the United States, and difficulties that may be faced by some of these companies, our investment portfolio could be further impaired.

Provisions of Our Charter Documents and Delaware Law Could Make It More Difficult For a Third Party To Acquire Us.

Our certificate of incorporation and bylaws contain provisions which could make it harder for a third party to acquire us without the consent of our Board of
Directors. Among other things, our Board of Directors has the ability to adopt a shareholder rights plan, or "poison pill," which would significantly dilute the ownership of a hostile acquiror. In
addition, Section 203 of the Delaware General Corporation Law limits business combination transactions with 15% stockholders that have not been approved by the Board of Directors. We also have
entered into agreements with some of our strategic investors that, to an extent, limit their ability to attempt to acquire us without board approval. All of these provisions make it more difficult for
a third party to acquire us without negotiation. These provisions may apply even if the offer may be considered beneficial by some stockholders.

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Product Liability Claims May Be Harmful To Our Reputation And Business.

We may be subject to product liability claims even though our license agreements typically seek to limit our exposure to such claims because the contract
provisions of our license agreements may not be sufficient to preclude all potential claims. Additionally, our general liability insurance may be inadequate to protect us from all liabilities that we
may face. Product liability claims could require us to spend significant time and money litigating these claims or where necessary to pay significant damages. As a result, any claim, whether
successful or not, could harm our reputation, operating results, financial condition and ultimately our business.

Changes In Accounting Standards And In The Way We Charge For Licenses Could Affect Our Future Operating Results.

In October 1997, the American Institute of Certified Public Accountants issued its Statement of Position 97-2, "Software Revenue
Recognition," and later amended its position by its Statement of Position 98-4 and Statement of Position 98-9. Based on our interpretation of the AICPA's position, we believe
our current revenue recognition policies and practices are consistent with Statement of Position 97-2, Statement of Position 98-4 and Statement of Position 98-9.
However, interpretations of these standards continue to be issued by the accounting standard setters. Future interpretations could lead to unanticipated changes in our current revenue recognition
practices, which could materially adversely affect our business, financial condition and operating results.

Accounting
standard setters, including the SEC and the Financial Accounting Standards Board, are also currently reviewing the accounting standards related to business combinations and
other areas. Any changes to these accounting standards or the way these standards are interpreted or applied could require us to change the way we account for any acquisitions we may pursue, or other
aspects of our business, in a manner that could adversely affect our reported financial results.

If We Cannot Meet Our Future Capital Requirements, We may Not Be Able to Fund Our Continued Operations.

We currently anticipate that our available cash resources will be sufficient to meet our anticipated working capital and capital expenditure requirements for
the next twelve months. The actual time period may differ materially from that indicated as a result of a number of factors so that we cannot assure you that such resources will be sufficient for
anticipated or unanticipated working capital and capital expenditure requirements for this period. If adequate funds are not available or are not available on acceptable terms, we may not be able to
take advantage of unanticipated opportunities, develop new products or services, fund our continued operations, or otherwise respond to unanticipated competitive pressures. We cannot assure you that
any additional financing we may need will be available on terms favorable to us, if at all.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The following discusses our exposure to market risk related to changes in interest rates, foreign currency exchange rates and equity prices. This discussion
contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors including those set forth in "Risk Factors" on
page 17.

INTEREST RATE RISK

As of March 31, 2001, we had cash, highly liquid investments and short-term investments of approximately $249.4 million, compared to
$97.0 million as of March 31, 2000. These investments may be subject to interest rate risk and will decrease in value if market interest rates decrease. A hypothetical increase or
decrease in market interest rates by 10 percent from the market interest rates

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at March 31, 2001 would cause the fair market value of our cash and cash equivalents to change by an immaterial amount. Declines in interest rates over time will, however, reduce our interest
income.

FOREIGN CURRENCY EXCHANGE RATE RISK

Substantially all of our revenues recognized to date have been denominated in U.S. dollars, a significant portion of which has been realized outside of the
United States. To the extent that we engage in international sales denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less
competitive in international markets. Although we will continue to monitor our exposure to currency fluctuations, and, when appropriate, may use financial hedging techniques to minimize the effect of
these fluctuations, we cannot assure you that exchange rate fluctuations will not harm our business in the future.

EQUITY PRICE RISK

We do not own any material equity investments. Therefore, we believe we are not currently exposed to any direct equity price risk.

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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in disputes and litigation in the normal course of business. The Company does not believe that the outcome of any of these disputes or
litigation will have a material effect on the Company's financial condition or results of operations. However, an unfavorable outcome of some or all of these matters could have a material effect on
the Company's financial position or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K





|Form |  | Filing Date |  | Event Reported                                                                                                                                                                                                                                     
|---- |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8-K  |  | 4/20/2001   |  | A report on Form 8-K (item 5), which contained a press release announcing financial results for the quarter ended March 31, 2001 and that the Board of Directors of Commerce One, Inc. approved the adoption of a Preferred
Stock Rights Agreement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                    |  | COMMERCE ONE, INC. (Registrant)
|------------------- |  | -------------------------------
|Dated: May 15, 2001 |  |                                
|                    |  | By:                            
|Dated: May 15, 2001 |  |                                
|                    |  | By:                            

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