UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

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(MARK ONE)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

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 000-32979



COMMERCE ONE, INC.



|Delaware                                                       | 94-3392885                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

One Market, Steuart Tower
                                        Suite 1300
San Francisco, CA  94105

(415) 644-8700

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:Common Stock, $0.0001 par value (title of class)



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 such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (subsection 229.405 of this chapter) is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or
any amendment to this Form 10-K.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).  Yes

The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 30, 2003 was $71,855,923 based upon the last sales price
reported for such date on The Nasdaq Stock Market's National Market. For
purposes of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
officers and directors of the registrant, have been excluded in that such
persons may be deemed to be affiliates. This determination is not necessarily
conclusive.

As of March 1, 2003, there were 35,672,032 shares of the registrant's Common
Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant has incorporated by reference into Part III of this
Form 10-K portions of its proxy statement for the registrant's Annual
Meeting of Stockholders currently scheduled to be held on May 26, 2004.







COMMERCE ONE, INC.

ANNUAL REPORT ON FORM 10-K

INDEX

|Part I.       |                                                                                                                 
|------------- | ----------------------------------------------------------------------------------------------------------------
|Item 1.       | Description of Business                                                                                         
|Item 2.       | Description of Property                                                                                         
|Item 3.       | Legal Proceedings                                                                                               
|Item 4.       | Submission of Matters to a Vote of Security Holders                                                             
|Part II.      |                                                                                                                 
|Item 5.       | Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
|Item 6.       | Selected Financial Data                                                                                         
|Item 7.       | Management's Discussion and Analysis of Financial Condition and
Results of Operations                           
|Item 7A.      | Quantitative and Qualitative Disclosure About Market
Risks                                                      
|Item 8.       | Consolidated Financial Statements and Supplementary Data                                                        
|Item 9.       | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure                            
|Item 9A.      | Controls and Procedures                                                                                         
|Part III.     |                                                                                                                 
|Item 10.      | Directors and Executive Officers of the Registrant                                                              
|Item 11.      | Executive Compensation                                                                                          
|Item 12.      | Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters                  
|Item 13.      | Certain Relationships and Related Transactions                                                                  
|Item 14       | Principal Accountant Fees and Services                                                                          
|Part IV.      |                                                                                                                 
|Item 15       | Exhibits, Financial Statement Schedules and Reports on Form 8-
K                                                
|Signatures   
|Exhibit Index



PART I

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements.  These forward-
looking statements include, but are not limited to, the following: management's
belief that our available cash resources will be sufficient to finance our
expected operating losses and working capital requirements through the 2004
calendar year; the expected decrease in cash expenditures as a result of, among
other things, our expense reduction efforts; the expected growth of our business
and related matters; the development and expected growth of a market for the
Commerce One Conductor

Commerce One, Inc., together with Commerce One Operations, Inc. and
their wholly-owned subsidiaries, are hereinafter sometimes referred to as "the
Registrant," "the Company," "Commerce One," "we" and "us."

ITEM 1.	DESCRIPTION OF BUSINESS

OVERVIEW

Commerce One is a technology company that specializes in software and
services that allow companies to conduct business more efficiently through
business process automation and web service solutions.  The goal of our
technology, products, and services is to make business processes and
interactions more efficient and to automate business functions.  From its
inception, Commerce One has focused on providing advanced technologies that
help global businesses collaborate with their partners, customers and
suppliers over the Internet.

Commerce One's newest product offerings-the Commerce One ConductorTM
platform and our existing and planned Composite Process Templates-represent our
next generation of collaborative solutions designed to help our customers
optimize their technology investments and improve the functionality of their
existing software applications.

We were founded as Distrivision in 1994, changed our name to Commerce One in
1997, and re-incorporated in Delaware in 1999.  On July 11, 2001, we
reorganized into a holding company structure.  As part of the
reorganization, the stockholders of the "old" Commerce One (now our wholly-owned
subsidiary Commerce One Operations, Inc.) became stockholders of the "new"
Commerce One. Our worldwide headquarters are located at One Market, Steuart
Tower, Suite 1300, San Francisco, CA 94105. We can be reached at 415.644.8700
and info@commerceone.com.

Commerce One Conductor

The premise of our new Commerce One Conductor

We believe that one of the largest costs in business today, and one of the
greatest opportunities for savings, is the connection, composition and creation
of relationships between unlinked or poorly linked internal and external
software systems.  As business networks expand, the complexity of the
systems and applications that must work together expands even more
rapidly.  For many companies, without an infrastructure to manage and
automate the connectivity between disparate software components, the effort
required to maintain these connections places a tremendous and costly strain on
available information technology resources.  The Commerce One
Conductor



- Demand management: The creation of a process to quickly
collect information about inventory needs from a variety of data sources within
a manufacturer (such as manual purchase requisitions and various internal
software applications) and locate suppliers for such needs, reducing time and
minimizing costs;

- Invoice Management: The integration of disparate procurement applications to
create a process to provide consistent matching of purchase orders, invoices and
receipts for payment authorization within an enterprise, eliminating duplication
and reducing overall costs;



- Contract Compliance Management:  The aggregation of
supplier contract data from disparate software systems within an enterprise,
allowing better compliance with pricing and other supplier terms and reducing
overall procurement expenses.

The Commerce One Conductor

Conductor Registry

Collaborative Interoperability Engine

Conductor Process Manager

Graphical Process Builder

Design Center

Systems Management - The Systems Management component handles end-to-
end message tracking, component monitoring, topology management, installation,
configuration, and initial data loading for participating services.

Commerce One Composite Processes

The Commerce One Conductor

Commerce One Supplier Relationship Management (SRM) Applications

Commerce One SRM applications, consisting of our Commerce One Buy

By working in combination with the Commerce One Conductor

- Sourcing - supports management of requests for proposals and bids from
suppliers, negotiations, supplier performance management and activity
reports.
- Auction - allows forward and reverse auctions for buying and selling goods
and services.
- Contract Management - provides tools for creation, review, negotiation,
award and management
- Supplier Self Service - provides order information, product availability,
confirmations, notices and payments.
- Contract Labor - tracks usage and expenses on contractors.
- Procurement - Enables enterprises to purchase goods from electronic
marketplaces.

We are currently considering selling our SRM applications and are in
discussions with a number of potential buyers.

COMMERCE ONE GLOBAL SERVICES

Commerce One Global Services provides design, planning, analysis, systems
integration, implementation, technical support, and operations services to help
deliver our solutions to global organizations.  Commerce One Global
Services has been integral in deploying the Commerce One Conductor

GLOBAL CUSTOMER SUPPORT

Our technical support group provides day-to-day maintenance and support
programs to help our customers and partners identify, manage and resolve their
issues.  Technical support provides a comprehensive range of services using on-
line access, call tracking and knowledge management systems.

STRATEGIC RELATIONSHIPS

We have entered into several strategic relationships that are integral to
developing our products.  These strategic relationships
involve mostly license agreements with third party software vendors from whom we
license software that is included in our products.The continued
establishment of strategic relationships is a fundamental piece of our strategy
as we evolve our products and services and enter new markets, and the
continuation of our existing relationships is critical to our ability to
continue to deliver our products and services in a cost-effective manner. We
view these arrangements as "strategic" due to the nature of the technology
involved and/or because such agreements may include terms related to joint
marketing efforts. We have strategic relationships with various technology
companies including Contivo, Inc., iWay, and Actional Corporation.

RESEARCH AND DEVELOPMENT

Commerce One continues to invest in researching and developing new products
and services, although our expenditures in this area have declined relative to
prior years as the Company has become smaller and as the result of our overall
efforts to reduce our operating expenses.    During 2003, our total
product-development expenses were $27.1 million.   In 2002 and 2001, product-
development expenses were approximately $76.9 million and $118.2 million,
respectively.  Our product-development team employs the latest software design
principles to guide the development of our products. Our methodology allows us
to exploit the capabilities of the Java programming language and the J2EE
standards to build reusable components and designs. Our design principles and
development practices help reduce the risks inherent in developing complex
systems, and help us design our solutions to meet the needs of our customers and
trading partners.

Key strategic areas in product development in 2003 focused on the development
of our web services-based platform, Commerce One Conductor

In January of 2003, we entered into a relationship with Satyam Computer
Services Limited ("Satyam") whereby we outsource to Satyam certain development
work relating to some of our enterprise applications.  Satyam performs
much of this development work in India.  This relationship has helped
us  maintain our enterprise applications while reducing our operating expenses
through headcount reductions.  If necessary, we believe that we could find
replacement outsourcing capabilities should our relationship with Satyam be
terminated.

During 2004, we plan to continue our focus on our Commerce One
Conductor

SALES AND MARKETING

We market and sell our products and services to organizations through a
combination of direct sales and sales through resellers.  Our physical sales
offices are located in the United States, although we also have sales employees
in the United Kingdom and Germany.   Because our products and services touch
upon multiple departments within an organization, our sales efforts are directed
at multiple decision makers, frequently including the chief financial officer,
chief information officer, chief technology officer, chief procurement officer
and the vice presidents of lines of business.  Our customer base at
December 31, 2003 consisted of international Fortune 1000 companies, as well as
electronic marketplace exchange operators. We target our sales efforts at large
enterprise companies and their suppliers and are focusing our vertical sales
strategies on the manufacturing, logistics, government, and financial services
sectors.

Our indirect sales force consists of resellers and distributors, primarily in
international locations. In addition, we have agreements with some third party
integrators, which require us to pay referral fees to those integrators for
their sale of our products and services.  Thus far, we have not generated
substantial revenues from such referral arrangements.

INTELLECTUAL PROPERTY RIGHTS

Our future success depends in part on our proprietary rights and technology.
We rely on a combination of patent, copyright, trademark and trade secret laws,
employee and third-party nondisclosure agreements and other methods to protect
our proprietary rights. To date, we own five U.S. patents and we have
approximately 64 patent applications pending in the U.S.  We also pursue
patents internationally.  Four of our issued U.S. patents generally relate to
electronic commerce transactions involving the receipt of data and storing of
specifications for the input and output of documents electronically.  These
patents are effective until 2020 and 2021.   The fifth  patent relates generally
to a computer system to compile source code and is effective until 2019.

We have fourteen trademark registrations in the United States. Our registered and unregistered trademarks and service marks
include:  Commerce One, Powering the Business Internet, Commerce One 6.0,
Commerce One Conductor

It may be possible for unauthorized third parties to copy certain portions of
our products or reverse engineer or obtain and use information that we regard as
proprietary. In addition, we have and continue to  license the use of source
code to certain of our applications to customers under limited conditions. 
While our agreements with these customers contain various provisions designed to
protect our intellectual property rights in such code, such access to source
code subjects us further to risks of potential infringement.  In addition,
some of our agreements with our customers and development partners contain
residual clauses regarding confidentiality. These provisions may curtail our
ability to limit access to our intellectual property rights in the future. 
In addition, the laws of some foreign countries do not protect proprietary
rights to the same extent as do the laws of the United States.

We license and will continue to license certain products integral to our
products and services from third parties, including products which are
integrated with our software code and used with our products to provide key
functionality.  We substantially rely upon our license agreements with
WebGain, Progress Software Corporation and Baltimore Technologies Ltd. for
intellectual property that is incorporated into our software products.  While we
believe these agreements are on commercially reasonable terms today, we cannot
be assured that these third party product licenses will continue to be available
to us on commercially reasonable terms or that we will be able to successfully
integrate such third party products into our solutions. Such product licenses
may expose us to increased risks, including risks associated with the
assimilation of new products, claims of infringement resulting from the use of
such third party products, the diversion of resources from the development of
our products, the inability to generate revenues from new products sufficient to
offset associated acquisition costs, and the maintenance of uniform, appealing
products. The inability to maintain any of these licenses could result in delays
in development or services until equivalent products can be identified, licensed
and integrated. Any such delays could harm our business, operating results and
financial condition.

COMPETITION

Our industry remains intensely competitive and is changing rapidly.  Our
primary source of competition comes from independent vendors of web-services
based software solutions, as well as vendors of procurement, sourcing and
related software applications and services.  We also face indirect
competition from the internal development efforts of existing and potential
customers.  Our current and potential competitors include, without
limitation:

Competitors to our SRM Products

- Current B2B enterprise software vendors (i2 Technologies, Ariba, Inc.,
BroadVision, Inc.) which offer software applications to automate specific
business processes.  Many of these companies have announced that they have
developed or will develop more connectivity features to allow cross-enterprise
business processes.

Competitors to our Conductor Platform and/or Composite Applications

- Enterprise Applications Integrators (EAI) vendors such as Vitria Technology,
Inc., Tibco Software, Inc., webMethods and SeeBeyond Technology Corporation.
These companies have traditionally provided integration software to connect
applications using proprietary adapters within and across enterprises and are
now moving to add standard web services and business process management
capabilities.
- Application Platform vendors, such as IBM/ Websphere,  BEA Systems, Inc. and
Microsoft.  These vendors have traditionally provided application development
platforms and are now adding integration and process management capabilities to
their platforms.
- Enterprise Resource Planning (ERP) vendors, such as SAP AG and Oracle
Corporation, which are providing platforms in addition to their application
suites.
- Pure Business Process Management (BPM) vendors, which include vendors who
traditionally provided workflow software, as well as relatively newer entrants
into the area.  Companies in this pure BPM group include Filenet, Staffware,
Intalio, Savvion, HandySoft, Intellicorp, Metastorm, and Versata.

In addition, several industry analysts are promoting composite applications
as a key technology trend.  As a result, several major vendors have begun
promoting wide varieties of composite applications capabilities.

Commerce One will face competition from the above vendors, some of which have
significantly greater resources, to establish itself in the web services and
composite applications market and will need to overcome customers' reluctance to
adopt new technology.

We believe that the principal competitive factors for web services and
composite applications solutions are breadth and scope of solution, ease of
interoperability with new and existing information technology systems, ease-of-
implementation, and total cost of ownership. We believe we compete favorably
with our competitors in these areas.

EMPLOYEES

As of December 31, 2003, we had 116 full-time employees, 33 of whom were
engaged in product development, 15 in sales and marketing, 44 in professional
services and 24 in general administration.  Our future success depends, in
part, on our continuing ability to attract, train and retain highly qualified
technical, sales and managerial personnel. We cannot guarantee that we will be
able to recruit and retain sufficient qualified personnel. None of our employees
are represented by a labor union, and we are not a party to any collective
bargaining agreements. We have not experienced any work stoppages and consider
our relations with our employees to be good.

AVAILABLE INFORMATION

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to reports filed pursuant to Section 13(a)
and 15(d) of the Securities Exchange Act of 1934, as amended, are available on
the Securities Exchange Commission website (http://www.sec.gov) or at the SEC's
Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.  For
information on the operation of the Public Reference Room, please call the SEC
at 1-800-SEC-0330.  You may also obtain copies of reports filed with the SEC,
free of charge, on our website at www.commerceone.com, as soon as reasonably
practicable after such reports are electronically filed with or furnished to the
SEC.

RISK FACTORS

You should carefully consider the risks described below before making a
decision to invest in our common stock. The risks and uncertainties described
below are not the only ones facing Commerce One. Additional risks and
uncertainties not presently known to us or that we do not currently believe are
important to an investor may also harm our business operations. If any of the
events, contingencies, circumstances or conditions described in the following
risks actually occur, our business, financial condition or our results of
operations could be seriously harmed. If that occurs, the trading price of our
common stock could decline, and you may lose part or all of your investment.

If we are not able to raise additional capital, we encounter larger
than anticipated expenses, or our revenues do not meet our expectations, our
cash position may not be sufficient to sustain our business operations through
2004.

As of December 31, 2003, we had approximately $10.1 million in cash
and cash equivalents, restricted cash and investments.  Of this amount,
approximately $7.0 million represented unrestricted cash and short-term
investments that we can use to fund operations.  The final cash balance for 2003
did not include $7.7 million of cash payments received on January 2, 2004.
Because our business operations currently use more cash than is generated, the
cash used each quarter substantially reduces the cash available to fund our
continuing operations and future capital requirements.  Although we expect that
our cash outflows will decrease as a result of our continuing expense reduction
efforts, we will continue to have significant negative cash flows from
operations.

In October 2003, we announced that our license revenues for the quarter ended
September 30, 2003 were approximately 70% less than our initial forecasts.  In
response to this revenue shortfall, we took additional steps to reduce our
operational expenses, including further reductions in force.  We believe that
these actions, along with our planned cash collections and other expected cash
inflows, will allow us to fund our operations through 2004.  However, if we
encounter unexpected expenses, we do not receive our expected cash collections
or other cash inflows, or our revenues do not meet our expectations, we may not
have sufficient funds to sustain our operations through the 2004 calendar year.

We believe that we will need to increase our revenues and/or raise additional
capital to meet our liquidity and capital needs beyond 2004.  We may seek to
raise additional capital through, among other things, potential asset sales,
additional equity or debt financings, or some combination of these.  The current
unfavorable market for equity or debt financing makes it increasingly difficult
to raise additional funding.  In addition, the rights of our Series B Preferred
Stock holder, BayStar, may discourage other potential investors and diminish our
ability to obtain additional financing.  If our revenues do not meet our
expectations, we are unable to obtain additional financing, or we encounter
expenses or cash outlays that are larger than expected, our remaining cash
reserves may not be sufficient to sustain our operations through 2004 or beyond.
In addition, our Series B Preferred Stock will become redeemable on July 5,
2004 unless we are able to have declared effective and maintain the
effectiveness of a registration statement covering the resale of underlying
common stock.  If BayStar chooses to exercise such redemption right at such
time, we will not have sufficient cash to cover such redemption.  If we do not
have sufficient cash to fund our operations, we will need to pursue other
alternatives such as the sale of some or all of our assets, dramatically
reducing or discontinuing some or all of our operations or filing for bankruptcy
protection.  If we do file for bankruptcy protection, there can be no assurance
that we can effectively reorganize under Chapter 11 of the Bankruptcy Code or
that we would be able to earn sufficient proceeds from a liquidation under
Chapter 7 of the Bankruptcy Code to pay all of our creditors or provide any
proceeds to our stockholders.

We may not be able to raise capital by selling corporate assets and
such sale, if it occurs, may negatively impact our operating results in the
short term.

In October 2003, we announced that we were evaluating various options
for raising additional capital, including the possible sale of some or all of
our business or assets.  Toward that end, we have retained investment bank
Broadview International LLC to assist in exploring our strategic alternatives.
We are currently evaluating offers to purchase our SRM applications
in order to provide necessary additional working capital, and are in discussions
with a number of potential buyers. However, there are significant
uncertainties surrounding our ability to raise money by selling corporate
assets.  We may not find a buyer willing to purchase assets on reasonable terms,
if at all.  Further, selling some or all of our business could be a lengthy
process.  An asset sale may also require shareholder approval, which may delay
the process and which might not be granted.  Even if we are able to obtain any
necessary shareholder approval and close a sale quickly enough to sustain our
ongoing operations, we cannot assure you that we will be able to obtain a
sufficient cash payment from such sale(s) to sustain our operations on an
ongoing basis.  For example, we have in the past licensed source code to some of
our customers of our products, primarily our SRM products, on a limited basis.
While these license agreements provide for limited use of such code and have
provided us with short-term revenue, such licenses may diminish the potential
value of such products in a potential asset sale.  If it becomes necessary to
raise money through the sale of corporate assets, and we cannot do so quickly
enough or obtain any required shareholder approval and/or cannot obtain
sufficient funds as a result of such sales, our ability to fund our operations
on an ongoing basis could be severely damaged.

In addition, even if we are able to close a sale of our SRM applications, the
sale may have a negative impact on our operating results in the short term.
Thus far, the substantial majority of our license revenue and support revenues
in 2003 related to our SRM products.  As a result, although the sale of the SRM
assets could generate cash for us and result in some cost savings in the future,
it would significantly diminish our revenues for the remainder of 2004.  If we
are unable to replace these revenues with new license and support revenues
relating to our Commerce One Conductor platform, our operating results and
financial condition would be severely harmed.

Our continued viability largely depends upon the success of our new
Commerce One Conductor

As our business model has moved toward enterprise software solutions
(i.e., sales to companies for their own internal use) and away from our
historical focus on electronic marketplaces, we have developed a new composite
application platform, called Commerce One Conductor.  The Commerce One Conductor
platform was released for general availability in March of 2003.  The Commerce
One Conductor platform and related solutions are the primary focus of Commerce
One's development and sales efforts, and our continued viability as a company
depends upon our ability to release and deliver the products in a timely fashion
and to establish a market for this relatively new category of products which may
be perceived to depart from Commerce One's historical focus.  Given the ongoing
downturn in enterprise technology spending, the complexity and youth of our new
technology, and the intense competition among enterprise software providers, our
ability to generate a significant and sustainable market demand for our new
solutions is uncertain.  We also face concern from existing and potential
customers as to our ongoing viability and our ability to provide long-term
product support, which further inhibits our ability to sell our products.
During 2003, revenues from sales of the Commerce One Conductor platform
represented a relatively small percentage of our license revenues, and we have
continued to experience long sales cycles.  In addition, we announced that our
license revenues for the quarter ended September 30, 2003 were approximately 70%
less than our initial forecasts, largely due to lower than anticipated sales of
the Commerce One Conductor platform, and in the quarter ended December 30, 2003,
license revenue related to the Commerce One Conductor platform represented a
relatively small percentage of our overall revenues.  If we do not sell a
significant number of licenses for our new Commerce One Conductor platform in
the future, our revenues, and hence our business, will be significantly
harmed.

In addition, we depend on strategic relationships with certain technology
providers for important functionality in our Commerce One Conductor platform.
Some of these technology providers are relatively new and have limited operating
histories.  While our agreements with these providers contain various provisions
protecting Commerce One's interests, there can be no guarantee that this
technology will remain available to us on reasonable terms, if at all, in the
long term.  If we cannot maintain these relationships on reasonable terms, it
may be difficult or costly to replace such technology, and our revenues and
hence our business may be harmed.

If we breach certain covenants we have made to BayStar in connection
with their purchase of Series B Preferred Stock, including without limitation
having our registration statement on Form S-3 declared effective on or before
July 4, 2004, or upon a change of control, we may be required to redeem the
Series B Preferred Stock they have purchased which we may not have the cash or
liquidity to do.

If we do not timely convert shares of Series B Preferred Stock into
common stock when requested, timely file, have declared effective and maintain
the effectiveness of the registration statement on Form S-3 filed on August 22,
2003 covering the resale of the common stock underlying the Series B Preferred
Stock, maintain the listing of our common stock on the Nasdaq National Market or
the Nasdaq SmallCap Market, or if we consummate a change of control (including a
merger, acquisition or sale of all or substantially all of our assets), then
BayStar may be able to require us to redeem all of the Series B Preferred Stock
at a redemption price equal to the greater of 120% of the original purchase
price plus any accrued and unpaid dividends or the value of the Series B
Preferred Stock on an as-converted-to-common stock basis based on the closing
bid price of our common stock on the day prior to the default or change of
control.  We initially filed our registration statement on Form S-3 on August
22, 2003, have since amended the filing in response to various comments from the
SEC, and the registration statement has not yet been declared effective as of
the time of this filing.   The registration statement is subject to additional
comments from the SEC and ensuring that it becomes effective is not entirely
within our control.  If the registration statement does not become effective on
or prior to July 4, 2004, then Baystar may exercise the redemption right
described above.  If Baystar chooses to exercise such right at such time, we
will not have the cash or liquidity to redeem such stock and our ability to fund
our ongoing operations could be severely damaged.  Further, in the event we were
to consummate a transaction that constitutes a change of control, BayStar may
choose to require us to redeem its shares at a premium as described above.  If
we do not have sufficient cash to fund our operations due to BayStar's exercise
of its redemption right, we will need to pursue other alternatives such as the
sale of some or all of our assets, dramatically reducing or discontinuing some
or all of our operations or filing for bankruptcy protection.  If we do file for
bankruptcy protection, there can be no assurance that we can effectively
reorganize under Chapter 11 of the Bankruptcy Code or that we would be able to
earn sufficient proceeds from a liquidation under Chapter 7 of the Bankruptcy
Code to pay all of our creditors or provide any proceeds to our
stockholders.

Our executive officers and certain key personnel are critical to our
business and if one or more of these officers and key personnel leave us, we may
not be able to compete effectively and meet our operating goals.

Our future success depends upon the continued service of our
executive officers and other key personnel, and none of these individuals is
bound by an employment agreement for any specific term.  In addition, our
ability to retain key personnel could be impacted by our various cost-cutting
measures and continued workforce reductions.  Any of these officers or employees
may leave our organization in the future.  In particular, the services of Mark
Hoffman, our Chairman of the Board, Chief Executive Officer and President would
be difficult to replace.  In addition, our Chief Financial Officer, Charles
Boynton, will be resigning from his position effective March 31, 2004.  Locating
and educating a new CFO will require management time and resources and may
disrupt our operations.  We may also have difficulty executing our CFO
transition plan successfully as a result of new regulatory requirements mandated
by the Sarbanes Oxley Act.  In particular, the SEC's new rules related to
internal controls over financial reporting and management's assessment of the
effectiveness of these controls may be more difficult to comply with.  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 may be seriously harmed.

Our limited operating history and a history of losses may limit our
ability to raise additional capital, sell our products and services and fund
continued operations.

We have not been profitable in our recent history and as of December 31,
2003, we had an accumulated deficit of $3.7 billion.  We will need to generate
significant additional revenues to avoid losses in the future.  If we do not
decrease our losses in the future, our business may suffer in a number of ways,
including increased difficulties in obtaining additional capital, selling our
products and services (since nearly all customers require future support) and
funding our continued operations.

The current downturn in general economic conditions and current global
unrest may decrease our revenues.

The current recession and uncertainty in global economic and market
conditions have decreased and may continue to decrease demand for our products
and services.  If the current economic downturn continues or worsens, our
business, financial condition and results of operations could be seriously
harmed.  In addition, the September 11, 2001 terrorist attacks in the United
States, the subsequent U.S. military operations abroad, and potential future
related events may adversely affect our business.  Primarily as a result of
economic conditions, spending on enterprise software has been dramatically
reduced across industries.  As a result, we have experienced decreased demand
and may continue to experience decreased demand for our products and services.
In addition, the economic downturn has made it increasingly difficult for
companies, in particular technology companies, to raise capital.  If general
economic conditions do not improve, we may not be able sufficiently increase
revenues or raise capital to continue operations, regardless of our operating
expense reductions and the introduction of new products.

Fluctuations in our quarterly results may cause our stock price to
decline and make it difficult for us to forecast quarterly revenue and operating
results.

Our quarterly results have fluctuated in the past and may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside of our control. It is likely that our results in one or more future
quarters may be below the expectations of securities analysts and investors. In
that event, the trading price of our common stock almost certainly would
decline.

We are required by generally accepted accounting principles to adjust the
warrant liability reflected in our balance sheet at December 31, 2003, to fair
value at the end of each quarter and record a charge or a benefit in our
statement of operations for the amount of the adjustment. The fair value of our
warrant liability could fluctuate significantly based on changes in the value of
our common stock and other factors which our outside of our control, which could
result in significant fluctuations to our quarterly results.

Additional factors that may affect our quarterly results include the
following:

- the timing of introductions or enhancements of our
products and services or our competitors;

- the demand for and the price that customers are willing
to pay for our new and unproven products and related services, particularly the
Commerce One Conductor platform and related product offerings that are the
primary focus of our future sales efforts;

- market acceptance of our new products;













- our sales cycles are relatively long, often six months or
longer, and may result from delays in the budgeting cycles of our customers that
are difficult to predict;

- nonrenewal of our maintenance agreements, which generally
automatically renew for one-year terms unless earlier terminated by either party
upon 90-days notice;

- product life cycles;

- changes in strategy, such as our change in focus from our
SRM and electronic marketplace products to our new Commerce One Conductor
platform;

- seasonal trends;

- the mix of distribution channels through which our
products are sold;

- the mix of international and domestic sales;





- changes in the level of operating expenses to support
projected growth.

Due to these and other factors, it is difficult to
accurately forecast our quarterly revenues and operating results. We believe
that period-to-period comparisons of our operating results may not be meaningful
and you should not rely upon them as any indication of our future performance.

Our restructuring initiatives and divestitures may not reduce our
operating expenses sufficiently and could result in business distractions or
negative market perception that reduce our ability to close revenue
transactions.

We implemented restructuring plans throughout 2002 and 2003.  The
primary objectives of our restructuring plans have been to reduce our operating
expenses and to focus on new products.  We also implemented certain strategic
initiatives designed to strengthen our operations.  These plans include without
limitation, reductions in our workforce and facilities, improved alignment of
our organization around our core business objectives and realignment of our
sales force, professional services and general and administrative functions.
Workforce reductions temporarily impact our remaining employees, including those
directly responsible for sales or services, which may affect their productivity
and hence, our future revenues.  In addition, the failure to retain and
effectively manage remaining employees could increase our costs and hurt our
development and sales efforts.

In addition, in early 2003, we divested certain services operations,
including CommerceOne.net, our hosted services offering, and we may engage in
similar divestitures in the future.  While we believe that such divestitures
benefit us by reducing overall costs and allowing us to focus on our core
business objectives, such divestitures reduce overall revenue in the short term.
Additionally, divestitures could cause disruption for our remaining and
transitioning employees, reducing overall productivity.

Workforce reductions, strategy changes and divestitures also can affect our
ability to close revenue transactions with our customers and prospects.  For
example, as we have shifted our focus to our new Commerce One
Conductor

Sales of a substantial number of shares of our common stock by certain
of our stockholders could cause the market price of our common stock to decline
and make it more difficult for us to raise financing.

A substantial percentage of our outstanding common stock is held by
SAP AG and Ford Motor Company.  SAP beneficially owns approximately 20% of our
outstanding common stock and is currently subject to only limited restrictions
on its ability to sell its shares. As of December 7, 2003, Ford Motor Company
owned 1,440,000 shares of our common stock, or approximately 4.9% of our
outstanding common stock.  The contractual restrictions on the ability of Ford
to sell its shares terminated on December 8, 2003.  The contractual restrictions
on SAP's ability to sell its shares effectively prohibit SAP from transferring
more than 50% of its shares in open market transactions prior to June 28, 2004,
and any transfers it may make are subject to certain other limitations on open
market sales and transfers to persons who after the transfer will hold in excess
of 10% of our voting power.  In addition, these stockholders possess certain
registration rights that will, in certain circumstances, require us to register
these stockholders' resale of their shares.

In July 2003, we issued 100,000 shares of Series B Preferred Stock to BayStar
that are initially convertible into approximately 4,297,748 shares of our common
stock.  The number of shares of common stock issuable upon conversion of the
Series B Preferred Stock may increase over time pursuant to the dividend
payments.  We also issued to BayStar warrants to purchase an additional
2,209,945 shares of our common stock.  We filed a registration statement on Form
S-3 with the SEC on August 22, 2003 to register the resale of the common stock
issuable upon conversion and exercise of these securities.  Once this
registration statement is declared effective by the SEC, BayStar may decide to
convert some or all of the Series B Preferred Stock into common stock, and such
common stock would be freely tradable in the public market.  In addition, in
December, we issued secured promissory notes to ComVest Investment Partners II
LLC and DCC Ventures, LLC that are potentially convertible into a maximum of
4,085,346 shares of our common stock.  In connection with this transaction, we
also issued warrants to purchase an aggregate of 2,568,494 shares of our common
stock to ComVest and DCC Ventures which they have fully exercised.
ComVest and DCC Ventures possess certain registration rights that will require
us to register the resale of these shares
of common stock underlying the notes and warrants.
Furthermore, SAP has exercised its right to have the resale of 5,254,431 shares
of our common stock included in this registration statement, which SAP could
sell subject to the contractual limitations described above.  As a result, these
stockholders may be able to sell a significant number of shares of our common
stock on the open market in a short period of time.  These sales, or the
perception that these sales may occur, could cause the market price of our
common stock to decline and could make it more difficult for us to raise equity
financing in the future.

If we ever liquidate Commerce One, outstanding shares of Series B
Preferred Stock will receive a liquidation preference over our common stock and,
if proceeds are not sufficient to pay the entire liquidation preference, holders
of common stock may not receive anything.

If we ever liquidate Commerce One, the outstanding shares of
Series B Preferred Stock will receive a liquidation preference over our common
stock.  The Series B Preferred Stock liquidation preference per share is equal
to the greater of the initial purchase price plus any accrued and unpaid
dividends (or an aggregate of $10 million plus any accrued and unpaid dividends
based on the current outstanding shares of Series B Preferred Stock) or the
value of the Series B Preferred Stock on an as converted to common stock basis
plus any accrued and unpaid dividends.  The liquidation preference reduces the
amount of proceeds available to the holders of our common stock in a liquidation
of the company's assets and, if the proceeds are not sufficient to pay the
entire liquidation preference, there may not be any proceeds available for the
holders of common stock following such liquidation.

Certain of our assets used to secure our recently issued promissory
notes to ComVest and DCC could be jeopardized if we are unable to pay the notes
in accordance with their terms.

On December 31, 2003 we issued secured promissory notes in the
aggregate principal amount of $5 million to ComVest Investment Partners II LLC
and DCC Ventures, LLC in a private placement with a maturity date of March 31,
2005.  The notes are secured by certain assets related to our SRM business and
certain promissory notes issued to us by eScout LLC in the aggregate principal
amount of $2,000,182.  We may prepay the notes at any time without penalty or
premium.  The notes must be prepaid in the event that we sell our SRM business,
the assets related to our SRM business and/or the promissory notes issued to us
by eScout or raise additional debt or equity financing.  The notes will mature
early if we are acquired, sell all or substantially all of our assets, undergo a
change of control, or one business day prior to the date on which we pay all or
substantially all amounts outstanding under a promissory note payable to
PeopleSoft.  In the event we fail to pay the notes in accordance with their
terms upon maturity or upon an event of default, ComVest and DCC Ventures may
convert their notes into shares of our common stock equal to the number obtained
by dividing the then-outstanding principal amount of such notes, together with
all accrued but unpaid interest thereon, by the conversion price, subject to
adjustment for stock splits, stock dividends, reclassifications and the like.
The conversion price per share is equal to 90% of the average closing bid price
for the 5 trading days immediately following the later of the date of such
default and the date of issuance of any press release announcing such default.

Managing operations in a changing environment could strain our
management and cause our operations to suffer.

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.  In 1999 and 2000, we experienced significant growth in
our workforce and expenditures, followed by a significant decline in 2001, 2002
and the first nine months of 2003.  These changes place a strain on our
managerial resources and make planning more difficult.  While we manage these
rapid changes, we must also compete effectively and manage our operations by
maintaining and enhancing our financial and accounting systems and controls,
integrating new and existing personnel and managing operations with fewer
personnel.  If we cannot effectively manage and plan in this rapidly changing
environment, our operations will suffer.

Our real estate settlements could be jeopardized if we seek bankruptcy
protection, or if we are forced into an involuntary bankruptcy proceeding by
creditors.

We have entered into a number of real estate settlement agreements
pursuant to which we paid cash and stock to reduce our long-term lease
obligations.  All of those agreements contain provisions that invalidate the
settlements in the event we seek bankruptcy protection and/or are involuntarily
forced into a bankruptcy proceeding within a period of time after the agreements
were signed or payments were made.  This period is generally 90 days after
signing the agreements, but in some agreements in which future payments are
required, the potential invalidation period continues until those future
payments are made.  In those situations, our pre-settlement lease obligations
would remain in effect and Commerce One would be entitled to recover or receive
credit for the consideration it paid for the settlement(s) at issue.  If some or
all of our real estate settlements were to become ineffective by virtue of a
bankruptcy proceeding, our ability to emerge from bankruptcy and continue as a
viable enterprise could be severely damaged.

We may experience difficulty collecting on our accounts due to the
nature of some of our customers.

Some of our customers are small emerging growth companies with
limited credit operating histories that are operating at a loss and have limited
access to capital.  With the significant downturn in the economy and uncertainty
relating to the prospects for near-term economic growth, some of these customers
represent a credit risk.  In addition, a small number of our customers
historically have accounted for a significant amount of our accounts receivable.
At December 31, 2003, two customers, Exostar and Covisint, accounted for 13% and
76% of our net accounts receivable balance, respectively.  On December 30, 2003,
we entered into a Settlement Agreement with Covisint relating to such payment
dispute pursuant to which Covisint paid us the sum of $4,650,000 on January 2,
2004. If our other customers experience financial difficulties or are otherwise
unable to pay us amounts owed, we may have difficulty collecting on our accounts
receivable and may need to institute similar litigation in an attempt to collect
such amounts.  Even if we instituted such litigation, we cannot be assured that
we would collect such amounts.  If we are unable to collect our accounts
receivable, our cash position would suffer materially.

If we are not able to retain essential personnel, we may not be able to
meet our operational goals.

Our future performance depends on the continued service of certain
key employees.  Our ability to retain key employees is becoming more difficult
given the decline in our business, the drop in our stock price, our prolonged
and ongoing cost-cutting measures, and overall employee concerns about our
ongoing viability.  This is of particular concern in our Engineering group,
where a relatively small number of employees have control over, and knowledge
of, our source code and product information.  To the extent we replace any
employees who resign, those new hires may require extensive training before they
achieve effective levels of productivity.  If we fail to retain our key
employees or to attract other highly qualified personnel, our business will
suffer.

Our significant reductions in our professional services group may
hinder our ability to sell our products and may cause us to depend more heavily
upon creating relationships with third-party systems integrators to support our
new solutions.

Our success depends upon the acceptance and successful implementation
and integration by our customers of our products.  We have implemented
reductions in our workforce throughout 2001, 2002 and 2003, which included
significant reductions in our professional services headcount.  While we believe
that these actions were necessary in order to reduce operating expenses and to
realign our organization to focus on our core products, these reductions may be
perceived negatively by potential customers who require integration services in
connection with the purchase of a product license and may therefore hinder our
ability to sell our products.  As a result of these downsizings, and/or due to
existing relationships between our customers and third party systems
integrators, our current and potential customers often rely on third-party
systems integrators such as Accenture, EDS, Computer Sciences Corporation, IBM
and others to develop, deploy and manage their composite management platforms
and solutions.  We, and our customers, will need to continue to rely on these
systems integrators, particularly in light of the recent downsizings of our
Global Services division, which competes with these systems integrators to some
extent.  Thus far, systems integrators are largely unfamiliar with our Commerce
One Conductor

In addition, we cannot control the level and quality of service provided by
our current and future third-party integrators.  While our agreements with those
integrators normally include provisions designed to ensure quality, those
provisions are often difficult to enforce and cannot guarantee acceptable
quality in all cases.  If our customers experience quality problems arising from
installation of our software by these third parties, we may experience negative
customer reactions, adverse publicity, or even legal claims.  If such problems
are significant, our reputation, financial condition and ultimately our business
may be harmed.

Our services revenue and operating results will suffer if we are not
able to maintain our prices and utilization rates for our professional services,
as well as our pricing for our support and maintenance services.

The rates we are able to charge for our professional services and the
utilization, or chargeability, of our professional services organization are a
large component of our overall gross margin, and therefore our operating
results.  Accordingly, if we are not able to maintain the rates we charge for
our professional services or an appropriate utilization rate for our
professionals, we will not be able to sustain our gross margin and our operating
results will suffer.  When we introduced our new Commerce One
Conductor

We also have licensed source code to certain customers for some of our
products for limited purposes.  Although those source code license sales have
generated short-term revenue, in the longer term they will reduce our services
revenue stream because those customers have less need for customer support or
professional services.  If, over the long term, we cannot generate enough
license sales to offset this lost services revenue, our business will
suffer.

In addition, maintenance and support services represent a significant
component of our services revenues.  As we have shifted our focus from our prior
SRM and marketsite-focused products, certain of our maintenance and support
customers have reduced, cancelled or otherwise renegotiated terms for the
provision of our support and maintenance services for such products.  As a
result, some of these customers have reduced these services-which has reduced
our overall support and maintenance revenues-and/or migrated to shorter-term
payments, which affects the stability of those revenues.  If we are unable to
replace this revenue with support and maintenance revenue from our Commerce One
Conductor

Our strategy of outsourcing development and maintenance of certain
products to an offshore partner may not achieve the desired cost reductions or
other expected results and could reduce the quality of our products or increase
the chance of infringement of our intellectual property rights.

In the course of restructuring initiatives during 2002 and in early
2003, we reduced our engineering headcount significantly.  In early 2003, we
entered into an outsourcing agreement with Satyam Computer Services Limited, a
software development firm located in India, to perform product development work
for certain of our software applications.  Although we have significantly scaled
back our product development efforts, we may continue to use Satyam occasionally
in the future.  While we have implemented various quality control measures in
our outsourcing agreement with Satyam, we cannot guarantee the level and quality
of service it will provide.  If Satyam does not provide the expected results,
our customers may experience quality problems and we may experience negative
customer reaction, adverse publicity, or even legal claims.  If such problems
are significant, our reputation, financial condition and ultimately our business
may be harmed.

Additionally, providing broad access to our software code and related
intellectual property to an offshore entity increases the opportunity for
infringement of the patent, trademark, copyright and trade secret rights in our
software products.  This is particularly true as a significant portion of the
development work is performed in India, where intellectual property protections
differ from those in the United States and may be difficult to enforce.  If our
intellectual property rights are infringed, we may need to engage in costly
litigation efforts to enforce such rights.  As a result, our financial condition
and business may be substantially harmed.

Our stock could be de-listed by the Nasdaq Stock Market's National
Market, which could cause a decline in our stock price, hinder our stockholders'
ability to trade their shares and undermine our ability to raise capital.

Our stock price has fallen substantially during each of the past
three years, and traded below one dollar per share on a number of trading days
during the last two months of 2003.  It is possible that our stock price will
continue to decline and trade below one dollar per share in the future.  If our
stock were to trade below one dollar for thirty consecutive trading days, and
did not trade at or above one dollar per share for ten consecutive trading days
during the following 180 calendar days, our stock could be de-listed by the
Nasdaq Stock Market's National Market (the Nasdaq National Market).  In
addition, we may be de-listed if we do not maintain the other minimum continued
listing requirements of the Nasdaq National Market including if, for example, we
do not maintain stockholders equity of at least $10 million or in the
alternative, maintain a minimum market value of $50 million of our securities
listed on the Nasdaq National Market.  At December 31, 2003, we had a
stockholders' deficit of $3.0 million and the market value of our common stock
was $42.6 million.  If we cannot maintain our listing on the Nasdaq National
Market, we will consider other alternatives, including applying for listing on
the Nasdaq SmallCap Market, the NASD's OTC Bulletin Board or the "pink sheets."
If we were to be de-listed from the Nasdaq National Market and could not
transfer to the Nasdaq SmallCap Market, it could make our stock more difficult
to trade, reduce its trading volume, and further depress our stock price.  De-
listing of our common stock from the Nasdaq National Market or failure to meet
the requirements for transferring to the Nasdaq SmallCap Market also could
weaken our ability to secure financing in the capital markets, which could
materially impact our business operations and financial condition.  In addition,
if we implement another reverse split, the volatility of our stock could
increase significantly because a second reverse split would severely reduce the
number of our shares in the market and magnify the effect of large sales or
purchases of our stock.

If we are unable to increase revenues generated from license fees, our
gross margins will decline.

In most cases, our license revenues have a higher gross margin
percent than our services revenues.  Our services revenues represented a
significant percentage of total revenues in 2003, constituting 80% of total
revenues.  To the extent that services revenues continue to increase as a
percentage of our total revenues, our overall gross margin will continue to
decline.  If we are not successful in increasing revenues from license fees, or
we are not successful in increasing the gross margin of our services fees, our
overall gross margins will suffer.  For example, we had expected that most of
our license revenues in 2003 would be derived from the sale of our new Commerce
One Conductor

Our industry is highly competitive and has low barriers to entry, and
we cannot assure you that we will be able to compete effectively.

Because the market for composite process management solutions is
extremely competitive, we may suffer a loss of business and a reduction in the
prices we can charge for our products and services.  We have experienced
competitive price pressure over the last two years and the average license fee
for our products has decreased substantially over time due to the economic
downturn and the shift of our focus to the highly competitive market of
enterprise software applications.  We expect competition to intensify as current
competitors expand their product offerings and new competitors enter the market.
There are relatively low barriers to entry in the composite process management
market, and 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 webMethods,
Inc., BEA, See Beyond, and other enterprise application integration (EAI)
vendors, as well as other companies with web services offerings such as IBM,
Microsoft, SAP AG, and Oracle Corporation, among others.  Our Global Services
division competes against many consulting companies, including many of our
integration partners.  Certain of these competitors jointly offer composite
process management and web services solutions to potential customers.  These
joint efforts could intensify the competitive pressure in our market.  Many of
our competitors, and new potential competitors, may have a longer operating
history, 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 solutions offered by competitors may be perceived by
buyers and suppliers as superior to ours.

Our revenues may not grow if we cannot resell our products through
strategic relationships.

We have established limited strategic relationships with companies
that resell and distribute our products to our customers, primarily in
international locations.  This strategy is unproven and, to date, some of our
partners have been unsuccessful in reselling our products.  Unless we are able
to sell more of our products through resellers, our revenues and our business
will continue to suffer.

Our efforts to reduce expenses by closing foreign operations have been
hindered by employment laws in some of those locations.

As part of our ongoing effort to manage our expenses and improve our
financial condition, we have chosen to reduce and/or cease operations in a
number of foreign locations.  While those reductions and closures may be
advantageous in the long run, the short-term costs have been significant in some
of those locations due to restrictive employment laws and the relatively high
cost of severance payments.  Given the high cost of scaling back our
international operations, we cannot assure you that we will ever realize the
financial benefit of taking those steps, which have had, and may continue to
have, negative consequences on our near-term financial condition through at
least the first half of 2004.

Because our business remains partially international, we continue to
face numerous obstacles in other countries that increase our costs to do
business.

A portion of our sales are made to customers in foreign countries.
International business involves inherent difficulties and costs that may affect
us or adversely affect our business or results of operations, including:

- longer payment cycles and greater difficulty in collecting accounts
receivable;
- difficulties in servicing foreign customers after closing all of our foreign
offices;
- the impact of recessions in economies outside the United States;
- the impact of different employment laws in other countries, including
without limitation laws providing for significant severance payments and
benefits under certain circumstances;
- the global impact of armed or political conflicts;
- political instability;
- price controls or other restrictions on foreign currency;
- potentially harmful tax consequences, including withholding tax issues;
- fluctuating exchange and tariff rates;
- difficulty in protecting intellectual property;
- difficulties in obtaining export and import licenses;
- delays, difficulties and expenses associated with discontinuing operations
in certain countries;
- foreign antitrust regulation; and
- inadequate technical and other infrastructure.

We also have only limited experience in marketing, selling, implementing and
supporting our products and services outside the United States.  These
difficulties may adversely affect our business.

Product liability claims or other claims regarding the performance of
our products or the nature of our services may harm our reputation, increase our
costs, or decrease our revenues.

We may be subject to product liability claims or other claims
regarding the performance of our products, 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.  Similarly, we design, develop, implement and manage solutions
that are often crucial to the operation of our customers' businesses.  Customers
who are not satisfied with these services could bring claims against us for
substantial damages.  Additionally, our general liability insurance may be
inadequate to protect us from all liabilities that we may face.  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.  We could be required to spend significant
time and money litigating these claims, or, where necessary, pay significant
damages.  Such claims could also result in lost revenues, adverse publicity and
negative customer reaction.  As a result, any claim, whether successful or not,
could harm our reputation, operating results, financial condition and ultimately
our business.

If third parties claim that we infringe upon their intellectual
property rights, our ability to use certain technologies and products could be
limited and we may incur significant costs to resolve these claims.

Our business depends upon intellectual property, and litigation
regarding intellectual property rights is common in the Internet and software
industries.  Intellectual property ownership issues may be complicated by the
fact that our Global Services division has often developed intellectual property
for its clients and, in order to carry out projects, frequently receives
confidential client information.  If an intellectual property infringement claim
is filed against us, we may be prevented from using certain technologies and may
incur significant costs to resolve the claim.  In addition, we generally
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, which could increase our
competition and lead to costly litigation.

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 five issued patents to date.  We
may not be able to protect our intellectual property rights adequately in the
United States or abroad.  In particular, we sometimes license the use of the
source code to certain of our applications to our customers on a limited basis.
We also have an outsourcing agreement with Satyam Computer Services Limited, an
offshore entity, which allows Satyam entity broad access to certain of our
applications.  While we have included many contractual provisions in our
agreements designed to limit the use of such code and to protect our
intellectual property rights, we cannot assure you that such protections are
sufficient to prevent infringement.  In addition, some countries outside the
United States have less stringent protections on intellectual property and our
rights may be difficult to enforce in such jurisdictions.  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.

Our participation in organizations creating web services standards may
increase the chance that our intellectual property rights are infringed, which
could increase our competition and reduce our revenues.

We participate in a number of organizations for the purpose of
establishing standards in the evolving Web Services area.  While we believe our
participation benefits Commerce One by allowing us to influence standards in a
way that is favorable for our technology, our participation also presents
certain risks to the intellectual property rights in our technology.  These
risks include, but are not limited to, the fact that these organizations
generally require participating companies to reveal certain aspects of their
intellectual property and to provide a limited grant of intellectual property
rights to other participating companies.  Such requirements can increase the
risk that our intellectual property rights will be infringed.

We may not have adequate back-up systems, and a disaster could damage
our operations, reduce our revenues and lead to a loss of customers.

We 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 at our facility in Santa
Clara, California, which reside on or near known earthquake fault zones.
Although these systems are designed to be fault tolerant, they are vulnerable to
damage from fire, floods, earthquakes, power loss, acts of terrorism,
telecommunications failures and similar events.  In addition, our facilities in
California could be subject to electrical blackouts if California faces another
power shortage similar to that of 2001.  Although we do have a backup generator,
which would maintain critical operations, this generator could fail.  We also
have significantly reduced our workforce in a short period of time, which has
placed different requirements on our systems and has caused us to lose personnel
knowledgeable about our systems and which may make it more difficult to quickly
resolve potential system disruptions.   Disruptions in our internal business
operations could harm our business by resulting in delays, disruption of our
customers' business, loss of data, and loss of customer confidence.

Provisions of our charter documents and Delaware law could make it more
difficult for a third party to acquire us even if the offer may be considered
beneficial by our stockholders.

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 adopted a
shareholder rights plan, or "poison pill," which would significantly dilute the
ownership of a hostile acquirer.  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.  In
addition, certain features of our Series B Preferred Stock that could require an
acquiror to give the holders of Series B Preferred Stock similar rights in the
acquiror may make us less attractive to potential buyers.  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 our stockholders.

Changes in accounting standards and in the way we charge for licenses
could result in a reduction of the revenue we are able to recognize.

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.  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.

The Securities and Exchange Commission and the Financial Accounting Standards
Board are also currently reviewing the accounting standards related to 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 other aspects of our business in a manner that could adversely affect our
reported financial results.

ITEM 2.
DESCRIPTION OF PROPERTY

We lease office space in four locations in the United States.  Our corporate
headquarters is located in San Francisco, California, where we currently lease
approximately 16,000 square feet of office space.  We currently have
contractual commitments to lease approximately 43,000 square feet of office
space in North America.  We believe our current facilities will be more than
adequate to address our space needs through at least the end of 2004. 
These leases expire at varying dates through June 2008.

ITEM 3.
LEGAL PROCEEDINGS

We currently are a party to various legal proceedings, including those noted
below.  While management currently believes that the ultimate outcome of
these proceedings will not have a material adverse effect on our results of
operations, litigation is subject to inherent uncertainties, and unfavorable
rulings could occur.  Depending on the amount and timing, an unfavorable
outcome of some or all of these matters could have a material adverse effect on
our cash flows, business, results of operations or financial position.

Securities Litigation

On June 19, 2001, a class-action securities claim,
captioned Cameron v. Commerce One, Inc., et al., was filed against
Commerce One, several company officers and directors (the "Individual
Defendants"), and the three lead underwriters in the Commerce One initial public
offering ("IPO") in the United States District Court for the Southern District
of New York.  Various plaintiffs have filed similar actions asserting virtually
identical allegations against more than 200 other companies. The lawsuits
against Commerce One and other companies have been coordinated for pretrial
purposes with these other related lawsuits and have been assigned the collective
caption In re Initial Public Offering Securities Litigation.

On April 19, 2002, plaintiffs' lawyers for the
coordinated lawsuits filed an amended complaint consisting of a set of "Master
Allegations" and individual amended complaints against the various defendants,
including Commerce One and the Individual Defendants.  The amended complaint
alleges violations of Section 11 and Section 15 of the Securities Act of 1933,
Section 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and
Section 10(b) of the Exchange Act (and Rule 10b-5, promulgated thereunder) as a
result of alleged conduct of the underwriters of the IPO to engage in a scheme
to under price the IPO and then artificially inflate our stock price in the
aftermarket. The complaint seeks unspecified damages on behalf of a purported
class of purchasers of common stock between July 1, 1999 and June 15, 2001.
On July 15, 2002, the issuer defendants and individual defendants
filed an omnibus motion to dismiss addressing issues generally applicable to the
defendants as a group.  On October 9, 2002, the district court entered an
order dismissing all of the living individual Commerce One officers and
directors from the case without prejudice.  On February 16, 2003, the district
court entered an order denying most of the defenses asserted by the defendants
in the omnibus motion to dismiss and allowing most of the case to proceed.
A proposal has been made for the settlement and release of claims
against the issuer defendants, including Commerce One.
Under the settlement proposal, the plaintiffs would
dismiss the issuer defendants from the lawsuit (including Commerce One and named
individual defendants) and continue to pursue their case against the underwriter
defendants.  In exchange for this dismissal, the D&O insurance carriers
would agree to guarantee a recovery by the plaintiffs from the underwriter
defendants of at least $1.0 billion. Our
Board of Directors has approved Commerce One's participation in the settlement.
The settlement remains  subject to a number of conditions, including approval of
the proposed settling parties and the court.  If the settlement does not
occur, and litigation against Commerce One continues, we believe we have
meritorious defenses and intend to defend the case vigorously.

In February 2003, Commerce One, along with its Chief
Executive Officer and former Chief Financial Officer, were named as defendants
in a similar class-action matter in Florida, Liu v. Credit Suisse First
Boston et al., United States District Court, Southern District of Florida.
In that case, the plaintiff alleges that various investment banks, issuer
companies, and individuals violated securities laws by engaging in a scheme to
under-price initial public offerings and then artificially inflate prices of
those stocks in the aftermarket.  The Commerce One defendants have been
dismissed from the case.  By court order dated July 16, 2003, the court declined
to grant the plaintiff's motion to vacate its order of dismissal, finding that
plaintiff lacked good cause for failing to effect service on the dismissed
defendants, including Commerce One.  This case also has been coordinated with
the other similar class-action securities cases pending in New York, including
the Cameron matter described above, and it remains unclear whether the
proposed settlement of those other cases will apply to the claims in the
Liu matter.

Other Litigation

In December 2003, Commerce One entered into a settlement agreement with
Covisint pursuant to which Covisint paid the Company $4,650,000.  In connection
with this agreement, the parties agreed that, as long as no bankruptcy event
occurs prior to the expiration of a 92-day period (which began on January 2,
2004), Covisint's future payment obligations to the Company will terminate and
the Company's existing technology agreement with Covisint will be cancelled.
See the section below entitled "Settlement with Covisint".

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

No matters were submitted to a vote of security holders during the fourth
quarter of 2003.

PART III

ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Stock Market's National Market under
the symbol "CMRC." The price per share reflected in the table below represents
the range of low and high sale prices for our common stock as reported on the
Nasdaq Stock Market's National Market commencing January 1, 2002 for the
quarters indicated.



|                                 | High | Low  
|-------------------------------- | ---- | -----
|Fiscal 2002:                     |      |      
|Quarter Ended March 31, 2002     | $    | 41.90
|Quarter Ended June 30, 2002      | $    | 15.80
|Quarter Ended September 30, 2002 | $    | 7.40 
|Quarter Ended December 31, 2002  | $    | 5.47 
|Fiscal 2003:                     |      |      
|Quarter Ended March 31, 2003     | $    | 3.31 
|Quarter Ended June 30, 2003      | $    | 3.38 
|Quarter Ended September 30, 2003 | $    | 3.15 
|Quarter Ended December 31, 2003  | $    | 2.51 

The information above reflects a one-for-ten reverse stock split
on September 16, 2002, effected by issuing one post-split share for every ten
pre-split shares to each stockholder of record as of July 22, 2002.  All
fractional shares resulting from the reverse stock split were cashed out.
We have never paid cash dividends on our capital stock. We currently intend
to retain all earnings, if any, for use in our business and do not anticipate
paying any cash dividends in the foreseeable future.

The closing price of Commerce One's common stock as reported on the Nasdaq
Stock Market's National Market on February 20, 2004 was $1.84.  As of
February 20, 2004, we had 898 stockholders of record of our common stock and a
substantially greater number of beneficial owners of our common stock.

RECENT SALES OF UNREGISTERED SECURITIES

In November 2003, we issued 1,561,321 shares of our common stock to the
landlord of our former Pleasanton, California headquarters pursuant to an
agreement to pre-pay the total remaining $5.6 million rent obligation with a
combination of cash, stock and a future note payable.  The foregoing issuance
was exempt from registration under the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof, on the basis that the transaction did not
involve a public offering.

On December 31, 2003 we issued secured promissory notes in the aggregate
principal amount of $5 million and warrants to purchase an aggregate of
2,568,494 shares of our common stock (Warrant Shares) to ComVest Investment
Partners II LLC and DCC Ventures, LLC for an aggregate purchase price of
$5,000,100.  The exercise price of the warrants is $.0001 per share.  The
conversion of the notes is limited to the extent that the number of Warrant
Shares and shares issuable upon conversion of the notes to ComVest and DCC
Ventures shall not exceed an aggregate of 6,653,840 shares of our common stock.
The foregoing issuances were not registered under the Securities Act of 1933, as
amended, on the basis of the exemptions provided by Section 4(2) thereof and
Rule 506 of Regulation D thereunder for a transaction not involving a public
offering and with accredited purchasers.

ITEM 6.
SELECTED FINANCIAL DATA

CONSOLIDATED STATEMENT OF OPERATIONS DATA: (In thousands, except per share
data)

`Years Ended December 31,
                                                       --------------------------------------------------------
                                                         2003       2002        2001         2000       1999
                                                       ---------  ---------  -----------  ----------  ---------
Revenues:
License fees......................................... $   7,071  $  28,597  $   130,917  $  223,277  $  24,571
Services.............................................    29,167     76,932      277,652     178,519      8,986
                                                       ---------  ---------  -----------  ----------  ---------
Total revenues (1)...................................    36,238    105,529      408,569     401,796     33,557
                                                       ---------  ---------  -----------  ----------  ---------
Costs and expenses:
Cost of license fees (2).............................    14,934    192,406      662,315      14,910        484
Cost of services.....................................    21,563     68,233      228,023     139,746     15,586
Sales and marketing..................................    18,388     78,945      183,412     168,647     31,546
Product development..................................    27,120     76,922      118,159     102,676     20,496
General and administrative (3).......................     8,239     25,615      116,621      43,236      5,050
Purchased in-process research and development........        --         --        4,548       5,142      9,374
Stock compensation...................................     3,395      8,728       98,302      39,820      2,324
Restructuring costs and other........................     7,085     22,947      126,605          --         --
Amortization of goodwill and other
   intangible assets.................................       612     11,867      332,789     233,183     11,133
Impairment of intangible assets
   and fixed assets..................................        --    214,082    1,120,464          --         --
                                                       ---------  ---------  -----------  ----------  ---------
Total costs and expenses.............................   101,336    699,745    2,991,238     747,360     95,993
                                                       ---------  ---------  -----------  ----------  ---------
Loss from operations.................................   (65,098)  (594,216)  (2,582,669)   (345,564)   (62,436)
Interest income and other, net.......................     4,940      4,681        7,571       7,017      3,302
                                                       ---------  ---------  -----------  ----------  ---------
Net loss before income taxes.........................   (60,158)  (589,535)  (2,575,098)   (338,547)   (59,134)
Provision for income taxes...........................    (2,388)       301        9,001       6,400      4,188
                                                       ---------  ---------  -----------  ----------  ---------
Net loss.............................................   (57,770)  (589,836)  (2,584,099)   (344,947)   (63,322)
                                                       ---------  ---------  -----------  ----------  ---------
Deemed dividend related to beneficial conversion
   feature on Series B Preferred Stock...............     3,327         --           --          --         --
Accretion of Series B Preferred Stock to
   redemption value..................................     5,895         --           --          --         --
Series B Preferred Stock dividends...................       400         --           --          --         --
                                                       ---------  ---------  -----------  ----------  ---------
Net loss attributable to common stockholders......... $ (67,392) $(589,836) $(2,584,099) $ (344,947) $ (63,322)
                                                       =========  =========  ===========  ==========  =========
Basic and diluted net loss per share
  attributable to common stockholders ............... $   (2.19) $  (20.33) $   (103.02) $   (20.52) $   (7.36)


Weighted average shares - basic and diluted..........    30,735     29,011       25,084      16,807      8,605
                                                       =========  =========  ===========  ==========  =========`

`(1)  Revenues from related parties................... $   7,392  $  32,022  $    97,741  $   52,512  $   2,078
                                                       =========  =========  ===========  ==========  =========
(2) Includes charges for the
     impairment and amortization
     of the Technology Agreement with
     Covisint (see  Notes 4 and 10 of
     Notes to Consolidated Financial
     Statements) .................................... $  15,943  $ 190,396  $   647,500  $    5,700  $      --
                                                       =========  =========  ===========  ==========  =========
(3)  Includes charges to (reversals of)
     bad debt expense................................ $  (2,723) $  (5,454) $    32,924  $    2,657  $     195
                                                       =========  =========  ===========  ==========  =========`

(a) Certain reclassifications have been made to prior year balances in order
to conform to the current year presentation.

(b) We implemented SFAS 142 on January 1, 2002, which requires that goodwill
(including assembled workforce) no longer be amortized, but tested for
impairment on at least an annual basis.    For a further
discussion of SFAS 142, see Note 4 to the Consolidated Financial Statements,
"Goodwill, Long Lived Asset and Other Intangible Assets," Part II, Item 8,
incorporated here by reference.

BALANCE SHEET DATA: (In thousands)

`December 31,
                                                       --------------------------------------------------------
                                                         2003       2002        2001         2000       1999
                                                       ---------  ---------  -----------  ----------  ---------

Cash and cash equivalents............................ $   6,943  $  73,753  $   192,547  $  215,189  $  51,792
Working capital......................................     9,148     24,574      180,411     245,963     77,480
Total assets.........................................    29,248    159,422      828,941   3,070,555    384,610
Long term liabilities................................     8,394     46,947       56,005       4,339        262
Redeemable convertible preferred stock...............    12,480         --           --          --         --
Total stockholder's equity (deficit).................    (3,028)    47,490      623,815   2,799,411    316,721`

(a) Certain reclassifications have been made to prior year balances in order
to conform to the current year presentation.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Background

Commerce One is a technology company that specializes in software and
services that allow companies to conduct business more efficiently through
composite process management. The goal of composite process management is to
make business processes and interactions more efficient and to automate business
functions.  Composite process management allows organizations to create new
applications with new features and capabilities from their existing software
applications. The resulting applications (called "composite applications")
combine the different functionality of stand-alone software applications into a
unified business process, allowing the customer to automate relationships both
inside and outside the company. The Commerce One ConductorTM platform is
designed to allow companies to collaborate more effectively with their partners,
customers and suppliers by automating their critical business processes.  The
platform has broad applicability in a wide variety of industries.  Examples of
business functions that can be automated using the Commerce One
Conductor

Our newest product offerings-the Commerce One
ConductorTM platform, and existing and planned Process Accelerators-
represent our next generation of collaborative solutions designed to help our
customers optimize their technology investments and improve the functionality of
their existing software applications.

We were founded as Distrivision in 1994, changed our name to Commerce One in
1997, and re-incorporated in Delaware in 1999.  On July 11, 2001, we
reorganized into a holding company structure.  As part of the
reorganization, the stockholders of the "old" Commerce One (now our wholly-owned
subsidiary Commerce One Operations, Inc.) became stockholders of the "new"
Commerce One.  The financial results reported in this Annual Report on Form
10-K include, as applicable, the historical financial results of new Commerce
One after the reorganization and the historical financial results of old
Commerce One prior to the reorganization.  The reorganization is described
more fully in Note 11 of Notes to Consolidated Financial Statements.  Our
worldwide headquarters are located at One Market, Steuart Tower, Suite 1300, San
Francisco, CA 94105. We can be reached at 415.644.8700 and
info@commerceone.com.

Source of Revenues

We generate revenues from multiple sources. License fees are generated from
licensing our software solutions primarily to end-user organizations through our
direct sales force, and, to a lesser extent, to certain third-party product
distributors and resellers (primarily in international locations). 
Services revenues are generated from professional consulting, software
maintenance, revenue-sharing arrangements with customers, and other related
services. Revenues from revenue-sharing arrangements have not been a significant
portion of our total services revenues to date and are not expected to be
significant in the future.

The portion of our license and service revenues attributable to sales outside
the United States continues to be a substantial portion of our overall revenues.
In 2003, approximately 47% of our license and service revenues were derived from
sales outside United States, compared to 35% in 2002 and 34% in 2001.

In 2003, 2002 and 2001, transactions with SAP accounted for
approximately 11%, 25% and 19% of our total revenues, respectively.  In 2002,
transactions with UCCnet accounted for approximately 11% of our total revenues.
For 2003, 2002 and 2001, no other customers accounted for more than 10% of our
total revenues.

Significant Trends Affecting Our Business

Liquidity and Cash Flows from Operations.  We had cash and cash
equivalents and short-term investments of approximately $10.1 million at
December 31, 2003, of which $7.0 million was unrestricted cash and short-term
investments that can be used to fund operations. In 2003, we used cash in
operating activities of approximately $91.2 million .  We have taken significant
steps to reduce our ongoing operating expenditures through personnel reductions,
renegotiating and settling real estate obligations and other cost reduction
measures.  While these efforts have significantly reduced our operating
expenditures, our operations are still drawing down our cash reserves.  Our
current cash position and expectations for 2004 are discussed in more detail in
the section below entitled "Liquidity and Capital Resources."

New Product Introduction.  We launched the Commerce One ConductorTM platform, our new product, in March of 2003 and we are currently
focused primarily on developing and selling this product line.  Thus far,
however, license revenue from sales of the Conductor platform has not been
significant.  Among the issues hampering our efforts to sell the Conductor
platform are ongoing concerns of existing and potential customers regarding our
viability, the lack of an established market for our new products, the length of
sales cycles, particularly for a new and unproven technology, and a depressed
technology market.  Moreover, these same issues make it difficult to sell our
SRM applications while we try to establish a market for the Conductor platform.
We believe that these trends, particularly with respect to our SRM products,
have affected us more than many of our competitors.

In addition, we do not expect that sales of the Commerce One ConductorTM platform will generate significant license revenue in the immediate
future.  In particular, in an effort to gain visibility of the product with our
customers, we have provided the product to several "early adopter" customers
under a program where the customer tests the product at significantly reduced
rates.  We may continue to offer the product at reduced rates or pursuant to
other similar programs in order to gain market acceptance.  As a result, we do
not anticipate that our average selling prices for our products will increase in
the near future, and we believe that we will continue to experience  downward
pricing pressure over the next year.

Industry Dynamics-Decline in Enterprise Spending.
The enterprise software industry is characterized by several trends that may
have a material impact on our strategic planning, results of operations and
financial condition.  One key trend has been the decline in spending on
enterprise software as a result of the weakened global economy and uncertainty
due to recent international events.  This decline in enterprise spending has had
a direct and significant adverse impact on our ability to generate license
revenues from new and existing customers.  The decline in spending has also been
coupled with increased competition in our industry resulting in significant
downward pricing pressure on our products.  Taken together, these trends have
resulted in a significant reduction in new sales and declining average selling
prices for the products we do sell.  In addition, we have only recently
introduced our new product,and we expect that sales
of such product will not generate significant license revenue in the immediate
future.  In particular, in an effort to gain visibility of the product with our
customers, we have provided the product to several "early adopter" customers
under a program where the customer tests the product at significantly reduced
rates.  We may continue to offer the product at reduced
ratesor pursuant to other similar programs in order to
gain market acceptance.  As a result, we do not anticipate that our average
selling prices for our products will increase in the near future, and we believe
that we will continue to experience downward pricing pressure over the next
year.

Potential Sale of SRM Assets.  We are currently considering the sale
of our SRM assets to generate additional necessary working capital and
in discussions with potential buyers.  The substantial
majority of our license revenues and maintenance revenues in 2003 related to our
SRM products.  While a sale of the SRM assets could generate cash for us and
result in some cost savings in the future, it would significantly diminish our
revenues for the remainder of 2004.  We cannot assure you, however, that we will
be able to sell our SRM assets on reasonable terms, if at all.

Loss of Future Covisint Revenues.  We have historically received
significant license, professional services and software maintenance revenues
from Covisint.  These amounts became a more substantial portion of our revenues
over time as our overall revenues have declined.  As discussed in the section
below entitled "Settlement with Covisint," we recently entered into a settlement
agreement with Covisint pursuant to which Covisint paid us $4,650,000.  Under the terms
of that agreement, if neither party files for bankruptcy after a 92-day period (which began on January 2, 2004),
Covisint's future payment obligations to us will terminate and our existing
technology agreement with Covisint will be cancelled.  As a result of this
settlement, we do not expect to derive any significant revenues from Covisint in
the future.

SPECIFIC EVENTS IN 2003

Relationship with SAP

Termination of Commercial Relationship

We entered into a strategic relationship with SAP in 2000 to jointly develop,
market and sell the MarketSet suite of applications and the Enterprise Buyer
procurement applications.  This agreement provided that either party
licensing the jointly developed products to its customers would owe a royalty to
the other party.  These products were primarily targeted at electronic
marketplace customers.  Historically, SAP was instrumental in assisting us with
selling the jointly developed products to SAP's customer base.  From 2000
to 2002, SAP accounted for a significant portion of our license revenue. 
However, these royalty payments declined in the past two years with the decline
of the market for electronic marketplace solutions.  In 2003, 2002 and
2001, SAP reported royalties to us of approximately $4.1 million, $26.1 million
and$79.1 million, respectively, of which license revenues were
approximately $0.4 million, $19.7 million and $68.3 million, respectively.

Over time, the relationship with SAP has changed and each company has phased
out the jointly developed Enterprise Buyer procurement products and replaced
such products with its own successor procurement products.  In addition,
the market for the Marketset suite of products has declined substantially over
the past two years with the decline in the electronic marketplace sector.  In
November 2003, SAP and Commerce One terminated the commercial relationship.  As
a result, we received only $0.4 million in license revenue from SAP in 2003 and
do not expect to receive any license revenue in 2004 or thereafter.

Historically, we have also generated revenue from our relationship with SAP
by providing technical customer support and maintenance services to joint
customers.  This revenue represented approximately 4% of our services revenues
in 2001, 11% in 2002 and 13% in 2003.  As a result of the termination of the SAP
relationship in November 2003, we do not expect to receive revenues, if any,
from SAP for technical support and maintenance in 2004 or thereafter.

Equity Relationship

At the time we entered into the strategic
alliance agreement with SAP in 2000, we sold 505,955 shares of our common stock
to SAP for an aggregate purchase price of approximately $250 million.

Subsequently, in 2001, we sold an additional 4,748,477 shares of our common
stock to SAP for an aggregate purchase price of approximately $225
million.

In connection with our issuance of common stock to SAP, we entered into
various agreements that restrict SAP's ability to acquire more than 23% of our
outstanding common stock or otherwise attempt to acquire control of Commerce
One, limit its transfer of the shares of common stock that it purchased from us
and, in very limited ways, affect SAP's ability to vote its shares of our common
stock.  We also granted SAP certain rights to require us to register the
resale of its shares of our common stock, certain pro rata rights to acquire
additional shares of our common stock and the right to have a designee appointed
to our board of directors or to send an observer to our board of directors
meetings. As of December 31, 2003, SAP has not exercised its right to have
such a designee appointed, but has exercised its right to send an observer to
our board of directors meetings.

Certain of the transfer restrictions imposed upon SAP's ability to sell our
common stock expired upon the termination of the SAP relationship in November
2003 and most of the remaining transfer restrictions will terminate on
June 28, 2004.  The standstill restrictions imposed upon SAP, as well as
their pro rata rights, will also terminate on June 28, 2004.

As of December 31, 2003, through its purchases from us and on the open
market, we believe that SAP beneficially owned approximately 20% of our outstanding common
stock.

Settlement with Covisint

On December 8, 2000, Commerce One, Ford Motor Company, General Motors
Corporation, Daimler Chrysler AG, Renault S.A. and Nissan Motor Co., Ltd.
entered into several agreements relating to the formation of Covisint, LLC, a
Delaware limited liability company. Covisint is a business-to-business e-
marketplace for the procurement of goods and services by automakers, their
suppliers and others.  Pursuant to a "Technology Agreement," we licensed
software and provided software maintenance to Covisint.  In exchange, Covisint
agreed to pay to us certain license and support fees and a share of Covisint's
electronic marketplace revenue over a ten-year period. We also own approximately
2% of Covisint.

In June 2003, we initiated an arbitration proceeding in Michigan against
Covisint to compel Covisint's payment to us of approximately $2.8 million in
accounts receivable as of the time of filing of the demand.   On December 30,
2003, we entered into a settlement agreement with Covisint pursuant to which
Covisint paid us $4,650,000.   As part of the agreement, the parties agreed to
resolve the arbitration and a related state court action that had been pending
between the parties, and we granted a fully paid software license to Covisint
for certain Commerce One software that Covisint has used in its operations.  We
previously had licensed that software to Covisint under the Technology
Agreement, which the parties agreed to terminate under certain conditions as
part of the settlement.  Covisint paid us in full by January 2, 2004.  Following
a 92-day period (which commenced on January 2, 2004), and provided that certain
bankruptcy events do not occur with respect to either party during that 92-day
period, all litigation between the parties will be permanently dismissed, and
the Technology Agreement that previously governed the relationship between us
and Covisint will terminate.  As a result of the settlement, we recognized
previously deferred services revenues of $2.0 million and collections of
approximately $2.6 million of our fully reserved receivable due from Covisint.
This resulted in a bad debt recovery of $2.6 million, creating a benefit to
general and administrative expense in 2003.  We recognized a charge to "Cost of
license fees" of $6.0 million in the fourth quarter of 2003 due to the write
down of the intangible asset related to the Technology Agreement.  In addition,
we recognized a charge of $5.0 million for the write down of our 2% equity
investment in Covisint.  This charge was included in the "Interest income and
other, net" line item on the Statement of Operations.

Renegotiation and Settlement of Certain Real Estate Obligations

Pleasanton Lease

In April 2003, we entered into an agreement to sublease the facility we
formerly occupied as our main corporate office in Pleasanton, California in an
effort to decrease our rent expense.  The sublease had a term from January 2004
through February 2005, which also was the remaining term of the lease.  The
amount of income provided for under the sublease was less than the lease
payments due and thus left us with a total remaining rent obligation of
approximately $5.6 million.

Subsequently, in the fourth quarter of 2003, in order to conserve cash, we
entered into an agreement with the Pleasanton landlord (PeopleSoft) to pre-pay
the total remaining $5.6 million rent obligation.  Pursuant to this agreement,
we gave PeopleSoft the following: 1) an initial cash payment of $1.5 million, 2)
an interest-free promissory note in the principal amount of approximately $2
million, payable in February 2005, and 3) shares of restricted common stock with
a market value of approximately $2.1 million based upon the issuance price.   As
the result of this transaction, we have no further rental payment obligations
for our former headquarters.

Pre-payment of Settlement Obligation

As part of a June 2003 settlement with a former landlord, we agreed to make
two cash payments of $375,000 each in September 2004 and September 2005,
respectively.  These payments were included in our restructuring liability at
December 31, 2003.  The 2004 payment was secured by a lien against our accounts
receivable until January 2005 (unless we defaulted on the 2004 payment in which
case the lien would extend to both the 2004 and 2005 payments).    In January
2004, we reached a further agreement with that landlord under which we paid
$500,000 in satisfaction of both the 2004 and 2005 cash payments.  This pre-
payment satisfies all of our remaining obligations to that landlord, although
the underlying settlement agreement provides that the landlord will have a
liquidated claim of $6 million against us if-as the result of a bankruptcy of
Commerce One or as the result of a fraudulent conveyance action-the landlord is
disgorged of any payments it has received from us.  That liquidated claim would
be offset by any settlement payments that the landlord retains.

Austin Lease

In January 2004, we signed an agreement with the landlord of the office space
we occupy in Austin, Texas.  Under the agreement, we reduced our monthly base
rent obligation, retroactive to November 1, 2003, and also assigned to the
landlord our sublease with a subtenant who had occupied some of our subleased
space.  In exchange, the landlord was permitted to draw down an existing letter
of credit in the amount of approximately $500,000 and reclaimed a significant
portion of the space under lease.  The net result of the transaction was to
reduce our overall monthly lease obligation by approximately 40% through the
term of the lease.  However, the landlord also has the right to extend the lease
for an additional 30 months upon its expiration in January 2006, subject to
certain buyout rights of the Company.

Investment from BayStar

On July 10, 2003, we received a $10 million investment from BayStar.
Under the terms of our investment agreement with BayStar, we issued 100,000
shares of  Series B Preferred Stock, and five-year warrants to purchase
2,209,945 shares of our common stock.  The Series B Preferred Stock is initially
convertible into approximately 4,297,748 shares of the our common stock at a
conversion price of $2.3268 per share. The exercise price for the warrants is
$2.715 per share.

Pursuant to the terms of the Series B Preferred Stock issued to BayStar, we
may upon the occurrence of certain events be required to redeem all of the
outstanding shares of Series B Preferred Stock.  The events that could lead to
redemption include failure to timely convert shares of Series B Preferred Stock
into common stock when requested, to timely file, have declared effective and
maintain the effectiveness of the registration statement on Form S-3 covering
the resale of the common stock underlying the Series B Preferred Stock or to
maintain the listing of our common stock on the Nasdaq National Market or the
Nasdaq SmallCap Market, or if we consummate a change of control (including a
merger, acquisition or sale of all or substantially all of our assets) of
Commerce One.  As of the date of this Form 10-K, the Form S-3 covering the
resale of the common stock underlying the Series B Preferred Stock had not yet
been declared effective by the SEC.  Beginning in January 2004, we began
incurring penalties of $5,000 per day until the registration statement is
declared effective.  Under the initial agreement with BayStar, in the event
that the Form S-3 was not declared effective on
or prior to April 5, 2004, we could have been required to redeem the Series B
Preferred Stock for approximately $12 million or the fair market value of the
common stock underlying the Series B Preferred Stock, whichever is greater, plus
any accrued and unpaid dividends and other penalties which were estimated,
as of December 31, 2003, to be
approximately $1.2 million on April 5, 2004.
On March 14, 2004, we entered into a Consent and Amendment Agreement with
BayStar to amend certain provisions of our Registration Rights Agreement
covering the registration of the Common Stock issuable upon conversion of our
Series B Preferred Stock and the Common Stock issuable upon exercise of
BayStar's warrants (collectively the "Registrable Securities").  Under
this agreement, in exchange for a cash payment of $200,000 on or before April 1,
2004 and issuance of  approximately 500,000 shares of our common stock,  BayStar
agreed to extend the deadline by which our Registration Statement must be
declared effective by the Securities and Exchange Commission by 90 days (to July
4, 2004).  In addition, in exchange for such consideration, Baystar has agreed
to waive the $5,000 per day penalties accrued thus far and up to and including
July 4, 2004.  If the Registration Statement is not declared effective on or
before July 4, 2004, BayStar would have the right to redeem the Series B
Preferred Stock for a price equal to the greater of 120% of the original
purchase price of $10 million plus any accrued and unpaid dividends or the then
current market value of the Series B Preferred Stock on an as-converted-to-
Common Stock basis.

Notes and Warrants Issuances to ComVest Investment Partners II and DCC
Ventures

On December 31, 2003, we issued secured promissory notes in the aggregate
principal amount of $5 million (the Notes) and warrants to purchase our common
stock (the Warrants) to ComVest Investment Partners II, LLC and DCC Ventures,
LLC for an aggregate purchase price of $5,000,100.  The Notes bear interest at a
rate varying from 6% to 10% over the term of the Notes, are due on March 31,
2005 or sooner upon the occurrence of certain events of default or other events,
and are secured by certain of our assets.  The Warrants to purchase an aggregate
of 2,568,494 shares (the Warrant Shares) of our common stock, at an exercise
price of $0.0001 per share, were fully exercised subsequent to December 31,
2003.  We may repurchase up to 513,699 of these shares if we repay the Notes on
or before April 30, 2004 and other conditions are met.  Upon an event of
default, the Notes become convertible, subject to certain limitations, into
shares of our common stock at a conversion price based on the market value of
the common stock at the time of the default.



Following is a summary of the terms of the securities we issued to ComVest
Investment Partners II and DCC Ventures and the related agreements. Our summary
is not intended to describe the material terms of these securities but our
summary is qualified by reference to the Note and Warrant Purchase Agreement,
the Notes, the Warrants, the Security Agreement, the Pledge Agreement, the
Guaranty, and the Registration Rights Agreement, each of which is filed as an
exhibit to our Current Report on Form 8-K, filed on January 8, 2004, and
incorporated by reference herein.

Terms of the Notes

Interest

- The Notes bear interest at a rate per annum as follows:



|Months 1-3 of the Note   | 6% per annum 
|------------------------ | -------------
|Months 4-6 of the Note   | 7% per annum 
|Months 7-9 of the Note   | 8% per annum 
|Months 10-12 of the Note | 9% per annum 
|Months 13-15 of the Note | 10% per annum

- Interest is payable quarterly in cash.
- If an event of default occurs and is continuing, the Notes bear interest of
12% per annum until such event of default has been cured.

Maturity



Event of Default





Conversion

- The Notes are not convertible unless we fail to pay such
Notes in accordance with their terms upon maturity or upon an event of
default.
- In such event, the holders of the Notes may convert their Notes into shares
of our common stock equal to the number obtained by dividing the then-
outstanding principal amount of such Notes, together with all accrued but unpaid
interest thereon, by the conversion price (the "Conversion Shares"), subject to
adjustment for stock splits, stock dividends, reclassifications and the like.
- The conversion price per share is equal to 90% of the average closing bid
price for the 5 trading days immediately following the later of (i) the date of
such default and (ii) the date of issuance of any press release announcing such
default.
- Such conversion upon default is limited to the extent that the number of
Warrant Shares and Conversion Shares issued to the holders of the Notes shall
not exceed an aggregate of 6,653,840 shares of our common stock.



Prepayment



Security Interest





Recent Personnel Changes

On March 1, 2004 we announced several personnel changes
at the Company. On February 16, 2004, Wain Beard, formerly a sales executive at
Sybase, Inc., joined Commerce One as Senior Vice President of Worldwide Sales.
Mr. Beard replaces Kip Quackenbush, who will assume the position of Senior Vice
President, Channels. We also hired Ed Mueller as Senior Vice President of
Marketing, effective March 1, 2004.  Mr. Mueller replaces Narender Singh in this
role, who has left Commerce One to pursue other opportunities.
Prior to joining
Commerce One, Mr. Mueller was an independent consultant and former executive and
co-founder of ShortCycles, Inc. and db-Centric.

In addition, our Chief Financial Officer, Charles Boynton, recently notified
us of his intention to resign his position to accept employment in Colorado. Mr.
Boynton's expected departure date is March 31, 2004, and Mr. Boynton will remain
in a consulting capacity with Commerce One for a transition period after his
departure. We are currently engaged in a search to find a replacement for Mr.
Boynton.

Registration of Shares of Common Stock for Resale

The Notes and the Warrants were issued in a private
placement without registration under the Securities Act of 1933, as amended.  We
have agreed to file with the SEC a registration statement to register the resale
of the common stock issuable upon conversion of the Notes and the common stock
issuable upon exercise of the Warrants. We are required to use reasonable best
efforts to cause the registration statement to be declared effective by the SEC
no later than April 30, 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses.  On an on-going basis, we evaluate estimates,
including those related to revenue recognition, accounts receivable allowances,
long-lived assets and restructuring.  We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about amount and timing of revenues and expenses, the carrying values
of assets and the recorded amounts of liabilities that are not readily apparent
from other sources.  Actual results may differ from these estimates and
such estimates may change if the underlying conditions or assumptions
change.

We believe that these significant judgments affect the following critical
accounting policies used in the preparation of our consolidated financial
statements.

Revenue recognition and related accounting policies

Our revenue recognition policies are consistent with Statement of Position
97-2 "Software Revenue Recognition," and Staff Accounting Bulletin No. 104,
"Revenue Recognition".

Revenues from license agreements for our software
products are recognized upon transfer of title and risk of loss which generally
occurs upon shipment of the software if there is persuasive evidence of an
arrangement, collection is probable and the fee is fixed or determinable. In the
limited circumstances where our software is licensed to third parties through
indirect sales channels (primarily in international locations), license fees are
recognized as revenue, under the sell-through method, when the criteria
described above have been met and the reseller has sold the software to an end
user customer. While generally we do not license software under barter or
concurrent arrangements, whenever software has been licensed under such
arrangements, we have recognized revenue equal to the net monetary amounts to be
received by us.

We assess whether fees are fixed or determinable when
products or services have been delivered.  Payment terms offered by us vary
based on customer requirements and standard practice in the customer's country
of domicile, and are typically within 90 days of delivery of the underlying
products or services.  Payment terms that extend beyond 90 days are not
considered fixed or determinable, and are not recognized as revenue until the
contractual payment due date, provided we then determine collection is probable
and all other revenue recognition criteria have been met.

We reduce license revenue to reflect estimated product returns. While as a
matter of contract and general practice, we do not accept the return of software
products after the expiration of any acceptance periods, unforeseen contractual
disputes with customers may require us to accept the return of a
product.Management uses a percentage of trailing license revenue in
order to calculate the required reserve balance.  The appropriate percentage is
determined by analyzing information pertaining to past customer issues or
disputes for particular products.  Our reserves have decreased significantly
over the past twelve months due to lower license revenue.  Should our actual
product returns be greater than our estimates, or if we experience higher
returns due to the introduction of our new Commerce One Conductor



Revenues from professional services contracts are
generally recognized on a time and material basis.  However, when we perform
work on a fixed price basis, revenue is recognized on the percentage-of-
completion method, with costs and estimated profits recorded as work is
performed.  We use labor hours as the input measure to determine progress under
the percentage-of completion-method.  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, which are recognized in the period in which the revisions are
determined.

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 significant customization or modifications
of the software or where professional services are considered necessary to the
functionality of the software. Revenue from these software and services
arrangements is recognized using the percentage-of-completion method by
utilizing specific milestones in order to assess the progress achieved.

We recognize revenue from royalty agreements upon receipt of the royalty
report when there is a signed agreement and collection is probable. Prepaid
royalties are recorded as deferred revenue until the royalty report is received.
For limited term fixed fee royalty agreements, we recognize the total fee
ratably over the term of the royalty agreement.

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

Subscription fees and hosting fees have not been
significant and are not expected to be significant in the future.  Revenues
related to revenue sharing are recognized as earned based on customer
transactions.  Revenues related to hosting fees generally are recognized ratably
over the term of the related contracts, typically one year.  In January 2003, we
divested to eScout LLC our CommerceOne.net division, which offered hosting,
software subscription services, transaction-based marketplace services and
content services.  During 2002, we recognized service revenues totaling
approximately $11.8 million from CommerceOne.net related services.  During 2003,
we recognized a total of approximately $3.2 million in services revenue from
CommerceOne.net related services. Due to this divestiture, we will no longer
offer these services. As a result of this divestiture, we received no
transaction fees in 2003 and will no longer receive these fees in the future.
In addition, our hosting revenue has declined substantially and will be limited
solely to the recognition of revenue that previously had been deferred.

Deferred revenue consists of prepaid licenses fees as
well as prepaid fees for royalties, services and maintenance and support
agreements.

Revenue by type for the years ended December 31, 2003, 2002 and 2001 are as
follows (in thousands):

`Years Ended December 31,
                                         -------------------------------
                                           2003       2002       2001
                                         ---------  ---------  ---------
License fees........................... $   7,071  $  28,597  $ 130,917
Professional services..................     6,475     34,303    200,816
Maintenance............................    15,649     24,725     34,185
Other..................................     7,043     17,904     42,651
                                         ---------  ---------  ---------
                                        $  36,238  $ 105,529  $ 408,569
                                         =========  =========  =========`

Included in Other above are revenues generated through hosting, content,
auction, education, training and subscription services.

Accounts receivable allowances

We maintain accounts receivable allowances for doubtful accounts, estimated
product and service returns and for certain performance related claims.

A summary of our accounts receivable allowances and related activity is as
follows:

`Allowance for Doubtful Accounts:               Charged
                                              (Released)                Balances
                                 Balances at   to Costs                    at
                                  Beginning      and      (Deductions)   End of
                                  of Period    Expenses   Recoveries     Period
                                 -----------  ----------  -----------  ----------
Year ended December 31, 2001... $     2,740  $   32,924  $   (21,880) $   13,784
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2002... $    13,784  $   (5,454) $    (5,862) $    2,468
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2003... $     2,468  $   (2,723) $     1,103  $      848
                                 ===========  ==========  ===========  ==========


Allowance for Product and Service Returns:
                                                                        Balances
                                 Balances at   Charged                     at
                                  Beginning   (Released)  (Deductions)   End of
                                  of Period   to Revenues Recoveries     Period
                                 -----------  ----------  -----------  ----------
Year ended December 31, 2001... $       500  $    7,807  $    (5,014) $    3,293
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2002... $     3,293  $      222  $    (2,479) $    1,036
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2003... $     1,036  $   (1,162) $       304  $      178
                                 ===========  ==========  ===========  ==========


Allowance for License Performance Claims:
                                               Charged                  Balances
                                 Balances at  (Released)                   at
                                  Beginning    to Costs                  End of
                                  of Period   of Revenues Deductions     Period
                                 -----------  ----------  -----------  ----------
Year ended December 31, 2001... $       --   $    7,000  $       --   $    7,000
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2002... $     7,000  $     (701) $    (3,802) $    2,497
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2003... $     2,497  $      --   $    (2,497) $      --
                                 ===========  ==========  ===========  ==========`

Our allowance for doubtful accounts reflects our estimate of losses resulting
from the inability of our customers to make required payments based on our
analysis of the current credit worthiness of the customer, prior payment history
and the age of the receivables.  We will periodically assess whether our actual
collection results differ substantially from our estimates and adjust our
assumptions if necessary.  Periodic provisions to our allowance for doubtful
accounts are recorded as a component of our general and administrative expense.
We write-off specific customer accounts receivable balances against the
allowance after our normal collection efforts have been unsuccessful.

In the year ended December 31, 2001 we experienced a rapid decline in revenue
and the financial condition of our customer base deteriorated with the overall
decline of the U.S. financial markets.  We increased our reserves based on
several factors, including without limitation the aging of our outstanding
accounts receivable, the financial condition of our customer base, and the
overall decline in the economy.  During 2002 and 2003, we
decreased the balance of our allowance for doubtful accounts primarily due to a
decrease in our accounts receivable balance related to an overall revenue
decline and collection on or write-off of accounts that were previously
reserved.  If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make such
payments, increases in the allowance may be required.

Our allowance for product and services revenue returns was established
through reductions in license and service revenues and relates to performance
issues raised by certain customers with outstanding receivable balances. We
believe the rapid deterioration in economic circumstances, especially during
2001, was a significant factor for these claims. We write-off specific customer
accounts receivable balances against the allowance after our efforts to resolve
the performance issues have been unsuccessful, or upon determination that the
receivable balance is otherwise uncollectible. The performance matters raised in
2001 were substantially resolved in 2002.

Our allowance for license performance claims was established in 2001 by
charges to cost of license fees as a result of performance issues raised by
certain license customers with outstanding receivable balances. This allowance
has been reflected as a reduction to our accounts receivable balance since it
relates to certain outstanding receivable balances. The performance matters
raised in 2001 were resolved and at December 31, 2003, no allowance for
performance claims was deemed necessary.

Long-lived Assets and Goodwill

In accordance with the provisions of SFAS 144, "Accounting for the Impairment
or Disposal of Long-lived Assets," and SFAS 142, "Goodwill and Other Intangible
Assets," we periodically assess the carrying value of our long-lived assets
including property and equipment, goodwill, our Technology Agreement with
Covisint and other identified intangible assets for impairment.  An
impairment assessment is performed whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. 
Impairment indicators include, but are not limited to, our net book value as
compared to market capitalization, significant negative industry and economic
trends, a significant decline in our stock price for a sustained period and
significant under performance relative to historical and projected future
operating results.  In assessing the recoverability of the current carrying
value of goodwill and other intangible assets, we must make assumptions
regarding the estimated future cash flows attributable to these assets.  In
addition we must make assumptions regarding discount rates to determine the fair
value of the respective assets. We have typically relied on valuation experts to
assist in the analysis of these factors. If these estimates or their related
assumptions change in the future, we may be required to record impairment
charges for these assets not previously recorded which could have a significant
impact on our operating results.

Restructuring Accrual

We have undergone multiple restructuring transactions during 2001, 2002 and
2003.  In accordance with Emerging Issues Task Force Issue (EITF) 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)", the
cost associated with transactions initiated in 2001 and 2002 have been charged
to restructuring expense in the period in which we committed to the
restructuring plan.  The charges relating to the consolidation and closing of
facilities and asset dispositions required significant estimates to determine
the amount of future payments to be accrued as a part of the restructuring
activity.  A change in the circumstances related to the plan for closure of the
facilities could result in additional charges or the reversal of prior charges
taken.

In June 2002, the Financial Accounting Standards Board
issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal
Activities."  SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies EITF Issue No.
94-3 "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)".  SFAS 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred,
not at the date of an entity's commitment to an exit plan, as required under
EITF 94-3.   The provisions of SFAS 146 were effective for exit or disposal
activities initiated after December 31, 2002.  During the year ended
December 31, 2003, we recorded restructuring costs of $20.7 million under the
provisions of SFAS 146.  The adoption of SFAS 146 may affect the timing of
recognizing future restructuring costs and the amounts recognized under such
costs.

Our restructuring charges and accrual have been based on our
estimates of future headcount and facility requirements. If we determine that
our actual requirements are less than our estimated requirements, we may be
required to record additional charges to further reduce our headcount and to
close additional facilities. In addition, our restructuring accrual is based on
other estimates including estimates of future sublease income and estimates of
benefits to be paid to terminated employees. At December 31, 2003, our
restructuring liabilities were primarily comprised of estimated payments to
terminated employees. We do not expect actual payments to differ significantly
from our estimates.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents and investments of approximately $10.1
million at December 31, 2003 compared to approximately $112.9 million at
December 31, 2002 and $288.2 million at December 31, 2001. Of the amount at
December 31, 2003, approximately $7.0 million represented unrestricted cash and
short-term investments that we can use to fund operations.  The final cash
balance for 2003 did not include $7.7 million of cash payments received on
January 2, 2004.

The amounts as of December 31, 2003 included approximately $3.2 million that
collateralized certain of our obligations related to operating lease agreements
for computer equipment and office facilities and potential workers compensation
claims.  The amounts as of December 31, 2002 included approximately $35.6
million that collateralized certain of our obligations related to operating
lease agreements for office facilities, potential workers compensation claims
and an outstanding note payable.  The amounts as of December 31, 2001 included
approximately $14.3 million that collateralized certain of our obligations
related to operating lease agreements for office facilities, potential workers
compensation claims and the guarantee of a personal home mortgage of an
executive officer.

Discussion of Cash Flows

As described in more detail below, we used a significant amount of cash
to support our operations in 2003.  This cash came from our existing cash, cash
equivalents and short-term investments, as well as from our financing in July
2003.  While the amount of cash we used in operations generally declined during
the year due to our efforts to reduce our expenses, we nonetheless ended 2003
with far less cash than we began the year.

Net Cash Used in Operating Activities

Net cash used in operating activities totaled approximately $91.3 million for
2003, as compared to net cash used in operating activities of approximately
$217.5 million and $267.0 million for 2002 and 2001, respectively.  Cash
used in operating activities for 2003 resulted primarily from the net loss in
2003, excluding non-cash charges for amortization, depreciation, loss on
disposal of fixed assets and impairment charges for intangible assets. The
payment of outstanding accounts payable, accrued compensation and other current
liabilities, along with a decrease in deferred revenue contributed to additional
cash used in operations.  Similarly, cash used in operating activities for 2002
resulted primarily from the net loss in that year, excluding non-cash charges
for amortization, depreciation, and impairment charges for fixed assets, the
equity investment held in Covisint, goodwill and other intangible assets. The
payment of outstanding accounts payable, accrued compensation and other current
liabilities, along with a decrease in deferred revenue also contributed to cash
used in operations.  Cash used in operating activities for 2001 resulted
primarily from the net loss in that year, excluding non-cash charges for
amortization, depreciation, and impairment charges for fixed assets and a $1.1
billion impairment charge for goodwill and other intangibles. The payment of
outstanding accounts payable, accrued compensation and other current
liabilities, along with a $57.1 million decrease in deferred revenue also
contributed to cash used in operations.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities totaled approximately $37.8 million
for 2003, as compared to cash provided by investing activities of $92.3 million
in 2002 and cash used in investing activities of $10.9 million in 2001. 
Cash provided by investing activities in 2003 related to the maturities of
short-term investments in the amount of $37.7 million. This was partially offset
by the purchase of short-term investments in the amount of $1.7 million and
purchases of property and equipment in the amount of $0.5 million.  Cash
provided by investing activities in 2002 related to the maturities of short-term
investments in the amount of $130.5 million and proceeds from divestitures in
the amount of $10.7 million. This was partially offset by the purchase of short-
term investments in the amount of $43.9 million and purchases of property and
equipment in the amount of $6.5 million.  Cash used in investing activities
in 2001 related to the purchase of short-term investments in the amount of
$173.9 million and the purchase of property and equipment of $39.5 million.
This was partially offset by the maturities of short-term investments in the
amount of $204.7 million.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities totaled approximately $13.5 million for
2003, compared to net cash provided by financing activities of $7.3 million in
2002 and $255.1 million in 2001.  The cash used in 2003 resulted from the
repayment of the note payable to Silicon Valley Bank in the amount of $25
million, partially offset by the exercise of employee stock options and stock
purchased through the employee stock purchase plan in the amount of $0.7
million and the $9.8 million of net proceeds from the issuance of preferred
stock and warrants to BayStar.  The cash provided in 2002 resulted from the
exercise of employee stock options and stock purchased through the employee
stock purchase plan in the amount of $4.9 million and cash proceeds drawn from a
credit facility with Silicon Valley Bank in the amount of $25 million, offset by
the payment of the outstanding balance of our loan from Microsoft in the amount
of $19 million and the payment of a loan to a former officer that we assumed
upon his termination in the amount of $4 million.  The cash provided in 2001
resulted from the sale of common stock to SAP for approximately $219.3 million,
proceeds from the exercise of employee stock options and the sale of stock
through the employee stock purchase plan in the aggregate amount of $18.6
million and cash proceeds drawn from a loan from Microsoft in the amount of $19
million, offset by $1.9 million in payments on notes payable and capital lease
obligations.

Future Obligations

The following summarizes our contractual obligations as of December 31, 2003,
and the effects such obligations are expected to have on our liquidity and cash
flows in certain future periods after December 31, 2003 (in thousands):

`5 years
                                                          Less than   1 to 3     4 to 5       and
                                                 Total    one year     years      years    thereafter
                                               ---------  ---------  ---------  ---------  ---------
Non-cancelable operating lease obligations... $   6,527  $   2,110  $   4,230  $     187  $      --
Peoplesoft note payable......................     2,039         --      2,039         --         --
Accrued restructuring costs..................     2,568      2,262        306         --         --
Redemption of Series B Preferred Stock.......    13,190     13,190         --         --         --
ComVest/DCC notes payable....................     5,507         --      5,507         --         --
Warrant liability............................     5,229         --         --         --      5,229
                                               ---------  ---------  ---------  ---------  ---------
Total........................................ $  35,060  $  17,562  $  12,082  $     187  $   5,229
                                               =========  =========  =========  =========  =========`

We presently occupy office space in four locations in the United
States.  Collectively, as of December 31, 2003, our long-term non-
cancelable obligations for future rents payable through June 2008 were
approximately $6.5 million.

The approximately $2.0 million promissory note issued to PeopleSoft is due
and payable in February 2005, or sooner upon the occurrence of any of the
following customary events of default, which generally include the following: (a) we fail to pay any amounts owed on
the note on or before the maturity date; (b) we fail to perform or observe any
other material agreement, covenant or obligation arising under the Note; (c) we
are in default under any other collateral obligation for repayment of borrowed
money from a bank or other financial institution; or (d) we file for bankruptcy,
an involuntary bankruptcy proceeding is brought against us  which is not
dismissed within thirty days,or other form of relief of debt, insolvency or
liquidation is sought by us or brought against us.

Accrued restructuring costs of $2.6 million includes approximately $0.9
million in lease termination liabilities not included in non-cancelable
operating lease obligations above, approximately $1.4 million in termination
payments to employees and approximately $0.2 million in liquidation fees in
connection with the closure of our offices in France.

Pursuant to the terms of the Series B Preferred Stock issued to BayStar, we
may upon the occurrence of certain events be required to redeem all of the
outstanding shares of Series B Preferred Stock.  The events that could lead to
redemption include failure to timely convert shares of Series B Preferred Stock
into common stock when requested, to timely file, have declared effective and
maintain the effectiveness of the registration statement on Form S-3 covering
the resale of the common stock underlying the Series B Preferred Stock or to
maintain the listing of our common stock on the Nasdaq National Market or the
Nasdaq SmallCap Market, or if we consummate a change of control (including a
merger, acquisition or sale of all or substantially all of our assets) of
Commerce One.

As of the date of this Form 10-K, the Form S-3 covering the resale of the
common stock underlying the Series B Preferred Stock had not yet been declared
effective by the SEC.  We are diligently working to complete the SEC review
process and to have the Form S-3 declared effective but cannot predict when this
will occur.  Beginning in January 2004, under the original contract, we began incurring penalties of $5,000
per day until the registration statement is declared effective.  Under the initial agreement with BayStar, in the event
that the Form S-3 was not declared effective on or prior to April 5, 2004,
we could have been required to redeem the Series B Preferred Stock for approximately $12
million or the fair market value of the common stock underlying the Series B
Preferred Stock, whichever is greater, plus any accrued and unpaid dividends and
other penalties which were estimated, as of December 31, 2003, to be approximately $1.2 million on April
5, 2004.
On March 14, 2004, we entered into a Consent and Amendment Agreement with
BayStar to amend certain provisions of our Registration Rights Agreement
covering the registration of the Common Stock issuable upon conversion of our
Series B Preferred Stock and the Common Stock issuable upon exercise of
BayStar's warrants (collectively the "Registrable Securities").  Under
this agreement, in exchange for a cash payment of $200,000 on or before April 1,
2004 and issuance of  approximately 500,000 shares of our common stock,  BayStar
agreed to extend the deadline by which our Registration Statement must be
declared effective by the Securities and Exchange Commission by 90 days (to July
4, 2004).  In addition, in exchange for such consideration, Baystar has agreed
to waive the $5,000 per day penalties accrued thus far and up to and including
July 4, 2004.  If the Registration Statement is not declared effective on or
before July 4, 2004, BayStar would have the right to redeem the Series B
Preferred Stock for a price equal to the greater of 120% of the original
purchase price of $10 million plus any accrued and unpaid dividends or the then
current market value of the Series B Preferred Stock on an as-converted-to-
Common Stock basis.

The approximate $5 million in secured promissory notes issued to ComVest and
DCC Ventures on December 31, 2003 become due and payable on March 31,
2005 along with accrued interest of $0.5 million, or sooner upon the occurrence
of certain events.  These events include a merger, a sale or change of control
of Commerce One, the sale, transfer or disposition of all or substantially all
of our assets, the sale of our SRM assets, our repayment of certain other
indebtedness, and certain events of default.

Under EITF 00-19, the ability to register stock is deemed to be outside of
the Company's control. Accordingly, the initial fair value of the warrants
issued to Baystar on July 10, 2003 of $3.6 million was recorded as an accrued
warrant liability in the consolidated balance sheet, and will be marked to
market at the end of each quarter.  At December 31, 2003, the warrant liability
was adjusted to its new fair value of $1.9 million as determined by us,
resulting in a gain of $1.8 million which has been reflected in the interest
income and other, net, on the consolidated statement of operations.
In addition, the fair values of the warrants
issued to Comvest and DCC Ventures on December 31, 2003 of $3.3 million have
been recorded as an accrued warrant liability in the consolidated balance sheet
at December 31, 2003, and will be marked to market at the end of each quarter.
We have reflected our warrant liability in the "5 years and thereafter" column
in the above table since there is no contractually specified settlement provision
or settlement date for these warrants.

We have no significant capital commitments or obligations other than those
described above.  We do not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes.  Further, we have not
guaranteed any obligations of unconsolidated entities nor have we any commitment
or intent to provide additional funding to any such entity.

Sources of Liquidity and Capital

We have historically satisfied our cash requirements primarily through the
issuances of equity securities and, to a significantly lesser extent, through
debt financing.

Financings and Other Events in 2003

On December 31, 2003, we issued secured promissory notes in the aggregate
principal amount of $5.0 million and warrants to purchase our common stock to
ComVest and DCC Ventures for an aggregate purchase price of $5.0 million.  Of
this amount, $1.0 million was received on December 31, 2003.  The remaining $4.0
million, recorded at December 31, 2003 as a short-term note receivable, was
received on January 3, 2004.

On December 30, 2003, we entered into a Settlement Agreement with Covisint,
LLC (Covisint) pursuant to which Covisint paid us $4,650,000.  As part of the
agreement, the parties resolved an arbitration and a separate Michigan state
court action that had been pending between the parties, and we granted a fully
paid software license to Covisint for certain Commerce One software that
Covisint has used in its operations.  The $4,650,000 from Covisint was received
on January 2, 2004 and was not included in the cash balance as of December 31,
2003.

In July 2003, we raised $10 million in connection with our sale of Series B
Preferred Stock and warrants to purchase our common stock to Baystar Capital II,
L.P.

In July 2003, we repaid our $25 million credit
facility with Silicon Valley Bank.  All amounts drawn under the facility
were fully secured by a cash collateral account with Silicon Valley Bank and, as
a result, the loan did not result in any net additional unencumbered cash to us.
The loan was repaid with the amounts in the cash collateral account.



Current Cash Position and Outlook for 2004

We had cash and cash equivalents and short-term
investments of approximately $10.1 million at December 31, 2003, of which $6.9
million was unrestricted cash and short-term investments that can be used to
fund operations. In 2003, we used on a net basis approximately $32.4 million and
$66.9 million of our total restricted and unrestricted cash reserves,
respectively.  This cash was used primarily to fund our operations.  We have
taken significant steps to reduce our ongoing operating expenditures,  including
a recent personnel reduction in October 2003 that reduced our headcount to
approximately 116 employees at the end of 2003, employee furloughs and multiple
real estate settlements.   While these efforts have significantly reduced our
operating expenditures, our operations are still drawing down our cash reserves.

Based upon our current plans and expectations, we believe that we will have
sufficient cash to fund our operations through 2004.  However, plans and
expectations are inherently uncertain and if our revenues do not meet our
expectations or we encounter expenses or cash outlays that are greater than
anticipated, we may not have sufficient cash to sustain our operations through
2004.  In addition, we believe that we will need to increase our revenues and/or
raise additional capital to meet our liquidity and capital needs beyond 2004.
We may seek to raise additional capital through, among other things, potential
asset sales, additional equity or debt financings, or some combination of
these.As announced previously, the Company has retained Broadview International
LLC to evaluate various strategic alternatives. Currently, the Company is
evaluating offers to purchase its Supplier Relationship Management (SRM)
applications. The Company's debt financing is secured by the SRM applications.
If the Company completes a sale of the SRM applications, the Company plans to
use the first $5.0 million in proceeds to repay existing secured debt. The
Company believes that estimated proceeds from a sale of the SRM applications,
after debt repayment, would provide additional liquidity to the Company
necessary to fund its operations.

The Company is building the market opportunity for its Commerce One Conductor
platform and composite process management solutions (Conductor Platform). The
Company's continued viability is dependent on its ability to generate revenues
through sales of its Conductor Platform.  However the Company has not yet
generated significant revenues from the Conductor Platform.

The current unfavorable market for equity or debt financing makes it
increasingly difficult to raise additional funding.  In addition, the rights of
our Series B Preferred Stock holder, BayStar, or our secured lenders,
ComVest and DCC Ventures, may discourage other potential investors and diminish
our ability to obtain additional financing.  If our revenues do not meet our
expectations, we are unable to obtain additional financing, or we encounter
expenses or cash outlays that are larger than expected, our remaining cash
reserves may not be sufficient to sustain our operations through 2004 or beyond.
In addition, our Series B Preferred Stock will become redeemable on July 5,
2004 unless we are able to have declared effective and maintain the
effectiveness of a registration statement covering the resale of underlying
common stock by July 4, 2004. If BayStar chooses to exercise its redemption right at that time,
we would not have sufficient cash to cover such redemption and our ability to
fund our operations would be severely damaged.  If we do not have sufficient
cash to fund our operations, we will need to pursue other alternatives such as
the sale of some or all of our assets, dramatically reducing or discontinuing
some or all of our operations or filing for bankruptcy protection.  If we do
file for bankruptcy protection, there can be no assurance that we can
effectively reorganize under Chapter 11 of the Bankruptcy Code or that we
would be able to earn sufficient proceeds from a liquidation under
Chapter 7 of the Bankruptcy Code to pay all of our creditors or provide any
proceeds to our stockholders.

The forecasts of the periods of time through which our
financial resources will be adequate to support our operations and all related
statements are forward-looking statements that involves risks and uncertainties,
and actual results could vary materially as a result of the factors described in
this paragraph and in the section entitled "Risk Factors."

RESULTS OF OPERATIONS

The following table sets forth the results of operations for Commerce One
expressed as a percentage of total revenues for the years ended
December 31, 2003, 2002 and 2001. These historical operating results are
not necessarily indicative of the results for any future period.

COMMERCE ONE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

`Years Ended December 31,
                                                       ---------------------------------
                                                         2003       2002        2001
                                                       ---------  ---------  -----------
Revenues:
License fees.........................................        20 %       27 %         32 %
Services.............................................        80 %       73 %         68 %
                                                       ---------  ---------  -----------
Total revenues ......................................       100        100          100
                                                       ---------  ---------  -----------
Costs and expenses:
Cost of license fees ................................        41 %      182 %        162 %
Cost of services.....................................        60 %       65 %         56 %
Sales and marketing..................................        50 %       75 %         45 %
Product development..................................        75 %       73 %         29 %
General and administrative...........................        23 %       24 %         29 %
Purchased in-process research and development........        -- %       -- %          1 %
Stock compensation...................................         9 %        8 %         24 %
Restructuring costs and other........................        20 %       22 %         31 %
Amortization of goodwill and other
   intangible assets.................................         2 %       11 %         81 %
Impairment of intangible assets,
   fixed assets......................................        -- %      203 %        274 %
                                                       ---------  ---------  -----------
Total costs and expenses.............................       280 %      663 %        732 %
                                                       ---------  ---------  -----------
Loss from operations.................................      (180)%     (563)%       (632)%
Interest income and other, net.......................        14 %        4 %          2 %
                                                       ---------  ---------  -----------
Net loss before income taxes.........................      (166)%     (559)%       (630)%
Provision for income taxes...........................        (7)%       -- %          2 %
                                                       ---------  ---------  -----------
Net loss.............................................      (159)%     (559)%       (632)%
                                                       ---------  ---------  -----------
Deemed dividend related to beneficial conversion
   feature on Series B Preferred Stock...............         9 %       -- %         -- %
Accretion of Series B Preferred Stock to
   redemption value..................................        16 %       -- %         -- %
Series B Preferred Stock dividends...................         1 %       -- %         -- %
                                                       ---------  ---------  -----------
Net loss attributable to common stockholders.........      (186)%     (559)%       (632)
                                                       =========  =========  ===========`

YEARS ENDED DECEMBER 31, 2003, 2002 and 2001.

Revenue

Total revenues for 2003 decreased to approximately $36.2 million
compared to $105.5 million for 2002 and $408.6 million for 2001.

License Revenue

License revenues for 2003 decreased to approximately $7.1 million compared to
$28.6 million for 2002 and $130.9 million in 2001.  In 2003, a significant
portion of the $21.5 million decrease in license revenue was due to a
significant drop in SAP license royalties.   SAP royalties in 2003 were $0.4
million, a decrease of $19.3 million from 2002.  The remaining $2.2 million
reduction in license revenue is due to a drop in average recognized license
revenue per customer.  The average license revenue per customer was $125,000 in
2003, a 38% decrease from 2002.  Excluding SAP, we recognized license revenues
relating to 53 specific customers in 2003, a 20% increase from the prior year.
In 2003, the decrease in license revenues relative to prior years primarily
resulted from the change in focus from our previous generation of products; a
significant slowdown in technology spending coupled with the continued general
economic downturn; and intense competition in the market for packaged SRM
applications, to which we were a relatively new entrant in 2001and 2002.  In
November 2003, we terminated our relationship with SAP and as a result, we do
not expect to receive any revenues from SAP for technical support and
maintenance in 2004 or thereafter.

In 2002, the decrease in license revenues primarily resulted from a
significant slowdown in technology spending coupled with a general economic
downturn, and significantly fewer opportunities to license marketplaces
resulting in fewer and lower priced customer orders.  The SRM-related portion of
our business overall declined from 2001 to 2002.  In addition to the decrease in
the SRM average sales price due to the overall decline in technology spending,
the sales and market share in the SRM area also shifted to software providers
that provide a full suite of enterprise products, such as SAP, Oracle and
PeopleSoft.  We experienced a more significant decline than most during this
period due to an intentional change in our focus from SRM and emarketplace
software applications to Composite Process Management (CPM) and the development
of our Commerce One Conductor
platform in 2002.  While we believe that our
SRM products are generally equal to those of our competitors from a feature and
function standpoint, we have lost market share in the SRM business and have not
been as competitive as we were historically due to this change in our focus and
strategy.

As a result of the above factors, we experienced a decrease in the total
number of new customers from approximately 141 customers in 2001 to
approximately 68 customers in 2002 and approximately 17 customers in 2003.
These numbers reflect the decrease in total number of customer license sales, as
well as a decrease in customers resulting from the divestiture of various lines
of our services business in 2003.

In 2002, license revenue decreased $102.3 million while SAP license revenue
royalties decreased $48.6 million from 2001.  Excluding SAP, license revenue was
$53.7 million lower in 2002 due to a drop in average recognized license revenue
per customer and the number of license revenue generating customers.  In 2002,
excluding SAP, the Company recognized license revenues on 44 specific customers,
a 44% decrease from 2001.  The average license revenue per customer was $200,000
in 2002, a 75% decrease from 2001.  In 2002, 69% of the decrease in direct
license business is due to the drop in selling price while 31% was due to a
lower deal volume.

Approximately $0.4 million of our total $7.1 million in license fees in 2003
was recorded as revenue from SAP pursuant to the fixed fee arrangement with SAP
during the twelve months ended December 31, 2003.  These fees were credited
against prior prepayments to Commerce One, which previously were recorded as
deferred revenue.  As a result, such fees did not provide us with any net
additional cash at the time the revenue was recognized.

Direct license sales of our SRM applications in both object code and source
code form represented the substantial majority of our license revenues in 2003.
We introduced our Commerce One Conductor

Service Revenue

Services revenues for 2003 decreased to $29.2 million compared to
$76.9 million in 2002 and $277.7 million in 2001. The percentage of
our revenues attributable to professional services in 2003 increased again
compared to 2002 and 2001, and professional services remained the largest
portion of our overall revenue.  The services revenue decrease in 2003 as
compared to 2002 and 2001 resulted primarily from the downsizing of the Global
services division through reductions in force and divestitures of various Global
Services divisions amounting to approximately $166.5 million, an approximate
$2.8 million reduction in the amounts received from various historical revenue-
sharing arrangements (primarily Covisint, with whom we were engaged in a payment
dispute throughout 2003 - See "Settlement with Covisint" in Management's
Discussion and Analysis), continued termination and reduction of support and
maintenance agreements by existing customers amounting to approximately $9.5
million, particularly our electronic marketplace customers, and an
approximate$22.0 million decrease in revenues from maintenance, hosting services
and other revenue services commensurate with the overall decline in license
revenues.  We expect that services revenues will decrease in 2004 as
compared to 2003 primarily due to the decrease in the number of employees in our
professional service division.  Our services revenues may also decline if
we are unable to maintain our prices and utilization rates.  In addition, we are
currently considering the sale of our SRM applications.  Although no assurance
can be provided that such sale would occur, if such sale does take place, it
likely would include the transfer of most of our current maintenance and support
revenues, and as a result, we expect that our services revenues would decrease
substantially until such revenues are replaced by maintenance revenues relating
to our new Commerce One Conductor

In January 2003, we closed the sale of CommerceOne.net, our marketplace
services business, consisting of auction services, subscription services,
content services and hosting services, to eScout.  During 2003, we
recognized a total of approximately $3.2 million in services revenue from
CommerceOne.net related services.  Subsequent to this sale, Commerce One no
longer offers these services and therefore will not receive any future additional revenues
related to these services.

The percentage of our revenues attributable to professional services
increased from 68% in 2001 to 73% in 2002 to 72% in 2003.  The decrease of
$200.7 million of services revenue in 2002 compared to 2001 was due primarily to
the downsizing of the Global Services division through reductions in force and
divestitures of various Global Services divisions, a reduction in the amounts
received from various historical revenue-sharing arrangements, continued
termination and reduction of support and maintenance agreements by existing
customers, particularly our electronic marketplace customers, and a decrease in
revenues from maintenance and hosting services commensurate with the overall
decline in license revenues.  Maintenance revenue also decreased significantly
again in 2003 to $15.6 million from $24.7 million in 2002 and $34.2 million in
2001.  The decrease is primarily due to customers canceling maintenance in 2003
and 2002.

Payments received from our strategic alliance with SAP constituted a
substantial portion of our total revenues during the years 2003, 2002 and
2001.  Total revenues received from SAP were approximately $4.1 million,
$26.1 million and $79.1 million for the years 2003, 2002 and 2001, respectively,
of which license revenues were approximately $0.4 million, $19.7 million and
$68.3 million.  Due to the termination of our relationship with SAP, we do
not expect to receive revenues from SAP in 2004 or thereafter.



Cost and Expenses

Cost of revenues consisting of cost of services and cost of licenses were
approximately $36.5 million, or 101% of total revenues, in 2003;
$260.6 million, or 247% of total revenues, in 2002; and $890.3 million, or
218% of total revenues, in 2001.

Cost of License Fees

Cost of license fees were $14.9 million in 2003, compared to
$192.4 million in 2002 and $662.3 million in 2001. The cost of license fees
includes the amortization and the impairment of the Technology Agreement with
Covisint plus the cost of royalties for third party licenses which are either
embedded in or bundled with Commerce One software. It also includes the
maintenance owed on third party licenses for second tier support and upgrades.
Other costs include a license performance claim reserve and in 2001 we incurred
referral fees.

In 2003, cost of license fees was composed of charges related to the
impairment of the Technology Agreement with Covisint of approximately $14.4
million and the amortization of the cost of the Technology Agreement with
Covisint of approximately $1.5 million.  This impairment and amortization
in 2003 is partially offset by a $1.2 million deduction to cost of license as a
result of our reduction in our license performance claim reserve to zero at
December 31, 2003.  Of the  $177.5 million decrease in cost of license fees
between 2003 and 2002, $165.6 million was due to a lower impairment of the
Technology Agreement with Covisint, and related amortization was lower by $8.9
million. In addition, third party software royalties were $2.3 million lower,
third party maintenance royalties were $0.2 million lower and the license
performance claim reserve requirement was lower by $0.5 million.

In 2002, cost of license fees were primarily composed of charges related to
the impairment of the Technology Agreement with Covisint of approximately $180.0
million and the amortization of the cost of the Technology Agreement with
Covisint of approximately $10.4 million and approximately $2.0 million in other
license costs.  In 2001, cost of license fees included charges related to
the impairment of the Technology Agreement with Covisint of approximately $592.3
million, amortization of the cost of Technology Agreement with Covisint of
approximately $55.2 million, a charge to establish the license performance claim
reserve of approximately $8.5 million and approximately $6.3 million in other
license costs.  Of the $469.9 million decrease in cost of license fees between
2002 and 2001, $412.3 million was due to a lower impairment of the Technology
Agreement with Covisint, and related amortization was lower by $44.8 million. In
addition, third party software royalties were $2.6 million lower and third party
maintenance royalties were $0.2 million lower. In addition, there were referral
fees of $0.8 million in 2001 and none in 2002.  The remaining $9.2 million
reduction in expense results from the establishment of the license performance
claim reserve of $8.5 million in 2001 compared to a reserve release adjustment
of  $0.7 million in 2002 .

Cost of Services

Cost of services, which primarily consists of consulting, personnel and
related cost, software maintenance and training costs, was $21.6 million for
2003, $68.2 million for 2002 and $228.0 million for 2001.  The
decrease in cost of services in 2003 resulted primarily from an approximate
$25.1 million decrease in salaries and wages resulting from the downsizing of
the Global Services division through reductions in force and divestitures of
certain business segments, an approximate $8.0 million decrease in depreciation
expense, an approximate $6.3 million decrease in outside consulting expenses, an
approximate $2.7 million decrease in IT spending, an approximate $2.7 million
decrease in travel and meals expenses and a decrease of approximately $1.8
million of other expenses, primarily reduced facilities and associated costs.
The decrease in cost of services in 2002 resulted primarily from the elimination
of the AppNet business unit which was consolidated into the Commerce One Global
Services division.  The total expense reduction of the former AppNet division,
which was primarily direct labor, was $89.2 million.  The remaining decrease in
cost of services in 2002 from 2001 was primarily related to the legacy Commerce
One business unit downsizing consisting of $46.7 million of personnel-related
expenses, $11.5 million in outside consulting and services expenses, $5.5
million in travel related expenses, $2.0 million in IT spending, and $4.9
million in other charges, primarily facilities and telephone charges.

As of December 31, 2003, the overall number of employees working in our
Global Services division was 44, a significant decrease from 234 as of December
31, 2002 and 640 as of December 31, 2001. Consistent with the decrease in the
size of our professional services organization, we expect a further decline in
professional services costs over the next few quarters.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel and related cost
and commissions, and the costs of seminars, promotional materials, trade shows
and other sales and marketing programs.  Sales and marketing expenses were
approximately $18.4 million for 2003, $78.9 million for 2002 and
$183.4 million for 2001.  The decrease in 2003 was primarily attributable
to an approximate $29.2 million decrease in salaries and wages due to an overall
decrease in the average number of sales and marketing personnel during the year,
an approximate $9.1 million decrease in depreciation expense, an approximate
$8.5 million decrease in travel and entertainment expenses, an approximate $6.3
million decrease in marketing-related activity related to product user
conferences held during the year, and an approximate $2.1 million decrease in
outside services and consulting expenses and an approximate $5.3 million
decrease in other charges, primarily rent and telephone charges as a result of
the reduced workforce. The decrease in 2002 was primarily attributable to
an overall decrease in the average number of sales and marketing personnel
during the year, resulting in a decrease of approximately $50.0 million in
salaries, wages and commissions, as well as an approximate
$10.0 million decrease in travel expenses, $19.6 million in marketing-
related activities, $9.2 million in connection with expenses incurred in 2001
for the acquisition of AppNet, a $3.4 million decrease in depreciation, an
approximate decrease in facilities and telephone charges of $4.4 million, an
approximate decrease of $2.3 million in IT charges, and a decrease of
approximately $5.6 million due to a reduction in allocated and other charges.
In 2002 the accounting for the AppNet business was integrated into the main
accounting system making it difficult to isolate the specific expenses and
thereby difficult to compare this segment year on year.  In 2001 the total Sales
and Marketing expenses for the AppNet segment were $9.2 million.  The number of
employees engaged in sales and marketing was approximately 15 at
December 31, 2003 compared to approximately 149 at December 31, 2002
and 395 at December 31, 2001.  We expect that sales and marketing
expenses will decrease over the next year primarily as a result of a decrease in
the number of employees in this area as part of our corporate restructuring
efforts.

Product Development Expenses

Product development expenses consist primarily of personnel and related costs
associated with our product development efforts.  Product development expenses
were approximately $27.1 million for 2003, $76.9 million for 2002 and
$118.2 million for 2001. In 2003, these expenses related primarily to
the development of our new Commerce One Conductor

The overall number of employees engaged in product development decreased to
33 at December 31, 2003, compared to 302 at December 31, 2002 and 588
at December 31, 2001.

In January 2003, we entered into an outsourcing arrangement with Satyam
Computer Services Limited.  Pursuant to this agreement, Satyam provides
certain support, maintenance and product development services with respect to
our SRM applications, including our Commerce One Buy and Commerce One Source
products.

Despite additional costs associated with our outsourcing agreement with
Satyam, we expect total product development expenses to decrease in 2004 due to
the significant reduction in the number of employees engaged in product
development.

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 $8.2 million for 2003,
$25.6 million for 2002 and $116.6 million for 2001.  The decrease in 2003
was primarily attributable to approximately $15.1 million in salary and wages
savings resulting from an overall decrease in the average number of general and
administrative personnel employed during the year, an approximate $2.6 million
decrease in depreciation expense, an approximate $1.4 million decrease in
facilities and telephone charges and an approximate decrease of $3.6 million of
other expenses, primarily travel, legal and consultant expenses. The savings
were offset by increased IT charges of $3.8.  In 2003 the bad debt reserve
requirement went down primarily as a result of customer collections and lower
sales.  The resulting release of the reserve in 2003 was less favorable than the
2002 release by approximately $1.5 million..   The decrease in 2002 was
primarily attributable to approximately $14.1 million in savings resulting from
an overall decrease in the average number of general and administrative
personnel employed during the yearand an approximate $7.1
million decrease in legal costs associated with operating our business in 2001.
In 2002 the accounting for the AppNet business was integrated into the main
accounting system making it difficult to isolate the specific expenses and
thereby difficult to compare this segment year on year.  In 2001 the total
G&A expenses for the AppNet segment were $29.4 million. These charges
related primarily to direct labor.  In 2001 the provision for bad debt was
approximately $33.0 million.  In 2002 the bad debt reserve requirement went down
and the reserve was released primarily as a result of customer collections and
reduced sales.  The result is a net favorable change of approximately $37.2
million in the provision for bad debts when comparing 2002 to 2001.  Other
reductions include a decrease of approximately $1.9 million of outside services,
a decrease in travel expenses of $1.7 million, a reduction in facilities and
telephone charges of $2.7 million, a reduction in depreciation charges of  $1.1
million and a reduction in other expenses of $1.6 million. Offsetting these
savings were increased IT charges of approximately $4.3 million and a loss on
disposition of assets of $1.5 million.  The number of employees engaged in
general and administrative functions was 24 at December 31, 2003, compared
to 94 at December 31, 2002 and 273 at December 31, 2001.  We expect general and
administrative expenses will decrease over the next year due primarily to the
decrease in the average number of employees in this area as a result of these
restructuring efforts.

Stock Compensation

Stock compensation expenses result from the grant of stock options, grant of
restricted common stock and sales of stock to employees at exercise or sales
prices below the deemed fair market value of our common stock. Stock
compensation expense was approximately $3.4 million in 2003, $8.7 million in
2002 and $98.3 million in 2001.

In September 2003, our Board of Directors approved the acceleration of
vesting of certain "out-of-the-money" employee stock options related to the
prior acquisitions of Exterprise, Mergent and AppNet.  This accelerated vesting
created an additional $1.0 million charge in stock compensation expense.  As a
result of the full vesting of these stock options, we do not expect any future
additional charge to stock compensation expense for deferred compensation
related to these acquisitions.

On January 30, 2003, we announced that we had discovered we had overstated
stock compensation expense for the quarters ended March 31, 2002, June 30, 2002
and September 30, 2002, resulting in a net loss for those periods that was
slightly better than previously reported.  The stock compensation expense
for these periods was less than previously reported by approximately $10.6
million in the third quarter of 2002, $8.8 million in the second quarter of 2002
and $8.9 million in the first quarter of 2002.  This overstatement related
to non-cash stock compensation expenses for certain employees from prior
acquisitions no longer employed with us, but for whom we continued to amortize
the expense.  After adjusting the results in these quarters to correctly
reflect the lower expense, the adjusted net loss on a GAAP basis for the third
quarter of 2002 was reduced to $36.3 million or $1.25 per share, for the second
quarter of 2002 was reduced to $62.3 million, or $2.15 per share, and for the
first quarter of 2002 was reduced to $211.7 million, or $7.36 per share. 
We also discovered that we had overstated our deferred stock compensation
expense for the fiscal years ended 2000 and 2001 by amounts that were immaterial
to the financial results for those periods.

Restructuring Costs and Other

In January 2003, we adopted SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities" for all restructuring plans initiated after
December 31, 2002.  SFAS 146 addresses financial accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force (EITF) Issue 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)."  SFAS 146 requires that a liability
for costs associated with an exit or disposal activity be recognized at fair
value when the liability is incurred, not at the date of an entity's commitment
to an exit plan as required under EITF Issue 94-3. Subsequent to initial
recognition at fair value,  restructuring liabilities are accreted to their
estimated settlement amounts. Prior to January 1, 2003, we accounted for
restructuring activities under EITF 94-3 and, as permitted under SFAS 146,
continues to use EITF 94-3 to account for liabilities related to restructuring
plans initiated prior to January 1, 2003.  All restructuring charges have been
reflected in "Restructuring costs and other" in the consolidated statement of
operations.

2003 Restructuring Plans

The following table summarizes the activity related to restructuring
plans initiated in 2003, and accounted for in accordance with FAS 146, for the
twelve months ended December 31, 2003 (in thousands):

`Amounts       Amounts                    Accrued
                                           charged to   reversed to     Amounts   restructuring
                                         restructuring restructuring    paid or      costs at
                                           costs and     costs and      written    December 31,
                                             other         other          off          2003
                                          ------------  ------------  ------------  -----------
January 2003 Plan:
  Lease cancellations and commitments... $      5,588  $       (458) $     (4,316) $       814
  Termination payments to employees
   and related costs....................       12,189            --       (12,189)          --
                                          ------------  ------------  ------------  -----------
                                               17,777          (458)      (16,505)         814
                                          ------------  ------------  ------------  -----------
July 2003 Plan:
  Termination payments to employees
   and related costs....................          995            --          (995)          --
                                          ------------  ------------  ------------  -----------
                                                  995            --          (995)          --
                                          ------------  ------------  ------------  -----------
October 2003 Plan:
  Termination payments to employees
   and related costs....................        1,609            --          (197)       1,412
  Write-off on disposal of assets
   and related costs....................          348            --          (144)         204
                                          ------------  ------------  ------------  -----------
                                                1,957            --          (341)       1,616
                                          ------------  ------------  ------------  -----------
Total accrued restructuring charges..... $     20,729  $       (458) $    (17,841)       2,430
                                          ============  ============  ============
Less non-current accrued
  restructuring charges.................                                                  (306)
                                                                                    -----------
Accrued restructuring charges
  included within other accrued
  liabilities...........................                                           $     2,124
                                                                                    ===========`

January 2003 Plan

In January 2003, management approved and began to implement a restructuring
plan aimed at further reducing its operating expenses while continuing to align
Commerce One's resources around its core product initiatives.  This first
quarter activity was intended to reduce our headcount by approximately 430
employees and payroll related expenses by $53 million annually. As a result,
approximately $12.2 million was accrued as a restructuring liability for the
payments due to the 430 terminated employees.  In addition, approximately $0.1
million was accrued in connection with the closure of our offices in the UK
during the first quarter of 2003.  All employee termination activities and
payments under this plan were completed by December 31, 2003.

In April 2003, in connection with the headcount reductions made under the
January 2003 Plan, we ceased using and entered into an agreement to sublease a
portion of our former corporate office facility in Pleasanton, California in an
effort to decrease our rent expense.  The sublease had a term from January 2004
through February 2005.  The amount of projected income provided for under the
sublease was less than the lease payments due by us, and we recorded a $3.5
million charge to establish a liability for the fair value of this shortfall.
This was subsequently accreted to $3.8 million during 2003.  We also entered
into an agreement to terminate  our Cambridge, Massachusetts office lease
agreement by paying $750,000 cash, and agreeing to make two additional cash
payments of $375,000 each to be paid in September 2004 and September 2005,
respectively.  As a result, we recorded a $1.5 million charge to restructuring
and established a restructuring liability for the additional cash payments.

In December 2003, we completed an agreement with our landlord for our former
Pleasanton, California headquarters to terminate our lease agreement for these
facilities. Pursuant to this agreement, we provided our landlord the following:
1) an initial cash payment of $1.5 million, 2) an interest-free promissory note
in the principal amount of $2 million (discounted to $1.3 million) payable in
2005 (see Note 7), and 3) 1.7 million shares of common stock with a market value
of $2.1million. Upon completion of this transaction, we have no further rental
payment obligations for our former headquarters. Upon termination of the
Pleasanton lease agreement, we applied the aggregate termination consideration
of $4.9 million as payment and reduction of $3.3 million of the previously
established Pleasanton facilities restructuring liability, and $1.6 million as
payment and reduction of accrued Pleasanton lease liabilities. Additionally, we
recorded a $0.5 reversal of the remaining Pleasanton lease restructuring
reserves.  In November 2003, we moved our operations from the Pleasanton
facility to other locations in San Francisco and Santa Clara, California
previously leased by us with significantly less square footage.

July 2003 Plan

In July 2003, management implemented further restructuring plans aimed at
reducing operating expenses.  This plan was intended to ultimately reduce our
headcount by 50 employees to approximately 250 employees by the fourth quarter
of 2003 and reduce payroll related expenses by $6 million annually.  We incurred
approximately $1.0 million of additional restructuring charges in the third
quarter related to these actions.  Of this approximate $1.0 million accrual for
payments due these approximate 50 terminated employees, approximately $0.7
million was attributable to employees in the US, approximately $70,000 was
attributable to employees in the UK and approximately $0.2 million was
attributable to employees in our Germany location.  Additionally, an approximate
$123,000 was accrued in relation to the closure of our French offices in the
third quarter of 2003.

October 2003 Plan

In October 2003, we continued to rationalize our operating expenses by
implementing additional restructuring initiatives.  The initiatives mainly
focused on reducing worldwide headcount to 116 employees by the end of the
fourth quarter of 2003 and to reduce payroll related expenses by $10 million
annually.  As a result, we incurred additional restructuring charges in the
fourth quarter of approximately $2.0 million related to these activities.  Of
this amount, approximately $1.6 million is attributable to payments due to the
approximately 84 employees terminated under this October 2003 Plan.
Approximately $1.2 million of the $1.6 million restructuring accrual for these
terminated employees related to the liquidation of the French subsidiary.
Approximately an additional $0.4 million related to an accrual for terminated
employees in the US locations.  The remaining French employee termination
accrual as of December 31, 2003 primarily relates to payments to be made in 2004
in accordance with applicable French laws governing termination payments to
employees.

In connection with the October 2003 Plan, we incurred approximately $0.3
million in other restructuring charges as a result of liquidator for the French
subsidiary.

We expect that the remaining liability of $1.6 million at December 31, 2003
for the October 2003 Plan will be paid in full by December 31, 2004.

In January 2004, we signed an agreement with the landlord of the office space
we occupy in Austin, Texas.  Under the agreement, we reduced our monthly base
rent obligation, retroactive to November 1, 2003, extended the lease term and also assigned to the
landlord our sublease with a subtenant who had occupied some of our subleased
space.  In exchange, the landlord was permitted to draw down an existing letter
of credit in the amount of approximately $500,000 and reclaimed a significant
portion of the space under lease.  The net result of the transaction was to
reduce our miminum lease obligation to this landlord by $0.2 million.  However,
the landlord also has the right to extend the lease for an additional 30 months
upon its expiration in January 2006, subject to certain buyout rights of the
Company.

2002 and Prior Restructuring Plans

The following tables summarize the activity related to the restructuring
plans initiated prior to January 1, 2003, and accounted for in accordance with
EITF 94-3 (in thousands):

`Amounts       Amounts                   Accrued
                                           charged to   reversed to     Amounts  restructuring
                                        restructuring restructuring     paid or     costs at
                                           costs and     costs and      written    December 31,
                                             other         other          off         2001
                                          ------------  ------------  ------------  ---------
Lease cancellations and commitments..... $     68,860  $         --  $    (17,971) $  50,889
Termination payments to employees
   and related costs....................       30,790            --       (26,275)     4,515
Write-off on disposal of assets
   and related costs....................       30,418        (4,321)      (25,657)       440
Costs associated with divestiture
   of certain businesses................          858            --          (858)        --
                                          ------------  ------------  ------------  ---------
Total restructure accrual and other..... $    130,926  $     (4,321) $    (70,761) $  55,844
                                          ============  ============  ============  =========`

`Accrued        Amounts       Amounts                  Accrued
                                       restructuring  charged to    reversed to    Amounts   restructuring
                                         costs at    restructuring  restructuring  paid or     costs at
                                       December 31,    costs and     costs and     written   December 31,
                                           2001          other         other         off         2002
                                       ------------  -------------  ------------  ---------  ------------
Lease cancellations and commitments.. $     50,889  $       4,600  $     (8,152) $ (12,593) $     34,744
Termination payments to employees
  and related costs..................        4,515         23,749          (193)   (26,558)        1,513
Write-off on disposal of assets
  and related costs..................          440          5,404          (161)    (5,570)          113
Reversal of restructuring cost in
  connection with sale of eGovernment           --             --        (2,300)     2,300            --
                                       ------------  -------------  ------------  ---------  ------------
Total restructure accrual and other.. $     55,844  $      33,753  $    (10,806) $ (42,421) $     36,370
                                       ============  =============  ============  =========  ============
Less non-current accrued
  restructuring charges..............                                                            (21,947)
                                                                                             ------------
Accrued restructuring charges
  included within other accrued
  liabilities........................                                                       $     14,423
                                                                                             ============`

`Accrued        Amounts       Amounts                  Accrued
                                       restructuring  charged to    reversed to    Amounts   restructuring
                                         costs at    restructuring  restructuring  paid or     costs at
                                       December 31,    costs and     costs and     written   December 31,
                                           2002          other         other         off         2003
                                       ------------  -------------  ------------  ---------  ------------
Lease cancellations and commitments.. $     34,744  $          --  $    (13,788) $ (20,818) $        138
Termination payments to employees
  and related costs..................        1,513            800           (95)    (2,218)           --
Write-off on disposal of assets
  and related costs..................          113             --          (103)       (10)           --
                                       ------------  -------------  ------------  ---------  ------------
Total restructure accrual and other.. $     36,370  $         800  $    (13,986) $ (23,046) $        138
                                       ============  =============  ============  =========  ============`

2001 Restructuring Activities

In 2001, we implemented restructuring plans to significantly reduce our
annual operating expenses while realigning our resources around our core product
initiatives. The restructuring costs in 2001 were estimated at $126.6 million.
Collectively, the 2001 costs were associated with the termination of
approximately 2,070 employees to cover costs such as separation pay,
outplacement services and benefit continuation and also the termination of
certain office leases, the divestiture of certain parts of our Global Services
division, the consolidation or closure of certain facilities and the write-down
of the carrying value of computers and equipment used by employees terminated.
Facilities consolidated or closed were located in the United States, Europe and
Asia.  These offices were primarily responsible for the sale of our software
products, professional services or customer support.  These lease related
restructuring charges reflected the remaining contractual obligations under
facility leases, net of anticipated sublease income from the date of facility
abandonment to the end of the lease term.  We continued to use certain
facilities during the completion of the restructuring and continued to record
monthly rent expense until the facilities were available for sub-lease or were
abandoned.

2002 Restructuring Activities

In 2002, we incurred restructuring charges of approximately $4.6 million for
facilities consolidated or closed in the United States, Europe and Asia. 
These offices were responsible for the sale of our software products,
professional services or customer support.  These restructuring charges
reflect the remaining contractual obligations under facility leases, net of
anticipated sublease income from the date of facility abandonment to the end of
the lease term.  In addition, the charges include $3.7 million of changes
in management assumptions regarding sub-lease income.  Amounts reversed are
mainly related to early lease settlement negotiations for certain leased
properties resulting in a reversal of $5.7 million and changes in management
assumptions regarding broker fees in connection with assumed sub-lease income
resulting in a reversal of $1.3 million.  We continued to use certain
facilities during the completion of the restructuring and continued to record
monthly rent expense until the facilities were available for sub-lease or were
abandoned.

In 2002, we incurred restructuring charges of approximately $23.7 million for
the termination of approximately 900 employees to cover costs such as separation
pay, outplacement services and benefit continuation.  The separation
payments and termination benefits were accrued and charged to restructuring
costs in the period that both the benefit amounts were determined and such
amounts were communicated to the affected employees.  The employee
reductions occurred in all areas of the Company. As of December 31, 2002, all of
the employees had been notified and the majority of these terminations had been
completed.

In 2002, we incurred restructuring charges of approximately $5.4 million
related to the carrying values of equipment and leasehold improvements abandoned
in connection with the restructuring.  Included in the assets disposed of
and charged to restructuring costs are personal computers and equipment used by
terminated employees, office equipment and leasehold improvements in connection
with closure or consolidation of facilities and subsidiaries in the United
States, Asia and Europe.

In 2002, we executed a stock purchase and sale agreement with Commerce One E-
Government Solutions, Inc., a Delaware corporation and a wholly-owned subsidiary
of Commerce One, and eGov Holdings, Inc., a Delaware corporation composed of
former Company employees.  In consideration for the sale of 100% of the
outstanding common stock of Commerce One E-Government Solutions, Inc to eGov
Holdings, Inc., we received cash consideration of approximately $8.4 million,
and recorded a gain of approximately $2.3 million, which was recorded as a
reversal of restructuring costs since Commerce One E-Government Solutions, Inc
had been included in restructuring charges recorded in 2001.

2003 Restructuring Activities

In 2003, we incurred restructuring charges of approximately $0.8 million
related to a change in management estimates related to employee termination
benefits to be paid under restructuring plans adopted prior to January 1, 2003.

Restructuring charges reversed in the year ended December 31, 2003 resulted
primarily from the settlement of various lease obligations as outlined below.
In addition, there were minor reversals as a result of changes in management
estimates relating to employee claims and the disposal price of equipment and
other assets.

During the second quarter of 2003, we reached a number of settlement and
restructuring agreements related to our real estate commitments in six U.S.
locations.  Pursuant to these agreements, we paid a total of approximately $9.8
million in cash and forfeited approximately $5.5 million under letters of credit
in the second quarter.  In addition, we issued a total of 2.3 million shares
of restricted common stock valued at approximately $4.8 million to the
landlords.   These settlements were part of the restructuring plans initiated
prior to January 1, 2003 accounted for in accordance with EITF 94-3, and
resulted in reversals of the restructuring liability in the amount of
approximately $13.8 million for the year ended December 31, 2003.  The remaining
approximate $0.1 million in restructuring liability related to restructuring
plans initiated prior to January 1, 2003 are expected to be paid out during the
year ended December 31, 2004.

Costs Associated with Divestiture of Certain Businesses

In October 2001, we executed an asset sale to Beaconfire Consulting Inc., a
company composed of former Commerce One employees.  In consideration of the
assets sold, we received a note receivable with a face value of approximately
$0.4 million due on September 30, 2006, that bears an annual interest rate of
8%, receivable on a quarterly basis.  Subject to certain criteria, we also
had the right to receive a 4% and 4.5% annual share of future revenues of
Beaconfire Consulting for the two and succeeding three years, respectively,
payable on a quarterly basis and beginning at the end of, and including payment
for, the quarter ending December 31, 2001. On December 3, 2003, we restructured
our outstanding note receivable with Beaconfire.  We agreed with Beaconfire to
accept a discount for early payment on the note from them and we agreed to
forgive them any future rights to receive our annual share of future Beaconfire
revenues for a total cash payment of $215,486, which was received in December
2003, in exchange for a full release of additional payment obligations.

In October 2001, we executed a stock transfer and asset sale with Edgar, Dunn
& Company, Inc., a company composed of former Commerce One employees. 
In connection with this agreement, we received a 10% minority interest in Edgar,
Dunn & Company, Inc., and two notes receivable with face values totaling
$1.3 million that are due by September 30, 2004.  The notes bear an annual
interest rate of 7.5%, receivable on a quarterly basis.  Subject to certain
criteria, we also had the rights to an annual revenue share of 6% of the future
revenues of Edgar, Dunn & Company, Inc., for the four-year period following
the closing in October 2001.  In October 2003, we restructured our outstanding
note receivable with EDC.  The notes have been paid by EDC over time, and the
remaining amount due as of September 30, 2003 was approximately $0.6 million.
We agreed with EDC to accept a discount for early payment of the note and
repurchase of the 10% minority interest in EDC for a total cash payment of
$525,000, which we received in November 2003, in exchange for a full release of
additional payment obligations.

On January 9, 2002, we executed an asset sale agreement with Connective
Commerce Company LLC, a Massachusetts limited liability company composed of
former Commerce One employees.  In connection with this agreement, we
received cash of approximately $2.4 million and a note receivable with a face
value of approximately $4.0 million due on December 31, 2004, that bears a
quarterly interest rate of 1.75%, receivable on a quarterly basis commencing
September 30, 2002.  In January 2002, in connection with this agreement,
approximately $2.3 million was recorded as a reduction to the restructure
liability due to Connective Commerce's agreement, in conjunction with this asset
sale, to assume the remaining lease obligation for our Michigan facility.  On
October 15, 2002, we agreed to modify the note agreement with Connective
Commerce to decrease the payments in 2003 and to forgive interest on the
principal balance for 2003.  In September 2003, the note, along with certain
lease obligations of Connective Commerce to Commerce One, was renegotiated and a
payment of approximately $0.6 million was received from Connective Commerce.  As
a result, we recognized  approximately $0.3 million as other income in the
Statement of Operations.  Due to Connective Commerce's financial position, we
have not recognized any asset in relation to the renegotiated payment schedule.
Any future payments made by Connective Commerce, if any, will be recognized as
other income when received.

On February 21, 2002, we executed a stock purchase agreement with Commerce
One E-Government Solutions, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company, and eGov Holdings, Inc., a Delaware corporation
composed of former Company employees.  In consideration for the sale of
100% of the outstanding common stock of Commerce One E-Government Solutions, Inc
to eGov Holdings, Inc., we received cash consideration of approximately $8.4
million.

On January 24, 2003, we executed the sale and license of certain assets and
liabilities, including customer commitments, related to CommerceOne.net, the
Company's marketplace services business consisting of auction services,
subscription services, content services and hosting services, with eScout LLC, a
privately held limited liability company.  In connection with the closing
of this transaction, we received notes receivable with an aggregate face value
of approximately $2.0 million, membership interests in eScout and the right to
receive a portion of CommerceOne.net revenues over the next four years not to
exceed $0.5 million in the aggregate.  The note receivable bears a
quarterly interest rate of 1.5% with payments due each quarter with the final
payment due on January 24, 2005.  Fifteen percent (15%) of the aggregate
purchase price was held in escrow until January 2004 as security for any claims
related to a breach of the Company's representations, warranties and
covenants.

In September 2003, we sold the software application package known as Xpress
Solutions, including intellectual property and related software license
agreements, to Computer Horizons Corporation (CHC) pursuant to an Asset Purchase
Agreement (the Purchase Agreement).  Pursuant to the terms of the Purchase
Agreement, CHC paid us $566,000 in cash and assumed certain of our liabilities,
obligations and duties related to Xpress Solutions occurring on or after July
16, 2003.  In addition, CHC agreed to pay us a royalty equal to twenty percent
(20%) of all licensing fees received from third parties for rights to use Xpress
Solutions, and intellectual property related thereto, until the aggregate amount
of such royalty payments equals $500,000.

As a result of the business divestitures completed in the fourth quarter of
2001, we recorded a loss on divestiture of $0.8 million that was charged to
restructuring costs and other in the fourth quarter of 2001.  As a result
of the business divestitures completed in the first quarter of 2002, we recorded
a gain of approximately $2.3 million based on the cash proceeds received from
the sale of E-Government Solutions, Inc, which was applied to the restructuring
accrual in the first quarter of 2002.  This approximate $2.3 million gain was
offset by an approximate $2.3 million note receivable recorded to the
restructure accrual in the first quarter of 2002 in connection with portions of
the Company's consulting business to Connective Commerce.We
recognized total revenues of approximately $98.7 million in 2001 from our
professional services operations within our Global Services division which were
disposed of in the fourth quarter of 2001 and the first quarter of 2002. 
We recognized total revenues of approximately $11.8 million in 2002 from the
CommerceOne.net operations, which were divested in January 2003.  As a result of
the transaction with CHC in September 2003, we recorded a gain of approximately
$0.5 million as other income in the third quarter of 2003.

While these actions were intended to focus the Company
on its core strengths and the headcount reductions were targeted in areas with
an attempt to minimize the impact to our customers, the impact to the business
will be felt across the organization with a general decrease in capabilities and
response times.  The overall decrease in capabilities and response times may
include delayed release schedules for new products, a decline in product quality
in new releases, slower response times to customer requests, fewer sales
opportunities identified and closed, and slower or delayed implementation for
customization engagements.

Amortization of Intangible Assets

Amortization of intangible assets totaled approximately $612,000 in 2003,
$11.9 million in 2002 and $332.8 million in 2001.  The amortization of
intangible assets in 2003, 2002 and 2001 resulted from the acquisitions of
Exterprise in 2001 and Mergent and AppNet during 2000. The approximate $320.9
million decrease in 2002 in amortization is a result of impairments of various
intangible assets and also certain intangible assets being subsumed by goodwill
as part of the adoption of SFAS 141 "Business Combinations".  Goodwill is
no longer amortized in accordance with SFAS 142.  See Note 4 of the
Consolidated Financial Statements.

Impairment of Long Lived and Other Intangible Assets

Under SFAS 142, intangible assets with finite lives that continue to be
amortized should be reviewed for impairment in accordance with SFAS 144. An
impairment assessment is required whenever events or changes in circumstances
indicate that the carrying value may not be recoverable.  During the
quarter ended March 31, 2002, we identified indicators of possible impairment
relating to the Technology Agreement with Covisint.  The impairment
indicators included, but were not limited to, significant negative industry and
economic trends, which resulted in a reduction of forecasted cash flows related
to the Technology Agreement.

In accordance with SFAS 144 we performed an impairment test of the carrying
value of the Technology Agreement to determine whether any impairment
existed.  We determined that the sum of the expected undiscounted cash
flows attributable to the Technology Agreement was less than its carrying value
and that an impairment write-down was required.  Accordingly, we calculated
the estimated fair value of the intangible asset by summing the present value of
the expected cash flows over its life.  The impairment was calculated by
deducting the present value of the expected cash flows from the carrying value.
This assessment resulted in an impairment write-down of $145.8 million in
relation to the Technology Agreement, which was charged to cost of license fees
during the quarter ended March 31, 2002.

During the quarter ended December 31, 2002, we identified indicators of
possible impairment relating to the Covisint equity investment, property and
equipment and intangible assets other than goodwill.  These indicators
included, but were not limited to, a history of negative cash flows and
operating losses and significant negative industry and economic trends.  We
performed an impairment test of the carrying value of these long-lived and
intangible assets to determine whether any impairment existed.  We
determined that the sum of the expected undiscounted cash flows attributable to
the assets was less than the carrying value of the assets and that an impairment
existed.  We determined fair value for long-lived assets by using market
values when available.  If no market existed for the asset, we calculated
fair value as the sum of the discounted cash flows attributable to the
assets.  The impairment was calculated by deducting the established fair
value from the carrying value.  This assessment resulted in an impairment
write-down of $20.5 million for property, plant, and equipment, $9.5 million for
intangible assets other than goodwill, and $34.2 million for the Covisint
Technology agreement during the quarter ended December 31, 2002.

During the quarter ended September 30, 2003, we identified indicators of
possible additional impairment relating to the Technology Agreement with
Covisint.  The primary impairment indicator was the recent dispute and
related negotiation with Covisint regarding Covisint's revenue sharing
obligations.  Because the projected undiscounted cash flows were below the
current carrying value of the intangible asset, an impairment existed and we
therefore performed a discounted cash flow analysis to value the asset.  Based
upon our analysis, we believed that the Technology Agreement with Covisint was
valued at $6.0 million.  As a result, in the quarter ended September 30, 2003,
we recorded an impairment charge to Cost of license fees of $8.4 million related
to the Technology Agreement with Covisint.

As a result of the settlement reached in December 2003 between us and
Covisint, we recognized a charge to "Cost of license fees" of $6.0 million in
the fourth quarter of 2003 due to the write down of the intangible asset related
to our previous Technology Agreement with Covisint.

Impairment of Goodwill

Effective July 1, 2001, we adopted certain provisions of SFAS 141, and
effective January 1, 2002, we adopted the full provisions of SFAS 141 and SFAS
142.  SFAS 141 requires business combinations initiated after June 30, 2001
to be accounted for using the purchase method of accounting, and broadens the
criteria for recording intangible assets apart from goodwill.  We evaluated
goodwill and other intangible assets acquired prior to June 30, 2001 using the
transition criteria of SFAS 141, which resulted in $15.7 million of other
intangible assets (comprised entirely of assembled workforce) being subsumed
into goodwill as of January 1, 2002.  SFAS 142 requires that purchased
goodwill and certain indefinite-lived intangible assets no longer be amortized,
but instead be tested for impairment at least annually.

SFAS 142 prescribes a two-phase process for impairment testing of
goodwill.  The first phase, required to be completed by June 30, 2002,
screens for impairment.  The second phase (if necessary), required to be
completed by December 31, 2002, measures the impairment.  We completed the
first phase impairment analysis of goodwill during the first quarter of 2002 and
found no instance of impairment of recorded goodwill.

During the fourth quarter of 2002, we prepared our required SFAS 142
impairment test.  Our fair value, established using the market method, was
below its carrying value as of December 31, 2002, indicating that a potential
impairment to goodwill existed.  We were then required to calculate the
potential impairment by establishing the fair value of goodwill and subtracting
this fair value from the carrying value of goodwill.  In accordance with
FAS No. 142, the fair value of goodwill is an implied value.  The fair
value of goodwill is calculated by subtracting the fair value of the net assets
of Commerce One (other than goodwill) from the fair value of Commerce
One.   The fair value of net assets includes determining the fair
value of any unrecognized intangible assets.  We established fair values
for any unrecognized intangible assets.  The impairment was then calculated
by deducting the fair value of goodwill from the carrying value of
goodwill.  This calculation resulted in an impairment write-down of $179.8
million.

Interest Income and Other, net

Interest income and other, net in 2003 was comprised of a $6.2 million gain
from the recognition of previously deferred amounts received from SAP due to our
settlement with SAP, a $1.8 million gain from the mark-to-market adjustment of
our warrant liability, a $0.8 million gain on the sale of equity investments,
and $2.4 million of interest income, partially offset by a $5.0 million charge
to write off our investment in Covisint, a $0.8 million loss on disposal of
property and equipment and interest expense of $0.5 million.
Interest income and other, net in 2002 was comprised of approximately $4.3
million in interest income, approximately $1.4 million in currency differences,
partially offset by approximately $1.0 million in interest expense.  The $0.6
million increase in 2001 from 2000 was due mainly to an increase in interest
income due to higher average cash and investment balances during 2001 compared
to 2000.

Provision for Income Taxes

We recognized a tax benefit of $2.4 million in 2003 as a result of ceasing to
do business in certain foreign jurisdictions, the business retraction in other
foreign jurisdictions and the favorable settlement of certain state tax issues.
Realization of our net deferred tax assets is dependent upon our generating
sufficient taxable income in future years in appropriate tax jurisdictions to
obtain benefit from the reversal of temporary differences and from the ability
to utilize net loss operating carryforwards that may be limited due to the
ownership change rules provided by the Internal Revenue Code and similar state
provisions.  Due to the uncertainty of the amount and timing of future taxable
income, we have provided a full valuation allowance against their net deferred
tax assets.

Charges to Common Stockholders

We recognized charges to common stockholders totaling $9.6 million in 2003,
all attributable to our Series B Preferred Stock issued in July 2003. A $3.3
million charge was recorded for the beneficial conversion right provided to the
purchaser, since the issuance proceeds allocated to the series B preferred stock
of $6.4 million were less than the common equivalent conversion value at date of
issuance of $9.7 million, as determined by the market value of the Company's
common stock on that date. In addition, we recognized charges of $0.4 million
and $5.9 million, respectively, to accrete the carrying value of the preferred
stock for dividends and to accrete the value of the preferred stock to its
redemption value of $12.5 million at December 31, 2004. In addition, these
charges offset $0.2 million in offering costs previously deducted from the value
allocated to the preferred.

NEW ACCOUNTING PRONOUNCEMENTS

In May 2003, the EITF reached a consensus on Issue No. 03-5,
"Applicability of AICPA Statement of Position 97-2, Software Revenue
Recognition, to Non-Software Deliverables in an Arrangement Containing More-
Than-Incidental Software." The FASB ratified this consensus in August 2003.
EITF Issue No. 03-5 affirms that AICPA Statement of Position 97-2 applies
to non-software deliverables, such as hardware, in an arrangement if the
software is essential to the functionality of the non-software deliverables. The
adoption of EITF Issue No. 03-5 did not have a material impact on the
Consolidated Financial Statements.

In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity."  SFAS
150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. SFAS 150 went into effect during the
second quarter of 2003.  SFAS 150 is not expected to have a material impact on
the Consolidated Financial Statements.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities."  FIN 46 deals with off-balance sheet assets,
liabilities, and obligations and gives companies guidance for determining which
assets and liabilities associated with the obligations are required to be
included in the company's financial statements.  FIN 46 will be effective during
the fourth quarter of 2003.  FIN 46 is not expected to have a material impact on
the Consolidated Financial Statements.

In November 2002, the FASB issued FASB Staff Position on Interpretation
(FIN) 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." 
FIN 45 requires that the Company recognize the fair value for guarantee and
indemnification arrangements issued or modified by the Company after
December 31, 2002, if these arrangements are within the scope of the
interpretation.   In addition, the Company must continue to monitor
the conditions that are subject to the guarantees and indemnifications, as
required under previously existing GAAP principles in order to identify if a
loss has occurred. If the Company determines it is probable that a loss has
occurred then any such estimable loss would be recognized under those guarantees
and indemnifications.   For further discussion of FIN 45, see Note 1
to the Consolidated Financial Statements, "Other Recent Accounting
Pronouncements," Part II, Item 8, incorporated here by reference.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISKS

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 the "Risk Factors" section of this Form 10-
K.

Interest Rate Risk

As of December 31, 2003, we had total restricted and unrestricted cash,
highly liquid investments and short-term investments of approximately $10.1
million. 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 at December 31, 2003 would cause the fair market value of these
investments 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 have been transacted with customers
outside 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 more expensive in
international markets. We will continue to monitor our exposure to currency
fluctuations and although we have never used financial hedging techniques to
date, we may use them in the future to minimize the effect of these
fluctuations. Nevertheless, we cannot assure you that these fluctuations will
not harm our business in the future.

Equity Price Risk

From time to time, we have made investments in private companies,
particularly private companies that are our strategic partners or customers. As
of December 31, 2003, our investment in private companies had an immaterial
carrying value.  These investments are illiquid and there is currently no market
for these investments.  If these companies do not complete initial public
offerings or are not acquired by publicly traded companies or for cash, we may
not be able to liquidate these investments. In addition, even if we are able to
sell these investments we cannot assure you that we will recoup our investment.

ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Report of BDO Seidman,
LLP, Independent Auditors                                                                                                                                                                                                                                                                                                                                                                               
|Report of
Ernst and Young LLP, Independent Auditors                                                                                                                                                                                                                                                                                                                                                                            
|Consolidated Financial Statements;                                                                                                                                                                                                                                                                                                                                                                                             
|Consolidated Balance Sheets as
of December 31, 2003 and 2002Consolidated Statements of
Operations for the Years Ended December 31, 2003, 2002 and
2001Consolidated Statements of
Stockholders' Equity (Deficit) and Comprehensive Loss for the Years Ended
December 31, 2003, 2002 and 2001Consolidated Statements of
Cash Flows for the Years Ended December 31, 2003, 2002 and
2001Notes to Consolidated
Financial Statements

REPORT OF BDO SEIDMAN, LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Commerce One, Inc.

We have audited the accompanying consolidated balance sheet of Commerce One,
Inc. and subsidiaries as of December 31, 2003, and the related consolidated
statements of operations, stockholders' equity
(deficit) and comprehensive loss, and cash flows for the year then ended. 
Our audit also included the financial statement schedule listed in the Index at
Item 15(a)(2) as of and for the year ended December 31, 2003.  These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and schedule are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Commerce One, Inc.
and subsidiaries at December 31, 2003, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America. 
Also in our opinion, the related financial statement schedule as of and for the
year ended December 31, 2003, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As described in Note 1, the Company is evaluating offers to purchase its
Supplier Relationship Management applications in order to provide additional
necessary liquidity to fund its operations.

As discussed in Notes 1 and 4 to the consolidated financial statements, in
2002 Commerce One, Inc. changed its method of accounting for goodwill and
certain other purchased intangible assets.

| | /s/  BDO Seidman, LLP
| | ---------------------



San Francisco, California

February 5, 2004,except for the 4th paragraph of Note 1 and Note 16,which are as of March 14, 2004





REPORT OF ERNST AND YOUNG LLP,
INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Commerce One, Inc.

We have audited the accompanying consolidated balance sheets of Commerce One,
Inc. as of December 31, 2002 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the two years in the
period ended December 31, 2002.  Our audits also included the financial
statement schedule listed in the Index at Item 15.  These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Commerce One, Inc.
at December 31, 2002 and the consolidated results of its operations and its cash
flows for each of the two years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States.
Also in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Notes 1 and 4 to the consolidated financial statements, in
2002 Commerce One, Inc. changed its method of accounting for goodwill and
certain other purchased intangible assets.

| | /s/  Ernst & Young LLP
| | ----------------------

Walnut Creek, California

January 27, 2003

---



COMMERCE ONE, INC.

                           CONSOLIDATED BALANCE SHEETS

                        (In thousands, except share and per share data)

`December 31,
                                                                    ------------------------
                                                                       2003         2002
                                                                    -----------  -----------
                              ASSETS
Current assets:
  Cash and cash equivalents....................................... $     6,943  $    73,753
  Restricted cash.................................................       1,547           --
  Short-term investments..........................................          76        3,510
  Note receivable.................................................       4,009           --
  Accounts receivable, net of allowances
    of $1.0 million at December 31, 2003 and
    $6.0 million at December 31, 2002 (1).........................       4,984        7,373
  Prepaid expenses and other current assets.......................       2,991        4,923
                                                                    -----------  -----------
Total current assets..............................................      20,550       89,559
Restricted cash, cash equivalents and short-term investments......       1,569       35,630
Property and equipment, net.......................................         511        9,761
Other intangible assets, net......................................       2,262       18,449
Investments and other assets......................................       4,356        6,023
                                                                    -----------  -----------
Total assets...................................................... $    29,248  $   159,422
                                                                    ===========  ===========
       LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
            STOCK  AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable ............................................... $     1,064  $     3,104
  Accrued compensation and related expenses.......................       1,041        8,338
  Deferred revenue (2)............................................       4,098       23,546
  Other current liabilities (3)...................................       5,199       29,997
                                                                    -----------  -----------
Total current liabilities.........................................      11,402       64,985
Notes payable.....................................................       2,777       25,000
Non-current accrued restructuring charges and other...............         388       21,947
Warrant liability.................................................       5,229           --

Commitment and Contingencies
Redeemable convertible preferred stock............................      12,480           --

Stockholders' equity (deficit) :
  Common stock, par value $0.0001, 950,000,000 shares authorized;
    33,558,063 and 29,276,716 issued and outstanding at
    December 31, 2003 and 2002, respectively .....................   3,686,044    3,674,645
  Deferred stock compensation.....................................          --       (4,385)
  Note receivable from stockholder................................        (129)        (129)
  Accumulated other comprehensive loss............................        (113)      (1,203)
  Accumulated deficit.............................................  (3,688,830)  (3,621,438)
                                                                    -----------  -----------
Total stockholders' equity (deficit)..............................      (3,028)      47,490
                                                                    -----------  -----------
Total liabilities, redeemable convertible preferred
   stock and stockholders' equity (deficit)....................... $    29,248  $   159,422
                                                                    ===========  ===========`

___________

`Amounts included above from related parties (Note 10):
  (1) Accounts receivable, net.................................... $     3,740  $     1,747
  (2) Deferred revenue............................................ $       850  $    11,138
  (3) Other current liabilities................................... $        --  $       418`

See accompanying notes.

---



COMMERCE ONE, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

`Years Ended December 31,
                                                              -----------------------------------
                                                                 2003        2002        2001
                                                              ----------  ----------  -----------
Revenues:
  License fees.............................................. $    7,071  $   28,597  $   130,917
  Services..................................................     29,167      76,932      277,652
                                                              ----------  ----------  -----------
Total revenues (1) .........................................     36,238     105,529      408,569
                                                              ----------  ----------  -----------
Costs and expenses:
  Cost of license fees (2)..................................     14,934     192,406      662,315
  Cost of services..........................................     21,563      68,233      228,023
  Sales and marketing.......................................     18,388      78,945      183,412
  Product development.......................................     27,120      76,922      118,159
  General and administrative (includes ($2.7) million,
      ($5.5) million and $32.9 million in bad debt
      (recovery) expense, respectively).....................      8,239      25,615      116,621
  Purchased in-process research and development.............         --          --        4,548
  Stock compensation........................................      3,395       8,728       98,302
  Restructuring costs and other.............................      7,085      22,947      126,605
  Amortization of goodwill and
     other intangible assets................................        612      11,867      332,789
  Impairment of intangible assets
     and fixed assets.......................................         --     214,082    1,120,464
                                                              ----------  ----------  -----------
Total costs and expenses....................................    101,336     699,745    2,991,238
                                                              ----------  ----------  -----------
Loss from operations........................................    (65,098)   (594,216)  (2,582,669)
Interest income and other, net..............................      5,461       5,627        8,049
Interest expense............................................       (521)       (946)        (478)
                                                              ----------  ----------  -----------
Net loss before income taxes................................    (60,158)   (589,535)  (2,575,098)
(Benefit) Provision for income taxes........................     (2,388)        301        9,001
                                                              ----------  ----------  -----------
Net loss....................................................    (57,770)   (589,836)  (2,584,099)
                                                              ----------  ----------  -----------

Deemed dividend related to beneficial conversion
   feature on Series B Preferred Stock......................      3,327          --           --
Accretion of Series B Preferred Stock to
   redemption value.........................................      5,895          --           --
Series B Preferred Stock dividends..........................        400          --           --
                                                              ----------  ----------  -----------
Net loss attributable to common stockholders................ $  (67,392) $ (589,836) $(2,584,099)
                                                              ==========  ==========  ===========
Basic and diluted net loss per share
  attributable to common stockholders....................... $    (2.19) $   (20.33) $   (103.02)
                                                              ==========  ==========  ===========
Weighted average shares - basic and diluted.................     30,735      29,011       25,084
                                                              ==========  ==========  ===========`

___________

`(1)  Revenue from related parties (Note 10) ................ $    7,392  $   32,022  $    97,741

(2)  Includes charges for the impairment
     and amortization of the Technology
     Agreement with Covisint (Notes 4 and 11)............... $   15,943  $  190,396  $   647,500`

See accompanying notes.

---



COMMERCE ONE, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                      (In thousands, except per share data)

`Note      Accumulated
                                                        Common Stock         Deferred    Receivable      Other
                                                   -----------------------     Stock        from      ComprehensiveAccumulated
                                                     Shares       Amount    Compensation Shareholder     Loss        Deficit       Total
                                                   -----------  ----------  -----------  -----------  -----------  -----------  -----------
BALANCES AT DECEMBER 31, 2000..................... 22,370,411  $3,401,487  $  (153,630) $      (129) $      (814) $  (447,503) $ 2,799,411
Issuance of common stock upon
  exercise of stock options.......................    429,331       6,961           --           --           --           --        6,961
Repurchase of common stock
  from terminated employees.......................    (17,416)        (59)          --           --           --           --          (59)
Issuance of common stock under
  employee stock purchase plan....................    291,330      11,664           --           --           --           --       11,664
Issuance of common stock and
  assumption of stock options in
  connection with business combinations...........    807,858      74,768       (2,181)          --           --           --       72,587
Issuance of restricted
  common stock to employees.......................    187,915      14,099      (14,099)          --           --           --           --
Forfeiture of restricted common
  stock by employees upon termination.............    (65,885)     (4,836)       4,836           --           --           --           --
Sale of common stock to SAP, net of issuance cost.  4,748,477     219,335           --           --           --           --      219,335
Amortization of deferred stock compensation.......         --          --       98,302           --           --           --       98,302
Net Loss..........................................         --          --           --           --           --   (2,584,099)  (2,584,099)
Foreign currency translation adjustment...........         --          --           --           --          120           --          120
Unrealized loss on investments....................         --          --           --           --         (407)          --         (407)
                                                                                                                                -----------
Comprehensive loss................................                                                                              (2,584,386)
                                                   -----------  ----------  -----------  -----------  -----------  -----------  -----------
BALANCES AT DECEMBER 31, 2001..................... 28,752,021   3,723,419      (66,772)        (129)      (1,101)  (3,031,602)     623,815
Issuance of common stock upon
  exercise of stock options.......................    215,382       3,163           --           --           --           --        3,163
Repurchase of common stock
  from terminated employees.......................     (9,661)        (53)          --           --           --           --          (53)
Issuance of common stock under
  employee stock purchase plan....................    358,760       2,275           --           --           --           --        2,275
Forfeiture of restricted common
  stock by employees upon termination.............    (39,786)     (2,958)       2,958           --           --           --           --
Additional issuance cost
  on sale of common stock to SAP..................         --        (500)          --           --           --           --         (500)
Deferred compensation forfeited...................         --     (50,701)      50,701           --           --           --
Amortization of deferred stock compensation.......         --          --        8,728           --           --           --        8,728
Net loss..........................................         --          --           --           --           --     (589,836)    (589,836)
Foreign currency translation adjustment...........         --          --           --           --         (490)          --         (490)
Unrealized gain on investments....................         --          --           --           --          388           --          388
                                                                                                                                -----------
Comprehensive loss................................                                                                                (589,938)
                                                   -----------  ----------  -----------  -----------  -----------  -----------  -----------
BALANCES AT DECEMBER 31, 2002..................... 29,276,716   3,674,645       (4,385)        (129)      (1,203)  (3,621,438)      47,490
Issuance of common stock upon
  exercise of stock options.......................    140,791         275           --           --           --           --          275
Issuance of common stock under
  employee stock purchase plan....................    186,352         402           --           --           --           --          402
Forfeiture of restricted common
  stock by employees upon termination.............     (7,117)       (544)         544           --           --           --           --
Issuance of common stock in connection
  with real estate settlements....................  3,961,321       8,385           --           --           --           --        8,385
Beneficial conversion feature of Series
  B Preferred Stock...............................         --       3,327           --           --           --       (3,327)          --
Accretion of Series B Preferred Stock to
  redemption value................................         --          --           --           --           --       (5,895)      (5,895)
Series B Preferred Stock dividends................         --          --           --           --           --         (400)        (400)
Deferred compensation forfeited...................         --        (446)         446           --           --           --           --
Amortization of deferred stock compensation.......         --          --        3,395           --           --           --        3,395
Net loss..........................................         --          --           --           --           --      (57,770)     (57,770)
Foreign currency translation adjustment...........         --          --           --           --        1,015           --        1,015
Unrealized gain on investments....................         --          --           --           --           75           --           75
                                                                                                                                -----------
Comprehensive loss................................                                                                                 (56,680)
                                                   -----------  ----------  -----------  -----------  -----------  -----------  -----------
BALANCES AT DECEMBER 31, 2003..................... 33,558,063  $3,686,044  $        --  $      (129) $      (113) $(3,688,830) $    (3,028)
                                                   ===========  ==========  ===========  ===========  ===========  ===========  ===========`

See accompanying notes.

---



COMMERCE ONE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

`Years Ended December 31,
                                                                      -------------------------------------
                                                                         2003         2002         2001
                                                                      -----------  -----------  -----------
Operating activities:                                                                                      
Net loss............................................................ $   (57,770) $  (589,836) $(2,584,099)
Adjustments to reconcile net loss to net cash
   used in operating activities:
Depreciation and amortization.......................................       5,873       30,733       45,375
Purchased in-process research and development.......................          --           --        4,548
Amortization of Technology Agreement with Covisint..................       1,495       10,428       55,188
Amortization of deferred stock compensation.........................       3,395        8,728       98,302
Amortization of goodwill and other intangible assets................         612       11,867      332,789
Impairment of goodwill and other intangible assets..................          --      189,344    1,098,869
Impairment of Technology Agreement with Covisint....................      14,448      179,968      592,334
Write down of investment in Covisint................................       5,000        4,255       21,595
Mark to market - warrant liability..................................      (1,834)          --           --
Loss on other investments and accumulated translation
   adjustment of liquidated foreign subsidiaries....................         819          248        2,958
Loss on disposal and impairment of property and equipment...........       2,576       20,483       26,914
Other...............................................................          --          977           --
  Changes in operating assets and liabilities:
  Restricted cash and investments...................................          50      (30,184)          --
  Accounts receivable, net..........................................       1,415       29,972      111,366
  Prepaid and other current assets..................................      (1,760)       7,980        8,221
  Accounts payable..................................................      (2,038)     (20,014)      (5,075)
  Accrued compensation and related expenses.........................      (7,297)      (9,622)     (27,390)
  Other liabilities.................................................     (37,987)     (28,981)     (28,780)
  Deferred revenue..................................................     (18,328)     (33,821)     (57,078)
  Non-current accrued restructuring charges.........................          --           --       37,005
                                                                      -----------  -----------  -----------
Net cash used in operating activities...............................     (91,331)    (217,475)    (266,958)
                                                                      -----------  -----------  -----------
Investing activities:                                                                                      
Purchase of property and equipment, net.............................        (458)      (6,503)     (39,491)
Proceeds from sale of assets........................................       1,486           --           --
Proceeds from maturities of short-term investments..................      37,723      130,550      204,709
Purchase of short-term investments..................................      (1,699)     (43,964)    (173,954)
Business combinations, net of cash acquired.........................          --           --       (2,499)
Additional costs of Technology Agreement with Covisint, net.........          --           --       (2,815)
Proceed from divestitures...........................................         740       10,734           --
Other investments...................................................          --        1,569        3,191
                                                                      -----------  -----------  -----------
Net cash provided by (used in) investing activities.................      37,792       92,386      (10,859)
                                                                      -----------  -----------  -----------
Financing activities:                                                                                      
Proceeds from issuance of common stock, net.........................         676        4,885      237,901
Proceeds from issuance of preferred stock and warrants, net.........       9,797           --           --
Proceeds from borrowings on notes payable and issuance of warrants..       1,000       25,423       19,000
Payments on notes payable and capital lease obligations.............     (25,000)     (23,053)      (1,846)
                                                                      -----------  -----------  -----------
Net cash (used in) provided by financing activities.................     (13,527)       7,255      255,055
                                                                      -----------  -----------  -----------
Effect of foreign currency translation on cash and cash equivalents.         257         (960)         120
                                                                      -----------  -----------  -----------
Net decrease in cash................................................     (66,809)    (118,794)     (22,642)
Cash balance at beginning of period.................................      73,753      192,547      215,189
                                                                      -----------  -----------  -----------
Cash balance at end of period....................................... $     6,944  $    73,753  $   192,547
                                                                      ===========  ===========  ===========
Supplemental disclosures:                                                                                  
Interest paid....................................................... $       521  $       946  $       351
Cash paid for income taxes.......................................... $     1,057  $     2,620  $     4,307
Non-cash investing and financing activities:
Deferred stock compensation......................................... $        --  $        --  $     9,263
Unrealized loss on investments...................................... $        75  $       388  $       407
Issuance of preferred stock, common stock and assumption of
   stock options in connection with business combinations........... $        --  $        --  $    74,768
Issuance of common stock in connection with real estate settlements. $     8,385  $        --  $        --
Deferred stock compensation related to stock
  option grants and options assumed in business combinations........ $        --  $        --  $     2,181
Non-cash note receivable due from ComVest........................... $     4,000           --           --`

See accompanying notes.

---

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE COMPANY

The Company was founded as Distrivision in 1994, changed its name to Commerce
One in 1997, and re-incorporated in Delaware in 1999.  On July 11, 2001,
the Company completed its reorganization into a holding company structure. 
Commerce One is a technology company that specializes in software and services
that allow companies to conduct business more efficiently through business
process automation and web service solutions.  The Company's software
provides the technology and infrastructure that enable companies to conduct
business processes via the Internet or Intranets and to manage their supplier,
partner and customer relationships more effectively.  Commerce One's
services operations support these software solutions and help companies take
maximum advantage of the efficiencies that these solutions can offer. 
Together, the Company's software and services allow companies to automate
business functions that traditionally involved costly and time-consuming phone
calls and paperwork.

BASIS OF PRESENTATION

The accompanying financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company has an accumulated deficit of $3.7 billion as of
December 31, 2003 and recurring losses of  $67.4 million, $590 million, and $2.6
billion for the years ended December 31, 2003, 2002 and 2001, respectively.

The Company is subject to a number of risks common to technology-based
companies, including limited operating history, dependence on key individuals,
rapid technological changes, the need for adequate financing to fund future
operations and the successful development and marketing of its products and
services. The Company's ability to continue as a going concern is contingent
upon its ability to continue to meet its obligations, and, ultimately, attain
profitable operations. Management intends to continue to service its existing
customers and increase revenue from new and existing customers. The Company has
funded its recent losses primary through sales of redeemable convertible
preferred stock, convertible notes payable and warrants. In July and December
2003, the Company issued an aggregate of $10 million in redeemable convertible
preferred stock and $5 million in convertible notes payable to investors,
respectively (Note 7).  Of the $5.0 million in debt financing, $1.0 million was
received on December 31, 2003 and the remaining $4.0 million was received on
January 2, 2004. There is no assurance that the Company will be able to obtain
additional loans or equity, or will be able to generate sufficient revenue and
cash to support its operations.

Pursuant to the terms of the redeemable convertible preferred stock, the
Company may, upon the occurrence of certain events, be required to redeem all of
the outstanding shares of Series B Preferred Stock.  The events that could lead
to redemption include failure to timely file, have declared effective and
maintain the effectiveness of the registration statement on Form S-3 covering
the resale of the common stock underlying the Series B Preferred Stock, or to
maintain the listing of the Company's common stock on the Nasdaq National Market
or the Nasdaq SmallCap Market, or upon a change of control (including a merger,
acquisition or sale of all or substantially all of our assets) of Commerce One.
As of the date of this Form 10-K, the Form S-3 covering the resale of the common
stock underlying the Series B Preferred Stock had not yet been declared
effective by the SEC.  In the event that the Form S-3 is not declared effective
on or prior to July 4, 2004, the Company may be required to redeem the
Series B Preferred Stock for approximately $12.0 million or the fair market
value of the common stock underlying the Series B Preferred Stock, whichever is
greater, plus any accrued and unpaid dividends and other penalties.
(See Notes 11 and 16).

At December 31, 2003, the Company has $10.1 million cash and cash equivalents
and investments, of which $6.9 million is unrestricted and available to fund
operations, and $9.1 million in working capital. Additionally, the Company
received proceeds in January 2004 of $4.0 million from the above described notes
payable and $4.6 million from the settlement as discussed below.

On December 30, 2003, the Company entered into a Settlement Agreement with
Covisint, LLC (Covisint) pursuant to which Covisint paid the Company $4,650,000.
As part of the agreement, the parties resolved an arbitration and a separate
Michigan state court action that had been pending between the parties, and the
Company granted a fully paid software license to Covisint for certain Commerce
One software that Covisint has used in its operations.  The $4,650,000 from
Covisint was received in full on January 2, 2004 and was not included in the cash
balance as of December 31, 2003.

The Company has taken significant steps to reduce its expenses through
personnel reductions and other cost reduction measures, including a personnel
reduction in October 2003 that reduced headcount to 116 by December 31, 2003,
multiple real estate settlement agreements intended to significantly reduce its
rental expenses, and employee furloughs.While these efforts have
significantly reduced the Company's expense levels, its operations are still
drawing upon its cash reserves.

As announced previously, the Company has retained Broadview International LLC
to evaluate various strategic alternatives. Currently, the Company is evaluating
offers to purchase its Supplier Relationship Management (SRM) applications. The
SRM applications are secured by the Company's debt financing.  If the Company
completes a sale of the SRM applications, the Company plans to use the first
$5.0 million in proceeds to repay existing secured debt. The Company believes
that estimated proceeds from a sale of the SRM applications, after debt
repayment, would provide additional liquidity to the Company necessary to fund
its operations.

The Company is building the market opportunity for its Commerce One Conductor
platform and composite process management solutions (Conductor Platform). The
Company's continued viability is dependent on its ability to generate revenues
through sales of its Conductor Platform, however the Company has not yet
generated significant revenues from the Conductor Platform.

The Company believes that based on its current plans and expectations, it
will have sufficient resources to meet its operating, working capital, investing
and financing requirements for the 2004 fiscal year. The Company has not made
any adjustment to its consolidated financial statements as a result of the
outcome of the uncertainty described above.

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation.  Certain previously
reported amounts have been reclassified to conform to the current presentation
format.

The functional currency of the Company's foreign subsidiaries is the
local currency. The Company translates all assets and liabilities to U.S.
dollars at the current exchange rates as of the applicable balance sheet date.
Revenue and expenses are translated using the average exchange rate for the
period. Gains and losses resulting from the translation of the foreign
subsidiaries' financial statements are reported as a separate component of
accumulated comprehensive other income (loss) in stockholders' equity (deficit).
Accumulated translation gains or losses relating to foreign subsidiaries to be
closed are recognized in Interest income and other, net, when a determination
has been made to discontinue the subsidiary's operations.  Net gains and losses
resulting from foreign exchange transactions, which are recorded in the
statement of operations, were not significant during any of the periods
presented.

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates. Significant estimates and assumptions made by management
involve revenue recognition, the establishment of provisions for bad debts and
other receivable allowances, the determination of the fair value of stock-based
compensation awards to employees for purposes of the pro forma disclosures, the
valuation of intangible assets, fixed assets, and equity investments,
depreciation and amortization estimates of fixed assets and other long-lived
assets including intangible assets, the restructuring accruals related to office
closures, and estimates of liability for legal proceedings against the
Company.

CASH AND CASH EQUIVALENTS

Cash equivalents are highly liquid investments with insignificant interest
rate risk and maturities of 90 days or less at the date of purchase and are
stated at amounts that approximate fair value. Cash equivalents consist
principally of investments in short-term money market instruments and
certificates of deposit.

RESTRICTED CASH AND SHORT-TERM INVESTMENTS

Short-term investments consist principally of commercial paper, corporate
notes and bonds, government notes and bonds and certificates of deposit with
maturities greater than 90 days at date of purchase and are stated at
amounts that approximate fair value.

The Company accounts for its short term investments in accordance with
Statement of Financial Accounting Standards (SFAS) 115, "Accounting for
Certain Investments in Debt and Equity Securities."  Management determines
the appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date.

The Company has classified its short-term investments as available-for-sale.
Available-for-sale investments are recorded at fair value based on quoted market
prices at December 31, 2003 and 2002, with unrealized gains and losses reported
as other comprehensive income (loss) and included within accumulated other
comprehensive income (loss) in the statement of stockholders' equity (deficit).
Realized gains and losses, which have been immaterial to date, are included in
interest and other income and are derived using the specific identification
method for determining the cost of investments sold. Dividend and interest
income is recognized when earned.

As of December 31, 2003, all of the Company's short-term investments, which
totaled approximately $1.6 million, have a contractual maturity date that is
less than one year from December 31, 2003.  These short-term investments consist
of government notes and bonds which collateralize certain of the Company's
obligations related to operating lease agreements for office facilities and
potential workers compensation claims.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments at December 31, 2003, consist of cash and
cash equivalents, restricted cash, short term investments, accounts receivable,
notes receivable, accounts payable, notes payable and warrants. The Company
believes the reported carrying amounts of its cash and cash equivalents,
restricted cash, short term investments, accounts receivable, notes receivable
and accounts payable approximates fair value, based upon the maturities and
short term nature of those instruments. The Company's notes payable to ComVest and DCC Ventures,
issued in December 2003 (see Note 7) with stated values totaling $5.0 million, were
recorded net of the $3.5 million fair value of warrants that were also issued to
the noteholders.  The Company's note payable to PeopleSoft issued in December 2003 (see Note 7)
was recorded net of effective interest of $0.8 million. The Company
believes the combined carrying value of its notes payable of $2.8 million at December 31,
2003 is less than the combined fair value, estimated to be approximately $4.0 million at
December 31, 2003. The difference is attributable to the requirement to record
the full fair value of the warrants as a liabililty and resulting dicount to the
carrying value of the related notess. The Company accounts for warrants issued
to purchase shares of its common stock as derivitive instruments and reflects
their full fair values as a liability in accordance with Emerging Issues Task
Force (EITF) 00-19, "Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company's Own Stock." Accordingly, warrants are
carried as a liability at fair value, and marked to market at the end of each
reporting period.

NON-CURRENT RESTRICTED CASH, CASH EQUIVALENTS, AND SHORT TERM
INVESTMENTS

Non-current restricted cash, cash equivalents, and short-term investments
totaled $1.6 million and $35.6 million as of December 31, 2003 and 2002,
respectively.  In 2003, these amounts collateralize the Company's
obligations related to operating lease agreements for office facilities and
potential workers compensation claims.  In 2002, these amounts
collateralize the Company's obligations related to operating lease agreements
for office facilities, potential workers compensation claims and a bank note
payable.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation. At
December 31, 2002, an impairment of property and equipment was determined to
exist.  As a result, the Company recorded impairment charges of $20.5 million
for property and equipment at December 31, 2002.  The remaining net property and
equipment balances at December 31, 2002 were scheduled to be depreciated over a
period of 18 months using the straight-line method.  As a result, all property
and equipment asset balances remaining at December 31, 2002 will be fully
depreciated as of June 30, 2004. Depreciation on assets acquired after December
31, 2002 is computed using the straight-line method over the estimated useful
lives of the related assets as follows: computer equipment, office equipment,
furniture and fixtures are depreciated over three years, and leasehold
improvements are depreciated over the shorter of the remaining term of the
related lease or the estimated economic useful life of the improvement.
Equipment acquired under capital leases is depreciated over the shorter of the
expected useful life or the related lease term.  During 2003, a significant
amount of property and equipment was sold or disposed of in connection with the
move from the Company's principal location in Pleasanton, California, to its
existing locations in San Francisco and Santa Clara, California.  Accordingly,
during the year ended December 31, 2003, approximately $1.5 million was recorded
as proceeds from the sale of assets and approximately $2.7 million was recorded
as a loss on the sale and disposal of property and equipment.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets result from business combinations
accounted for under the purchase method and intellectual property that is
comprised of the cost incurred filing for original patents. Intangible assets
related to acquired technology, trademarks, patents and other intangible assets
acquired through business combinations are being amortized on a straight-line
method over the estimated useful life of the related asset, generally one to
five years, and intellectual property related to original patents is being
amortized over an estimated useful life of ten years.  Effective July 1,
2001 the Company adopted certain provisions of SFAS 141, "Business
Combinations", and on January 1, 2002, the Company adopted the full provisions
of SFAS 141 and SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, and also specifies the criteria for
the recognition of intangible assets separately from goodwill. Under the new
rules, goodwill is no longer amortized but is subject to an impairment test at
least annually. SFAS 141 specifically identified assembled workforce as an
intangible asset that is not to be recognized apart from goodwill, and it was
subsumed into goodwill on January 1, 2002. Other intangible assets that meet the
new criteria continue to be amortized over their useful lives.  In 2002,
goodwill was evaluated for impairment and deemed to be fully impaired as of
December 31, 2002. The Company also periodically evaluates potential impairments
of its long-lived assets, including intangibles.  When the Company
determines that the carrying value of long-lived assets may not be recoverable
based upon the existence of one or more indicators of impairment, the Company
evaluates the expected undiscounted cash flows related to the assets.  If
these cash flows are less than the carrying value of the assets, the Company
measures the impairment using discounted cash flows.

LONG-LIVED ASSETS

The Company adopted SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," on January 1, 2002. Long-lived assets, other than goodwill,
are reviewed for impairment whenever events or changes

in circumstances indicate that the carrying amount of the assets might not be
recoverable. The Company does not perform a periodic assessment of assets for
impairment in the absence of such information or indicators. Conditions that
would necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not
recoverable. For long-lived assets to be held and used, the Company recognizes
an impairment loss only if its carrying amount is not recoverable through its
undiscounted cash flows and measures the impairment loss based on the difference
between the carrying amount and fair value. Long-lived assets held for sale are
reported at the lower of cost or fair value less costs to sell.

SOFTWARE DEVELOPMENT COSTS

The Company accounts for software development costs in accordance with the
SFAS  86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed," under which certain software development costs
incurred subsequent to the establishment of technological feasibility are
capitalized and amortized over the estimated lives of the related products.
Technological feasibility is established upon completion of a working model.
Development costs, other than purchased technology (see Note 4), incurred
subsequent to the establishment of technological feasibility have not been
significant, and all software development costs have been charged to product
development expense in the accompanying consolidated statements of
operations.

CONCENTRATION OF CREDIT RISK AND CREDIT EVALUATIONS

Financial instruments that potentially subject the Company to concentrations
of risk include cash, cash equivalents, short-term investments and accounts
receivable. The Company's investment policies limit cash equivalents and short-
term investments to short-term, low risk investments.  Cash and cash
equivalents, short-term investments are held with a domestic financial
institution with high credit standing. For the year ended December 31,
2003, transactions with SAP AG (SAP) accounted for approximately 11% of the
Company's total revenues. For the year ended December 31, 2002, transactions
with SAP accounted for approximately 25% of the Company's total revenues.  For
the year ended December 31, 2002, one other customer, UCCnet, accounted for 11%
of the Company's total revenues.  For the year ended December 31, 2001,
transactions with SAP accounted for approximately 19% of the Company's total
revenues. For the years ended December 31, 2003 and 2001, no other customer
accounted for more than 10% of the Company's total revenues.  At December
31, 2003, two customers, Covisint and Exostar, accounted for 76% and 13% of the
Company's net accounts receivable balance, respectively.  At December 31,
2002, no customers accounted for more than 10% of the Company's gross accounts
receivable balance.  At December 31, 2001, two customers accounted for 13%
and 12% of the Company's gross accounts receivable balance. The Company performs
ongoing credit evaluations of its customers and does not typically require
collateral or guarantees. Management maintains allowances for doubtful accounts
for estimated losses resulting from the inability of the Company's customers to
make required payments.  If the financial condition of the Company's
customers were to deteriorate, resulting in an impairment of their ability to
make such payments, increases in the allowance may be required.

REVENUE RECOGNITION

The Company's revenue recognition policies are consistent with Statement of
Position 97-2 "Software Revenue Recognition," and Staff Accounting Bulletin No.
104, "Revenue Recognition".

Revenues from license agreements for software products are recognized upon
transfer of title and risk of loss which generally occurs upon shipment of the
software if there is persuasive evidence of an arrangement, collection is
probable and the fee is fixed or determinable. When software is licensed to
third parties through indirect sales channels, license fees are recognized as
revenue under the sell-through method, when the criteria described above have
been met and the reseller has sold the software to an end-user customer. While
the Company generally does not license software under barter or concurrent
arrangements, whenever software has been licensed under such arrangements the
Company has recognized revenue equal to the net monetary amounts to be received
by the Company.

The Company assesses whether fees are fixed or determinable when products
or services have been delivered.  Payment terms offered by the Company vary
based on customer requirements and standard practice in the customer's country
of domicile, and are typically within 90 days of delivery of the underlying
products or services.  Payment terms that extend beyond 90 days are not
considered fixed or determinable, and are not recognized as revenue until the
contractual payment due date, provided the Company then determines collection is
probable and all other revenue recognition criteria have been met.

The Company reduces license revenue to reflect estimated product
returns.  While as a matter of contract and general practice, the Company
does not accept the return of software products after the expiration of any
acceptance period, unforeseen contractual disputes with customers may require
the Company to accept the return of a product.  Should actual product
returns differ from estimates, revisions to the product return allowance would
be required.

Revenues from professional services contracts are generally recognized on a
time and material basis.  However, when contracts have a fixed price,
revenue is recognized on the percentage-of-completion method, with costs and
estimated profits recorded as work is performed.  The Company uses labor
hours as the input measure to determine progress under the percentage of
completion method.  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, which are recognized in the
period in which the revisions are determined.

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
significant customization or modifications of the software or where professional
services are considered necessary to the functionality of the software. Revenue
from these software and services arrangements is recognized using the percentage
of completion method by utilizing specific milestones in order to assess the
progress achieved.

The Company recognizes revenue from royalty agreements upon receipt of the
royalty report when there is a signed agreement and collection is probable.
Prepaid royalties are recorded as deferred revenue until the royalty report is
received. For limited term fixed fee royalty agreements, the Company recognizes
the total fee ratably over the term of the royalty agreement.

Software maintenance revenues, subscription and hosting fees are recognized
ratably over the term of the related contract, typically one year, in accordance
with revenue recognition criteria.

Deferred revenue consists of license fees for which revenue recognition
criteria have not been met and prepaid fees for royalties, services,
subscription fees, and maintenance and support agreements.

Revenues by type for the years ended December 31, 2003, 2002 and 2001 are as
follows (in thousands):

`Years Ended December 31,
                                         -------------------------------
                                           2003       2002       2001
                                         ---------  ---------  ---------
License fees........................... $   7,071  $  28,597  $ 130,917
Professional services..................     6,475     34,303    200,816
Maintenance............................    15,649     24,725     34,185
Other..................................     7,043     17,904     42,651
                                         ---------  ---------  ---------
                                        $  36,238  $ 105,529  $ 408,569
                                         =========  =========  =========`

Included in Other above are revenues generated through hosting, content,
auction, education, training and subscription services.

STOCK-BASED COMPENSATION

The Company generally has three categories of employee stock-based awards:
restricted stock, stock options and a stock purchase plan, which are more fully
described in "Note 11 - Stockholders' Equity." The Company accounts
for employee stock options using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and has adopted the disclosure-only alternative of SFAS 123,
"Accounting for Stock-Based Compensation" as amended.  Under the intrinsic value
method, the Company has only recorded stock-based compensation resulting from
restricted stock issued and options assumed in various prior period
acquisitions.

Restricted stock is measured at fair value on the date of grant based on the
number of shares granted and the quoted price of the Company's common stock.
Such value is recognized as an expense ratably over the corresponding employee
service period. To the extent restricted stock or restricted stock units are
forfeited prior to vesting, any corresponding previously recognized expense is
reversed as an offset to "Stock-based compensation." Stock-based compensation
associated with restricted stock was $0 and $2.7 million during 2003 and 2002,
respectively.

The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
123 to stock-based employee compensation (in thousands except per share
data):

`Years Ended December 31,
                                           --------------------------------------
                                              2003         2002          2001
                                           ----------  -------------  -----------
Net loss - as reported................... $  (57,770) $    (589,836) $(2,584,099)
Add:  Stock-based compensation cost,
  included in the determination of
  net loss as reported...................      3,395          8,728       98,302
Deduct: Total stock-based employee
  compensation expense (benefit) determined
  under the fair value based
  method for all awards..................       (495)       (42,344)     120,723
                                           ----------  -------------  -----------
Proforma net loss........................ $  (54,870) $    (623,452) $(2,365,074)
                                           ==========  =============  ===========
Loss per share:
  Basic and diluted - as reported........ $    (2.19) $      (20.33) $   (103.02)
                                           ==========  =============  ===========
  Basic and diluted - pro forma.......... $    (1.79) $      (21.49) $    (94.29)
                                           ==========  =============  ===========`

The weighted average fair value of stock options granted during 2003, 2002
and 2001 was $2.02, $4.33 and $40.80, respectively. The weighted-average fair
values for stock options granted were calculated using the Black-Scholes option-
pricing model based on the following assumptions:

`2003         2002          2001
                                           ----------  -------------  -----------
Volatility...............................        104 %          148 %        146 %
Weighted-average estimated life..........   3 years       3 years       3 years
Weighted-average risk-free interest rate.        2.5 %          4.6 %        5.0 %
Dividend yield...........................         --             --           --`

The weighted average fair value of shares issued under the employee stock
purchase plan during 2003, 2002, and 2001 was $2.55, $5.26, and $68.06,
respectively. The weighted-average fair value of shares issued under the
employee stock purchase plan was calculated using the Black-Scholes option-
pricing model based on the following assumptions:

`2003         2002          2001
                                           ----------  -------------  -----------
Volatility...............................        104 %          148 %        146 %
Weighted-average estimated life..........   6 months     6 months      6 months
Weighted-average risk-free interest rate.        2.5 %          4.6 %        5.0 %
Dividend yield...........................         --             --           --`

ADVERTISING

Advertising costs are expensed as incurred. Advertising expense was
approximately $(0.3) million, $0.8 million and $6.0 million for the years ended
December 31, 2003, 2002 and 2001, respectively.  In 2003, advertising expense
was a net negative amount due to reversals of 2002 advertising accruals
primarily in the UK for estimated advertising costs in excess of actual final
amounts.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS 109,
"Accounting for Income Taxes," which requires the use of the liability method in
accounting for income taxes.  Under this method, deferred tax assets and
liabilities are measured using enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

NET LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic and diluted net loss per share information for all periods is presented
under the requirements of SFAS 128, "Earnings per Share." Basic earnings per
share has been computed using the weighted-average number of shares of common
stock outstanding during the period, less shares subject to repurchase and
forfeiture, and excludes any dilutive effects of options, warrants, and
convertible securities. Potentially dilutive securities 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, expect per share data):

`Years Ended December 31,
                                                --------------------------------------
                                                   2003         2002          2001
                                                ----------  -------------  -----------
Net loss attributable to common stockholders.. $  (67,392) $    (589,836) $(2,584,099)
                                                ----------  -------------  -----------
Weighted average shares of common
  stock outstanding...........................     30,756         29,074       25,250
Less: weighted average shares subject
  to repurchase and forfeiture................        (21)           (63)        (166)
                                                ----------  -------------  -----------
Weighted average shares of common
  stock outstanding used in computing
  basic and diluted net loss per share........     30,735         29,011       25,084
                                                ==========  =============  ===========
Basic and diluted net loss per share
  attributable to common stockholders......... $    (2.19) $      (20.33) $   (103.02)
                                                ==========  =============  ===========`

If the Company had reported net income, the calculation of diluted earnings
per share would have included approximately an additional 445,000, 584,000, and
2,327,300 common equivalent shares related to outstanding stock options and
warrants not included above (determined using the treasury stock method) for the
years ended December 31, 2003, 2002 and 2001, respectively.

COMPREHENSIVE LOSS

Comprehensive loss is comprised of net loss and other comprehensive income
(loss). Other comprehensive income (loss) includes certain changes in
stockholders' equity that are excluded from net loss. Other comprehensive income
(loss) includes unrealized gains and losses on marketable securities and
currency translation adjustments.
In 2003, other comprehensive loss includes a reclassification adjustment
of $0.7 million for accumulated foreign currency translation losses that were
reported in net income in 2003 because the related foreign subsidiaries'
operations were terminated.  At December 31, 2003 and
2002, cumulative unrealized losses on marketable securities totaled $0.1 million
and $0.1 million, respectively, and cumulative currency translation adjustments
totaled $0 and $1.1 million, respectively. Comprehensive income (loss) for the
years ended December 31, 2003, 2002 and 2001 has been reflected in the
Consolidated Statements of Stockholders' Equity.

EFFECTS OF NEW ACCOUNTING STANDARDS

In May 2003, the EITF reached a consensus on Issue No. 03-5,
"Applicability of AICPA Statement of Position 97-2, Software Revenue
Recognition, to Non-Software Deliverables in an Arrangement Containing More-
Than-Incidental Software." The FASB ratified this consensus in August 2003.
EITF Issue No. 03-5 affirms that AICPA Statement of Position 97-2 applies
to non-software deliverables, such as hardware, in an arrangement if the
software is essential to the functionality of the non-software deliverables. The
adoption of EITF Issue No. 03-5 did not have a material impact on the
Consolidated Financial Statements.

In May 2003, the Financial Accounting Standards Board issued SFAS 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity."  SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of those instruments were previously
classified as equity. SFAS 150 went into effect during the second quarter of
2003.  Adoption of SFAS 150 did not have a material impact on the Consolidated
Financial Statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities."  FIN 46 deals with
off-balance sheet assets, liabilities, and obligations and gives companies
guidance for determining which assets and liabilities associated with the
obligations are required to be included in the company's financial statements.
Adoption of FIN 46 did not have a material impact on the Consolidated Financial
Statements.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN 45 requires that the
Company recognize the fair value for guarantee and indemnification arrangements
issued or modified by the Company after December 31, 2002, if these
arrangements are within the scope of the Interpretation. In addition, the
Company must continue to monitor the conditions that are subject to the
guarantees and indemnifications, as required under previously existing generally
accepted accounting principles, in order to identify if a loss has occurred. If
the Company determines it is probable that a loss has occurred then any such
estimable loss would be recognized under those guarantees and indemnifications.
Some of the software licenses granted by the Company contain provisions that
indemnify licensees of the Company's software from damages and costs resulting
from claims alleging that the Company's software infringes the intellectual
property rights of a third party. The Company has historically received only a
limited number of requests for indemnification under these provisions and has
not been required to make material payments pursuant to these provisions.
Accordingly, the Company has not recorded a liability related to these
indemnification provisions.

REVERSE STOCK SPLIT

On September 16, 2002, the Company completed a reverse stock split where ten
shares of common stock outstanding were converted into one share of common
stock. All references in the consolidated financial statements and notes thereto
with respect to the number of shares, per share amounts and market prices of the
Company's common stock have been restated to reflect the effect of the reverse
stock split.

2. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following (in thousands):

`December 31,
                                           -------------------------
                                              2003         2002
                                           ----------  -------------
Accounts receivable...................... $    6,010  $      10,347
Unbilled accounts receivable.............         --          3,027
                                           ----------  -------------
                                               6,010         13,374
Less allowances for doubtful
  accounts and other.....................      1,026          6,001
                                           ----------  -------------
                                          $    4,984  $       7,373
                                           ==========  =============`

Unbilled accounts receivable result from professional services
provided to customers that have not yet been formally invoiced as of the
reporting date. Such amounts are generally invoiced within fifteen business days
of the end of the period in which services are provided.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

`December 31,
                                           -------------------------
                                              2003         2002
                                           ----------  -------------
Computer and office equipment............ $    1,486  $       7,417
Furniture and fixtures...................        284          2,344
                                           ----------  -------------
                                               1,770          9,761

Less accumulated depreciation............      1,259             --
                                           ----------  -------------
                                          $      511  $       9,761
                                           ==========  =============`

Depreciation expense was approximately $5.9 million in 2003, $30.7 million in
2002 and $45.4 million in 2001. In accordance with SFAS 144 (See Note 4), an
impairment charge was recorded for all long-lived assets whose carrying value
exceeded their estimated fair value. As a result, the Company recorded
impairment charges of $20.5 million for property and equipment during the year
ended December 31, 2002 to reduce the book value to the estimated fair
value.

4. GOODWILL, LONG LIVED ASSETS AND INTANGIBLE ASSETS

Intangible assets, which result from acquisitions accounted for under the
purchase method and the Covisint Technology Agreement entered into in December
2000, consist of the following (in thousands):

`December 31,
                                           -------------------------
                                              2003         2002
                                           ----------  -------------
Covisint Technology Agreement............ $       --  $      15,943
Core and developed technology............      1,431          1,431
Intellectual property and other..........      1,505          1,075
                                           ----------  -------------
                                               2,936         18,449
Less accumulated amortization............        674             --
                                           ----------  -------------
Other intangible assets, net............. $    2,262  $      18,449
                                           ==========  =============`

Changes in the net carrying amount of goodwill in 2002 are as follows (in thousands):

`Balance as of December 31, 2001............................... $   164,679
Reclassification of intangible asset - assembled workforce
  into goodwill, net..........................................      15,700
Exterprise goodwill adjustment for final purchase accounting..        (545)
Impairment....................................................    (179,834)
                                                                -----------
Balance as of December 31, 2002............................... $        --
                                                                ===========`

Core and developed technology of $1.4 million and Intellectual property and
other of $1.5 million relate to technology and intellectual property rights
acquired during acquisitions in 2000 and 2001of Mergent and Exterprise, as well
as certain additional patent costs.

Amortization expense of our goodwill and intangible assets are as follows (in
thousands):

`December 31,
                                                       -------------------------------------
                                                          2003         2002         2001
                                                       -----------  -----------  -----------
Goodwill amortization................................ $        --  $        --  $   305,120
Covisint technology agreement amortization...........       1,495       10,428       55,188
Acquisition related intangible asset amortization....         477       11,824       27,669
Intellectual property and other amortization.........         135           43           --
                                                       -----------  -----------  -----------
Total................................................ $     2,107  $    22,295  $   387,977
                                                       ===========  ===========  ===========`

Amortization of the previous Technology Agreement with Covisint has been recorded in Cost of
license fees.  Intangible assets related to acquired technology, trademarks,
patents and other intangible assets acquired through business combinations are
being amortized on a straight-line basis over the estimated useful life of the
related asset, generally one to five years, and intellectual property related to
original patents is being amortized over an estimated useful life of ten
years.

The expected future annual amortization expense of  intangible assets is as
follows (in thousands):

`Amortization
For the Year Ending December 31,                         Expense
-----------------------------------------------------  -----------
  2004............................................... $       602
  2005...............................................         597
  2006...............................................         125
  2007...............................................         125
  2008...............................................         125
Thereafter...........................................         688
                                                       -----------
Total expected future amortization................... $     2,262
                                                       ===========`

In accordance with SFAS 141 and 142, the Company discontinued the
amortization of goodwill and assembled workforce beginning January 1,
2002.  A reconciliation of previously reported net income (loss) and
earnings per share to the amounts adjusted for the exclusion of goodwill
amortization and the amortization of assembled workforce is as follows (in
thousands, except per share amounts):

`Years Ended December 31,
                                                           -------------------------------------
                                                              2003         2002         2001
                                                           -----------  -----------  -----------
Net Loss:
  Reported net loss attributable to common stockholders.. $   (67,392) $  (589,836) $(2,584,099)
  Goodwill amortization..................................          --           --      305,120
  Assembled workforce amortization.......................          --           --        9,959
                                                           -----------  -----------  -----------
Adjusted net loss........................................ $   (67,392) $  (589,836) $(2,269,020)
                                                           ===========  ===========  ===========

Basic and diluted loss per share:
  Reported net loss attributable to common stockholders.. $     (2.19) $    (20.33) $   (103.02)
  Goodwill amortization..................................          --           --        12.16
  Assembled workforce amortization.......................          --           --         0.40
                                                           -----------  -----------  -----------
Adjusted basic and diluted net loss per share............ $     (2.19) $    (20.33) $    (90.46)
                                                           ===========  ===========  ===========`

Under SFAS 142, intangible assets with finite lives that continue to be
amortized should be reviewed for impairment in accordance with SFAS 144. An
impairment assessment is required whenever events or changes in circumstances
indicate that the carrying value may not be recoverable.  During 2003 and
2002, the Company identified indicators of possible impairment relating to the
Technology Agreement with Covisint.  The impairment indicators included,
but were not limited to, significant negative industry and economic trends,
which resulted in a reduction of forecasted cash flows related to the Technology
Agreement.

In accordance with SFAS 144, the Company performed impairment tests of the
carrying value of the Technology Agreement to determine whether any impairment
existed in both 2003 and 2002.  The Company determined that the sum of the
expected undiscounted cash flows attributable to the Technology Agreement was
less than its carrying value and that impairment write-downs were
required.  Accordingly, the Company calculated the estimated fair value of
the intangible asset by summing the present value of the expected cash flows
over its life.  The impairments were calculated by deducting the present
value of the expected cash flows from the carrying value, resulting in
impairment write-downs of $8.4 million and $180.0 million in relation to the
Technology Agreement, which were charged to cost of license fees in 2003 and
2002, respectively.

On December 30, 2003, the Company entered into a settlement agreement
with Covisint pursuant to which Covisint paid the Company $4,650,000.   As part
of the agreement, the parties agreed to resolve the arbitration and separate
Michigan state court action that had been pending between the parties, and the
Company granted a fully paid software license to Covisint for certain Commerce
One software that Covisint has used in its operations.  The Company previously
had licensed that software to Covisint under the Technology Agreement, which
terminated as part of the settlement.  Covisint paid the Company in full on or
before January 2, 2004.  Following a 92-day period (which commenced on January
2, 2004), and provided that certain bankruptcy events do not occur with respect
to either party during that 92-day period, all litigation between the parties
was permanently dismissed, and the Technology Agreement that previously governed
the relationship between the Company and Covisint terminated.    As a result of
the settlement, Commerce One recognized a charge to "Cost of license fees" of
$6.0 million in the fourth quarter of 2003 due to the write down of the
intangible asset related to its previous Technology Agreement with Covisint.  In
addition, Commerce One recognized a charge of $5.0 million for the write down of
its 2% equity investment in Covisint.  This charge was included in the "Interest
income and other, net" line item on the Statement of Operations.

During the quarter ended December 31, 2002, the Company identified indicators
of possible impairment relating to property, plant, and equipment and intangible
assets other than goodwill.  These indicators included but were not limited
to a history of negative cash flows and operating losses and significant
negative industry and economic trends.  The Company performed an impairment
test of the carrying value of these long-lived and intangible assets to
determine whether any impairment existed.  The Company determined that the
sum of the expected undiscounted cash flows attributable to the assets was less
than the carrying value of the assets and that an impairment existed.  The
Company determined fair value for long-lived assets by using market values when
available.  If no market existed for the asset, the Company calculated fair
value as the sum of the discounted cash flows attributable to the assets. 
The impairment was calculated by deducting the established fair value from the
carrying value.  As a result, the Company recorded impairment charges of
$20.5 million for property and equipment, $9.5 million for intangible assets
other than goodwill.

Effective July 1, 2001, the Company adopted certain provisions of SFAS 141,
and effective January 1, 2002, the Company adopted the full provisions of SFAS
141 and SFAS 142.  SFAS 141 requires business combinations initiated after
June 30, 2001 to be accounted for using the purchase method of accounting, and
broadens the criteria for recording intangible assets apart from goodwill. 
The Company evaluated its goodwill and other intangible assets acquired prior to
June 30, 2001 using the transition criteria of SFAS 141, which resulted in $15.7
million of other intangible assets (comprised entirely of assembled workforce)
being subsumed into goodwill as of January 1, 2002.  SFAS 142 requires that
purchased goodwill and certain indefinite-lived intangible assets no longer be
amortized, but instead be tested for impairment at least annually.

During the fourth quarter of 2002, the Company prepared its required annual
SFAS 142 impairment test of goodwill.  The Company's fair value,
established using the market method, was below its carrying value as of December
31, 2002, indicating that a potential impairment to goodwill existed.  The
Company then calculated the potential impairment by establishing the fair value
of goodwill and subtracting this fair value from the carrying value of
goodwill.  In accordance with SFAS 142, the fair value of goodwill is an
implied value and is calculated by subtracting the fair value of the net assets
of the Company (other than goodwill) from the fair value of the Company. 
The fair value of net assets includes determining the fair value of any
unrecognized intangible assets.  The Company established fair values for
any unrecognized intangible assets.  The impairment was then calculated by
deducting the fair value of goodwill from the carrying value of goodwill. 
This calculation resulted in an impairment charge of $179.8 million, which
brought the carrying value of goodwill to zero.

During 2001, in accordance with the provisions of SFAS 121, "Accounting for
the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
of," the Company performed impairment tests to determine whether any impairment
existed.  The Company determined that the sum of the expected undiscounted
cash flows attributable to certain of its intangible assets was less than the
carrying value of those intangible assets.  Accordingly, the Company
calculated the estimated fair value of the assets by summing the present value
of the expected cash flows over the life of the assets.  The impairment was
calculated by deducting the present value of the expected cash flows from the
carrying value of the intangible assets.  Based on the results of these
tests, the Company determined that the carrying values of goodwill and other
intangible assets related to AppNet, the Technology Agreement with Covisint, and
CommerceBid were not recoverable and therefore had suffered impairment.  This
assessment resulted in write-downs during the second quarter of 2001 of $1,098.9
million to record the amount by which the carrying amounts of the goodwill and
other intangible assets related to AppNet and CommerceBid exceeded their
respective fair values.  Further, an impairment write-down of $592.3
million was recorded in relation to the Technology Agreement with Covisint, and
this amount was charged to cost of license fees.

5. INVESTMENTS AND OTHER ASSETS

Investments and other assets consists of the following (in thousands):

`December 31,
                                                       ------------------------
                                                          2003         2002
                                                       -----------  -----------
Investment in Covisint............................... $        --  $     5,000
Note receivable - noncurrent.........................       2,000           --
Non-current prepaid rent.............................       2,356           --
Non-current prepaid software licenses................          --          308
Other................................................          --          715
                                                       -----------  -----------
                                                      $     4,356  $     6,023
                                                       ===========  ===========`

The Company has made several investments in privately
held companies and two publicly traded companies and has an investment in Covisint (Note 11). The Company owns less than a 5% interest in
these companies and does not have a significant influence over these companies.
Investments in publicly traded companies are carried at fair value, based on
quoted market prices, with unrealized gains and losses recorded in equity.
Investments in private companies are recorded at cost. These investments are
periodically evaluated for declines in value that are considered other than
temporary.  During 2002, the Company recognized losses related to its
investments.  Due to the significant and enduring downturn in the technology
sector of the economy, the Company felt that the related declines in value were
other than temporary and recognized impairments on all of its investments.  During 2002, the Company recorded an investment loss of
$4.3 million related to the investment in Covisint. This loss was partially
offset by an approximate $0.4 million gain from the sale of the investments in
publicly traded companies.  As a result, the Company recorded total
investment losses of approximately $3.9 million in 2002.  During 2003, the
Company recorded an investment loss of $5.0 million related to the
investment in Covisint (as shown in table above). This loss was partially offset
by an approximate $0.7 million gain from the sale of investments in publicly
traded companies.  As a result, the Company recorded total investment
losses of approximately $4.3 million to Interest income and other in the
consolidated statement of operations in 2003.

On January 24, 2003, the Company executed the sale and license of certain
assets and liabilities, including customer commitments, related to
CommerceOne.net, the Company's marketplace services business consisting of
auction services, subscription services, content services and hosting services,
with eScout LLC, a privately held limited liability company.  In connection
with the closing of this transaction, the Company received notes receivable with
an aggregate face value of approximately $2.0 million, and the right to receive
royalty payments over the four years following the closing of no more than $0.5
million in the aggregate.  Royalties received, if any, will be recognized
by the Company in the period they are received.  The note receivable bears a
quarterly interest rate of 1.5% payable each quarter with full principal payment
due on January 24, 2005.  The note receivable collateralizes certain obligations
of the Company to ComVest and DCC Ventures (See Note 7).

In December 2003, the Company entered into an agreement regarding its lease
obligation with its San Francisco, California landlord.  In this revised
agreement, the Company forfeited approximately $1.7 million remaining on a $2.0
million letter of credit, paid $562,000 in cash and issued 500,000 shares of
restricted stock in exchange for a reduced monthly rent obligation from $154,000
to $60,000 per month for the remaining term of the lease which expires in
December 2007.  The debt forgiveness, cash and stock payments are viewed as
prepaid rent and are being amortized over the term of the lease.  The current
portion of prepaid rent totaling approximately $0.7 million is included in the
Balance Sheet in Prepaid expenses and other current assets.  The long-term
portion amounts to  approximately $2.4 million as included in the table
above.

6. OTHER CURRENT LIABILITIES

Other accrued liabilities consist of the following (in thousands):

`December 31,
                                                       ------------------------
                                                          2003         2002
                                                       -----------  -----------
Accrued restructuring costs:
  2003 Plans......................................... $     2,124  $        --
  2002 and prior Plans...............................         138       14,423
Income taxes payable.................................       1,429        4,688
Royalty, referral, and marketing commitment payable..          10        1,821
Accrued litigation costs.............................         375        1,040
Customer deposits....................................          97          157
Deferred rent........................................         109        2,578
Other................................................         917        5,290
                                                       -----------  -----------
Total other current liabilities...................... $     5,199  $    29,997
                                                       ===========  ===========`

In January 2003, the Company adopted SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities" for all restructuring plans
initiated after December 31, 2002.  SFAS 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue 94-3 "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)."  SFAS 146 requires
that a liability for costs associated with an exit or disposal activity be
recognized at fair value when the liability is incurred, not at the date of an
entity's commitment to an exit plan as required under EITF Issue 94-3.
Subsequent to initial recognition at fair value,  restructuring liabilities are
accreted to their estimated settlement amounts. Prior to January 1, 2003, the
Company accounted for restructuring activities under EITF 94-3 and, as required
under SFAS 146, continues to use EITF 94-3 to account for liabilities related to
restructuring plans initiated prior to January 1, 2003.  All restructuring
charges have been reflected in "Restructuring costs and other" in the
consolidated statement of operations.

2003 Restructuring Plans

The following table summarizes the activity related to restructuring plans
initiated in 2003, and accounted for in accordance with FAS 146, for the twelve
months ended December 31, 2003 (in thousands):

`Amounts       Amounts                    Accrued
                                           charged to   reversed to     Amounts     restructurin
                                          restructuring restructuring   paid or      costs at
                                           costs and     costs and      written     December 31,
                                             other         other          off          2003
                                          ------------  ------------  ------------  -----------
January 2003 Plan:
  Lease cancellations and commitments... $      5,588  $       (458) $     (4,316) $       814
  Termination payments to employees
   and related costs....................       12,189            --       (12,189)          --
                                          ------------  ------------  ------------  -----------
                                               17,777          (458)      (16,505)         814
                                          ------------  ------------  ------------  -----------
July 2003 Plan:
  Termination payments to employees
   and related costs....................          995            --          (995)          --
                                          ------------  ------------  ------------  -----------
                                                  995            --          (995)          --
                                          ------------  ------------  ------------  -----------
October 2003 Plan:
  Termination payments to employees
   and related costs....................        1,609            --          (197)       1,412
  Write-off on disposal of assets
   and related costs....................          348            --          (144)         204
                                          ------------  ------------  ------------  -----------
                                                1,957            --          (341)       1,616
                                          ------------  ------------  ------------  -----------
Total accrued restructuring charges..... $     20,729  $       (458) $    (17,841)       2,430
                                          ============  ============  ============
Less non-current accrued
  restructuring charges.................                                                  (306)
                                                                                    -----------
Accrued restructuring charges
  included within other accrued
  liabilities...........................                                           $     2,124
                                                                                    ===========`

January 2003 Plan

In January 2003, management approved and began to implement a restructuring
plan aimed at further reducing its operating expenses while continuing to align
Commerce One's resources around its core product initiatives.  This first
quarter activity was intended to reduce the Company's headcount by approximately
430 employees and payroll related expenses by $53 million annually. As a result,
approximately $12.2 million was accrued as a restructuring liability for the
payments due to the 430 terminated employees.  In addition, approximately $0.1
million was accrued in connection with the closure of the Company's offices in
the UK during the first quarter of 2003.  All employee termination activities
and payments under this plan were completed by December 31, 2003.

In April 2003, in connection with the headcount reductions made under the
January 2003 Plan, the Company ceased using and entered into an agreement to
sublease a portion of its former corporate office facility in Pleasanton,
California in an effort to decrease the Company's rent expense.  The sublease
had a term from January 2004 through February 2005.  The amount of projected
income provided for under the sublease was less than the lease payments due by
the Company, and the Company recorded a $3.5 million charge to establish a
liability for the fair value of this shortfall.  This was subsequently accreted
to $3.8 million during 2003.  The Company also entered into an agreement to
terminate its Cambridge, Massachusetts office lease agreement by paying $750,000
cash, and agreeing to make two additional cash payments of $375,000 each to be
paid in September 2004 and September 2005, respectively.  As a result, the
Company recorded a $1.5 million charge to restructuring and established a
restructuring liability for the additional cash payments.

In December 2003, Commerce One completed an agreement with its landlord for
its former Pleasanton, California headquarters to terminate its lease agreement
for these facilities. Pursuant to this agreement, Commerce One provided its
landlord the following: 1) an initial cash payment of $1.5 million, 2) an
interest-free promissory note in the principal amount of $2 million (discounted
to $1.3 million) payable in 2005 (see Note 7), and 3) 1.7 million shares of
common stock with a market value of $2.1million. Upon completion of this
transaction, Commerce One has no further rental payment obligations for its
former headquarters. Upon termination of the Pleasanton lease agreement, the
Company applied the aggregate termination consideration of $4.9 million as
payment and reduction of $3.3 million of the previously established Pleasanton
facilities restructuring liability, and $1.6 million as payment and reduction of
accrued Pleasanton lease liabilities. Additionally, the Company recorded a $0.5
reversal of the remaining Pleasanton lease restructuring reserves.  In November
2003, the Company moved its operations from the Pleasanton facility to other
locations in San Francisco and Santa Clara, California previously leased by the
Company with significantly less square footage.

July 2003 Plan

In July 2003, management implemented further restructuring plans aimed at
reducing operating expenses.  This plan was intended to ultimately reduce the
Company's headcount by 50 employees to approximately 250 employees by the fourth
quarter of 2003 and reduce payroll related expenses by $6 million annually.  The
Company incurred approximately $1.0 million of additional restructuring charges
in the third quarter related to these actions.  Of this approximate $1.0 million
accrual for payments due these approximate 50 terminated employees,
approximately $0.7 million was attributable to employees in the US,
approximately $70,000 was attributable to employees in the UK and approximately
$0.2 million was attributable to employees in the Company's Germany location.
Additionally, an approximate $123,000 was accrued in relation to the closure of
the Company's French offices in the third quarter of 2003.

October 2003 Plan

In October 2003, the Company continued to rationalize its operating expenses
by implementing additional restructuring initiatives.  The initiatives mainly
focused on reducing worldwide headcount to 116 employees by the end of the
fourth quarter of 2003 and to reduce payroll related expenses by $10 million
annually.  As a result, the Company incurred additional restructuring charges in
the fourth quarter of approximately $2.0 million related to these activities.
Of this amount, approximately $1.6 million is attributable to payments due to
the approximately 84 employees terminated under this October 2003 Plan.
Approximately $1.2 million of the $1.6 million restructuring accrual for these
terminated employees related to the liquidation of the French subsidiary.
Approximately an additional $0.4 million related to an accrual for terminated
employees in the US locations.  The remaining employee termination accrual as of
December 31, 2003 primarily relates to payments to be made in 2004 in accordance
with applicable French laws governing termination payments to employees.

In connection with the October 2003 Plan, the Company incurred approximately
$0.3 million in other restructuring charges as a result of liquidator fees for
the French subsidiary.

The Company expects that the remaining liability of $1.6 million at December
31, 2003 for the October 2003 Plan will be paid in full by December 31, 2004.

In January 2004, the Company signed an agreement with the landlord of the
office space it occupies in Austin, Texas.  Under the agreement, the Company
reduced its monthly base rent obligation, retroactive to November 1, 2003, extended the lease term and
also assigned to the landlord its sublease with a subtenant who had occupied
some of the Company's subleased space.  In exchange, the landlord was permitted
to draw down an existing letter of credit in the amount of approximately
$500,000 and reclaimed a significant portion of the space under lease.  The net
result of the transaction was to reduce the Company's miminum lease obligation
to this landlord by $0.2 million.  However, the landlord also has the right to
extend the lease for an additional 30 months upon its expiration in January
2006, subject to certain buyout rights of the Company.

2002 and Prior Restructuring Plans

The following tables summarize the activity related to the restructuring
plans initiated prior to January 1, 2003, and accounted for in accordance with
EITF 94-3 (in thousands):

`Amounts       Amounts                    Accrued
                                           charged to   reversed to     Amounts     restructuring
                                          restructuring restructuring   paid or      costs at
                                           costs and     costs and      written     December 31,
                                             other         other          off          2001
                                          ------------  ------------  ------------  -----------
Lease cancellations and commitments..... $     68,860  $         --  $    (17,971) $    50,889
Termination payments to employees
   and related costs....................       30,790            --       (26,275)       4,515
Write-off on disposal of assets
   and related costs....................       30,418        (4,321)      (25,657)         440
Costs associated with divestiture
   of certain businesses................          858            --          (858)          --
                                          ------------  ------------  ------------  -----------
Total restructure accrual and other..... $    130,926  $     (4,321) $    (70,761) $    55,844
                                          ============  ============  ============  ===========`

`Accrued        Amounts       Amounts                  Accrued
                                       restructuring  charged to    reversed to    Amounts   restructuring
                                         costs at    restructuring  restructuring  paid or     costs at
                                       December 31,    costs and     costs and     written   December 31,
                                           2001          other         other         off         2002
                                       ------------  -------------  ------------  ---------  ------------
Lease cancellations and commitments.. $     50,889  $       4,600  $     (8,152) $ (12,593) $     34,744
Termination payments to employees
  and related costs..................        4,515         23,749          (193)   (26,558)        1,513
Write-off on disposal of assets
  and related costs..................          440          5,404          (161)    (5,570)          113
Reversal of restructuring cost in
  connection with sale of eGovernment           --             --        (2,300)     2,300            --
                                       ------------  -------------  ------------  ---------  ------------
Total restructure accrual and other.. $     55,844  $      33,753  $    (10,806) $ (42,421) $     36,370
                                       ============  =============  ============  =========  ============
Less non-current accrued
  restructuring charges..............                                                            (21,947)
                                                                                             ------------
Accrued restructuring charges
  included within other accrued
  liabilities........................                                                       $     14,423
                                                                                             ============`

`Accrued        Amounts       Amounts                  Accrued
                                       restructuring  charged to    reversed to    Amounts   restructuring
                                         costs at    restructuring  restructuring  paid or     costs at
                                       December 31,    costs and     costs and     written   December 31,
                                           2002          other         other         off         2003
                                       ------------  -------------  ------------  ---------  ------------
Lease cancellations and commitments.. $     34,744  $          --  $    (13,788) $ (20,818) $        138
Termination payments to employees
  and related costs..................        1,513            800           (95)    (2,218)           --
Write-off on disposal of assets
  and related costs..................          113             --          (103)       (10)           --
                                       ------------  -------------  ------------  ---------  ------------
Total restructure accrual and other.. $     36,370  $         800  $    (13,986) $ (23,046) $        138
                                       ============  =============  ============  =========  ============`

2001 Restructuring Activities

In 2001, the Company implemented restructuring plans to significantly reduce
its annual operating expenses while realigning Commerce One's resources around
its core product initiatives. The restructuring costs in 2001 were estimated at
$126.6 million. Collectively, the 2001 costs were associated with the
termination of approximately 2,070 employees to cover costs such as separation
pay, outplacement services and benefit continuation and also the termination of
certain office leases, the divestiture of certain parts of the Company's Global
Services division, the consolidation or closure of certain facilities and the
write-down of the carrying value of computers and equipment used by employees
terminated.  Facilities consolidated or closed were located in the United
States, Europe and Asia.  These offices were primarily responsible for the sale
of software products, professional services or customer support.  These lease
related restructuring charges reflected the remaining contractual obligations
under facility leases, net of anticipated sublease income from the date of
facility abandonment to the end of the lease term.  The Company continued to use
certain facilities during the completion of the restructuring and continued to
record monthly rent expense until the facilities were available for sub-lease or
were abandoned.

2002 Restructuring Activities

In 2002, the Company incurred restructuring charges of approximately $4.6
million for facilities consolidated or closed in the United States, Europe and
Asia.  These offices were responsible for the sale of software products,
professional services or customer support.  These restructuring charges
reflect the remaining contractual obligations under facility leases, net of
anticipated sublease income from the date of facility abandonment to the end of
the lease term.  In addition, the charges include $3.7 million of changes
in management assumptions regarding sub-lease income.  Amounts reversed are
mainly related to early lease settlement negotiations for certain leased
properties resulting in a reversal of $5.7 million and changes in management
assumptions regarding broker fees in connection with assumed sub-lease income
resulting in a reversal of $1.3 million.  The Company continued to use
certain facilities during the completion of the restructuring and continued to
record monthly rent expense until the facilities were available for sub-lease or
were abandoned.

In 2002, the Company incurred restructuring charges of approximately $23.7
million for the termination of approximately 900 employees to cover costs such
as separation pay, outplacement services and benefit continuation.  The
separation payments and termination benefits were accrued and charged to
restructuring costs in the period that both the benefit amounts were determined
and such amounts were communicated to the affected employees.  The employee
reductions occurred in all areas of the Company. As of December 31, 2002, all of
the employees had been notified and the majority of these terminations had been
completed.

In 2002, the Company incurred restructuring charges of approximately $5.4
million related to the carrying values of equipment and leasehold improvements
abandoned in connection with the restructuring.  Included in the assets
disposed of and charged to restructuring costs are personal computers and
equipment used by terminated employees, office equipment and leasehold
improvements in connection with closure or consolidation of facilities and
subsidiaries in the United States, Asia and Europe.

In 2002, the Company executed a stock purchase and sale agreement with
Commerce One E-Government Solutions, Inc., a Delaware corporation and a wholly-
owned subsidiary of the Company, and eGov Holdings, Inc., a Delaware corporation
composed of former Company employees.  In consideration for the sale of 100% of
the outstanding common stock of Commerce One E-Government Solutions, Inc to eGov
Holdings, Inc., the Company received cash consideration of approximately $8.4
million, and recorded a gain of
approximately $2.3 million, which was recorded as a reversal of restructuring
costs since Commerce One E-Government Solutions, Inc had been included in
restructuring charges recorded in 2001.

2003 Restructuring Activities

In 2003, the Company incurred restructuring charges of approximately $0.8
million related to a change in management estimates related to employee
termination benefits to be paid under restructuring plans adopted prior to
January 1, 2003.

Restructuring charges reversed in the year ended December 31, 2003 resulted
primarily from the settlement of various lease obligations as outlined below.
In addition, there were minor reversals as a result of changes in management
estimates relating to employee claims and the disposal price of equipment and
other assets.

During the second quarter of 2003, the Company reached a number of settlement
and restructuring agreements related to its real estate commitments in six U.S.
locations.  Pursuant to these agreements, the Company paid a total of
approximately $9.8 million in cash and forfeited approximately $5.5 million
under letters of credit in the second quarter.  In addition, the Company issued
a total of 2.3 million shares of restricted common stock valued at approximately
$4.8 million to the landlords.   These settlements were part of the
restructuring plans initiated prior to January 1, 2003 accounted for in
accordance with EITF 94-3, and resulted in reversals of the restructuring
liability in the amount of approximately $13.8 million for the year ended
December 31, 2003.  The remaining approximate $0.1 million in restructuring
liability related to restructuring plans initiated prior to January 1, 2003 are
expected to be paid out during the year ended December 31, 2004.

7.  NOTES PAYABLE AND WARRANT LIABILITIES

Notes payable consist of the following (in thousands):

`December 31,
                                          ------------  ------------
                                              2003          2002
                                          ------------  ------------
Peoplesoft Note Payable, net of
   discount of $0.8 million............. $      1,270  $         --
ComVest/DCC Notes Payable, net of
   discount of $3.5 million.............        1,507            --
Note Payable to Silicon Valley Bank.....           --        25,000
                                          ------------  ------------
Total................................... $      2,777  $     25,000
                                          ============  ============`

In December 2003, the Company completed an agreement with the Peoplesoft to
pre-pay the total remaining $5.6 million rent obligation.  Pursuant to this
agreement, the Company paid Peoplesoft an initial cash payment of $1.5 million,
an interest-free promissory note in the principal amount of approximately $2
million, and shares of restricted common stock with a market value of
approximately $2.1 million based upon the issuance price.  The approximate $2
million promissory note is due and payable in February 2005.

On December 31, 2003, the Company issued secured promissory notes in the
aggregate principal amount of $5.0 million (the Notes) and warrants to purchase
the Company's common stock (the Warrants) to ComVest and DCC for an aggregate
purchase price of $5 million.  The Notes bear interest at a rate varying from 6%
to 10% over the term of the Notes, are due on March 31, 2005 or sooner upon the
occurrence of certain events of default or other events, and are secured by
certain assets related to our SRM business and notes payable to the Company by
eScout LLC.  The Warrants are exercisable to purchase an aggregate of 2,568,494
shares (the Warrant Shares) of the Company's common stock, at an exercise price
of $0.0001 per share, for a period of one year following the financing.  Up to
513,699 shares may be repurchased by the Company for a nominal amount if the
Company repays the Notes on or before April 30, 2004 and other conditions are
met.  Upon an event of default, the Notes become convertible, subject to certain
limitations, into shares of the Company's common stock at a conversion price
based on the market value of the common stock at the time of the default.  These
events include a merger, a sale or change of control of the Company, the sale,
transfer or disposition of all or substantially all of the Company's assets, the
sale of the Company's SRM assets, its repayment of certain other indebtedness,
and certain events of default.

The holders of the Notes and Warrants have registration rights that require
the Company to file a registration statement with the Securities and Exchange
Commission (SEC) to register the resale of the common stock issuable upon
conversion of the Notes or the exercise of the Warrants.  Under  Emerging Issues
Task Force Issue No. 00-19, "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock" (EITF 00-19), the
ability to register stock is deemed to be outside of the Company's control.
Accordingly, the fair value of the Warrants of $3.3 million has been recorded as
an accrued warrant liability in the consolidated balance sheet at December 31,
2003, and was marked to market at the end of each quarter.  The remaining
proceeds from the $5 million note of $1.5 million are recorded as a discounted
note payable at December 31, 2003, and will be amortized up to its stated
principal amount using the effective interest rate method over the term of the
note.  As of December 31, 2003, Warrant liabilities consisted of $3.3 million
related to ComVest and DCC Ventures warrants and $1.9 million related to BayStar
warrants. (See Note 11).

On October 23, 2002, the Company executed a Loan and Security Agreement with
Silicon Valley Bank for a credit facility of up to $25 million.  In the
fourth quarter of 2002, Commerce One drew $25 million against the  credit
facility.  During the third quarter of 2003, the Company voluntarily repaid
this $25 million loan to Silicon Valley Bank, which reduced the Company's
restricted cash balance by that amount.  All amounts drawn by Commerce One
pursuant to that loan agreement had been fully secured by a cash collateral
account with Silicon Valley Bank and, as a result, the loan did not result in
any net additional unencumbered cash to the Company. This repayment allowed the
Company to save approximately $0.2 million in interest expense per quarter.

In October 2002, the Company repaid its loan from Microsoft Corporation in
the principal amount of $19 million.  The Microsoft loan bore interest at
7% per annum, payable quarterly, and was secured with a $19 million cash
collateral account.

8.  BUSINESS DIVESTITURES AND NOTES RECEIVABLE

During 2003, 2002 and 2001, the Company completed the divestiture of certain
professional services divisions within its Global Services division.  These
service divisions were initially acquired through the acquisition of AppNet in
September 2000, and were divested through management buy-outs of the
division.

In September 2003, the Company sold the software application package known as
Xpress Solutions, including intellectual property and related software license
agreements, to Computer Horizons Corporation (CHC) pursuant to an Asset Purchase
Agreement (the Purchase Agreement).  Pursuant to the terms of the Purchase
Agreement, CHC paid the Company $566,000 in cash and assumed certain of the
Company's liabilities, obligations and duties related to Xpress Solutions
occurring on or after July 16, 2003.  In addition, CHC agreed to pay the Company
a royalty equal to twenty percent (20%) of all licensing fees received from
third parties for rights to use Xpress Solutions, and intellectual property
related thereto, until the aggregate amount of such royalty payments equals
$500,000.  Royalties received, if any, will be recognized by the Company in the
period they are received.  As a result of this transaction, Commerce One
recorded a gain of approximately $0.5 million as other income in the third
quarter of 2003.

On January 24, 2003, the Company executed the sale and license of certain
assets, including approximately $1.0 million in customer accounts receivable,
and liabilities, including customer commitments, related to CommerceOne.net, the
Company's marketplace services business consisting of auction services,
subscription services, content services and hosting services, to eScout LLC, a
privately held limited liability company.  In connection with the closing
of this transaction, the Company received notes receivable with an aggregate
face value of approximately $2.0 million, and the right to receive royalty
payments over the four years following the closing of no more than $0.5 million
in the aggregate.  As a result of this sale, the Company recorded a loss of
$0.2 million in Interest income and other in the consolidated statement of
operations in 2003. Royalties received, if any, will be recognized by the
Company in the period they are received.  The note receivable bears a quarterly
interest rate of 1.5% with payments due each quarter with the final payment due
on January 24, 2005.  Fifteen percent (15%) of the aggregate purchase price
was held in escrow until January 2004 as security for any claims related to a
breach of the Company's representations, warranties and covenants.  During
2003 and 2002, the Company recognized service revenues totaling approximately
$3.2 million and $11.8 million, respectively, from CommerceOne.net related
services.  Subsequent to this sale, Commerce One no longer offers these
services and therefore receives no future revenues related to these
services.

On February 21, 2002, the Company executed a stock purchase and sale
agreement with Commerce One E-Government Solutions, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Company, and eGov Holdings, Inc., a
Delaware corporation composed of former Company employees.  In
consideration for the sale of 100% of the outstanding common stock of Commerce
One E-Government Solutions, Inc to eGov Holdings, Inc., the Company received
cash consideration of approximately $8.4 million.  As a result of this sale, the
Company recorded a gain of approximately $2.3 million
which has been reflected as a reduction of restructuring expense in 2002, since
Commerce One E-Government Solutions, Inchad been included in
restructuring charges recorded in 2001.

On January 9, 2002, the Company executed an asset sale agreement with
Connective Commerce Company LLC, a Massachusetts limited liability company
composed of former Commerce One employees.  In connection with this
agreement, the Company received cash of approximately $2.4 million and a note
receivable with a face value of approximately $4.0 million due on December 31,
2004, that bore a quarterly interest rate of 1.75%, receivable on a quarterly
basis commencing September 30, 2002.  The Company did not recognize any
gain or loss at the time of this sale.  On October 15, 2002, the Company agreed
with Connective Commerce to modify the note agreement to decrease the payments
in 2003 and to forgive interest on the principal balance for 2003. Due to the
renegotiation of the note and Connective Commerce's deteriorating financial
condition, the Company determined that the value of the asset was significantly
impaired and reduced the remaining value of the note to zero during the quarter ended
December 31, 2002.  The charge was taken as expense in the "General and
administrative" section of the Consolidated Statement of Operations.  In
September 2003, the note, along with certain lease obligations of Connective
Commerce to Commerce One, was renegotiated and a payment of approximately $0.6
million was received from Connective Commerce.  As a result, the Company
recognized  approximately $0.3 million as other income in the Statement of
Operations.  Due to Connective Commerce's financial position, the Company has
not recognized any asset in relation to the renegotiated payment schedule.  Any
future payments made by Connective Commerce, if any, will be recognized as other
income when received.

In October 2001, the Company executed a stock transfer and asset sale with
Edgar, Dunn & Company, Inc., (EDC) a company composed of former Commerce One
employees.  In connection with this agreement the Company received a 10%
minority interest in EDC and two notes receivable with face values totaling $1.3
million due by September 30, 2004. The notes bore an annual interest rate of
7.5%, receivable on a quarterly basis.  Subject to certain criteria, the
Company also had the rights to an annual revenue share of 6% of the future
revenues of EDC for the four-year period following the closing in October 2001.
As a result of this sale, the Company recorded a loss of $0.7 million reflected
in Restructuring costs and other in the consolidated statement of operations in
2001. In October 2003, the Company restructured the outstanding note receivable
with EDC.  The notes have been paid by EDC over time, and the remaining amount
due as of September 30, 2003 was approximately $0.6 million.   The Company
agreed with EDC to accept a discount for early payment of the note and
repurchase of the 10% minority interest in EDC for a total cash payment of
$525,000, which was received in November 2003, in exchange for a full release of
additional payment obligations.

In October 2001, the Company executed an asset sale to Beaconfire Consulting
Inc., a company composed of former Commerce One employees.  In
consideration of the assets sold, the Company received a note receivable with a
face value of approximately $0.4 million due on September 30, 2006, that bore an
annual interest rate of 8%, receivable on a quarterly basis.  Subject to
certain criteria, the Company also had the right to receive a 4% and 4.5% annual
share of future revenues of Beaconfire Consulting for the two and succeeding
three years, respectively. As a result of this sale, the Company recorded a loss
of $0.2 million reflected in Restructuring costs and other in the consolidated
statement of operations in 2001.  On December 3, 2003, the Company restructured
its outstanding note receivable with Beaconfire. The Company agreed with
Beaconfire to accept a discount for early payment on the note from them and it
agreed to forgive them any future rights to receive its annual share of future
Beaconfire revenues for a total cash payment of $215,000, which was received in
December 2003, in exchange for a full release of additional payment
obligations.

9. COMMITMENTS AND CONTINGENCIES

GUARANTEES

In November 2002, the FASB issued FIN No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, including
Indirect Guarantees of Indebtedness of Others -- an interpretation of FASB
Statements No. 5, 57 and 107 and rescission of FIN 34." The following is a
summary of the Company's agreements that the Company has determined are within
the scope of FIN 45.

Under its bylaws and certain agreements with officers and directors, the
Company has agreed to indemnify its officers and directors for certain events or
occurrences arising as a result of the officer or director's serving in such
capacity. The term of the indemnification period is for the officer's or
director's lifetime. The maximum potential amount of future payments the Company
could be required to make under these indemnification agreements is unlimited.
However, the Company has a directors and officer liability insurance policy that
limits its exposure and enables it to recover a portion of any future amounts
paid. As a result of its insurance policy coverage, the Company believes the
estimated fair value of these indemnification agreements is minimal and has no
liabilities recorded for these agreements as of December 31, 2003.

The Company enters into indemnification provisions under (i) its agreements
with other companies in its ordinary course of business, typically with business
partners, contractors, and customers, landlords and (ii) its agreements with
investors. Under these provisions, the Company generally indemnifies and holds
harmless the indemnified party for losses suffered or incurred by the
indemnified party as a result of the Company's activities or, in some cases, as
a result of the indemnified party's activities under the agreement. These
indemnification provisions often include indemnifications relating to
representations made by the Company with regard to intellectual property rights,
and often survive termination of the underlying agreement. In addition, in some
cases, the Company has agreed to reimburse employees for certain expenses and to
provide salary continuation during short-term disability. The maximum potential
amount of future payments the Company could be required to make under these
indemnification provisions is unlimited. The Company has not incurred material
costs to defend lawsuits or settle claims related to these indemnification
agreements. As a result, the Company believes the estimated fair value of these
agreements is minimal. Accordingly, the Company has no liabilities recorded for
these agreements as of December 31, 2003.

The Company's software license agreements also generally include a
performance guarantee that the Company's software products will substantially
operate as described in the applicable program documentation for a period of 90
days after delivery.  The Company also generally warrants that services that the
Company performs will be provided in a manner consistent with reasonably
applicable industry standards. To date, the Company has not incurred any
material costs associated with these warranties.

LEASE OBLIGATIONS

The Company leases its principal office facilities under non-cancelable
operating leases with escalating rent. Rent expense amounted to $7.4 million,
$16.5 million and $22.9 million for the years ended December 31, 2003, 2002
and 2001, respectively.

Future minimum payments under operating leases at December 31, 2003 are
as follows (in thousands):

`Operating
YEARS ENDING DECEMBER 31,                       Leases
---------------------------------------------  ---------
  2004....................................... $   2,110
  2005.......................................     1,526
  2006.......................................     1,382
  2007.......................................     1,322
  2008.......................................       187
Thereafter...................................        --
                                               ---------
Total Future Minimum Payments................ $   6,527
                                               =========`

LEGAL PROCEEDINGS

The Company currently is a party to various legal proceedings, including
those noted below.  While the Company currently believes that the ultimate
outcome of these proceedings will not have a material adverse effect on our
results of operations, litigation is subject to inherent uncertainties, and
unfavorable rulings could occur.  Depending on the amount and timing, an
unfavorable outcome of some or all of these matters could have a material
adverse effect on the Company's cash flows, business, results of operations or
financial position.

Securities Litigation

On June 19, 2001, a class-action securities claim, captioned Cameron v.
Commerce One, Inc., et al., was filed against Commerce One, several
company officers and directors (the Individual Defendants), and the three lead
underwriters in the Commerce One initial public offering (IPO) in the United
States District Court for the Southern District of New York.  Various plaintiffs
have filed similar actions asserting virtually identical allegations against
more than 200 other companies. The lawsuits against Commerce One and other
companies have been coordinated for pretrial purposes with these other related
lawsuits and have been assigned the collective caption In re Initial Public
Offering Securities Litigation.

On April 19, 2002, plaintiffs' lawyers for the coordinated lawsuits filed an
amended complaint consisting of a set of "Master Allegations" and individual
amended complaints against the various defendants, including Commerce One and
the Individual Defendants.  The amended complaint alleges violations of Section
11 and Section 15 of the Securities Act of 1933, Section 20(a) of the Securities
Exchange Act of 1934 (Exchange Act), and Section 10(b) of the Exchange Act (and
Rule 10b-5, promulgated thereunder) as a result of alleged conduct of the
underwriters of the IPO to engage in a scheme to under price the IPO and then
artificially inflate our stock price in the aftermarket. The complaint seeks
unspecified damages on behalf of a purported class of purchasers of common stock
between July 1, 1999 and June 15, 2001. On July 15, 2002, the issuer
defendants and individual defendants filed an omnibus motion to dismiss
addressing issues generally applicable to the defendants as a group.  On
October 9, 2002, the district court entered an order dismissing all of the
living individual Commerce One officers and directors from the case without
prejudice.  On February 16, 2003, the district court entered an order denying
most of the defenses asserted by the defendants in the omnibus motion to dismiss
and allowing most of the case to proceed. A proposal has been made for
the settlement and release of claims against the issuer defendants, including
Commerce One. Under the settlement proposal, the plaintiffs would
dismiss the issuer defendants from the lawsuit (including Commerce One and named
individual defendants) and continue to pursue their case against the underwriter
defendants.  In exchange for this dismissal, the D&O insurance carriers
would agree to guarantee a recovery by the plaintiffs from the underwriter
defendants of at least $1.0 billion.  The Company's Board of Directors
has approved Commerce One's participation in the settlement.  The settlement
remains subject to a number of conditions, including approval of the proposed
settling parties and the court.  The Company has stated that if settlement
does not occur, and litigation against Commerce One continues, it believes it
has meritorious defenses and intends to defend the case vigorously.

In February 2003, Commerce One, along with its Chief Executive Officer and
former Chief Financial Officer, were named as defendants in a similar class-
action matter in Florida, Liu v. Credit Suisse First Boston et al.,
United States District Court, Southern District of Florida.  In that case, the
plaintiff alleges that various investment banks, issuer companies, and
individuals violated securities laws by engaging in a scheme to under-price
initial public offerings and then artificially inflate prices of those stocks in
the aftermarket.  The Commerce One defendants have been dismissed from the case.
By court order dated July 16, 2003, the court declined to grant the plaintiff's
motion to vacate its order of dismissal, finding that plaintiff lacked good
cause for failing to effect service on the dismissed defendants, including
Commerce One.  This case also has been coordinated with the other similar class-
action securities cases pending in New York, including the Cameron matter
described above, and it remains unclear whether the proposed settlement of those
other cases will apply to the claims in the Liu matter.

Other Litigation

In December 2003, the Company entered into a settlement agreement with
Covisint pursuant to which Covisint paid the Company $4,650,000.  In connection
with this agreement, the parties agreed that, as long as no bankruptcy event
occurs prior to the expiration of a 92-day period (which began on January 2,
2004), Covisint's future payment obligations to the Company will terminate and
the Company's existing technology agreement with Covisint will be cancelled.
See the section above entitled "Settlement with Covisint".

10. RELATED PARTY TRANSACTIONS

The Company entered into a strategic relationship with SAP in 2000 to jointly
develop, market and sell the MarketSet suite of applications and the Enterprise
Buyer procurement applications.  In connection with this agreement, the
Company also entered into an equity relationship with SAP (See Note 11).  This
agreement provided that either party licensing the jointly developed products to
its customers would owe a royalty to the other party.  These products were
primarily targeted at electronic marketplace customers.  Historically, SAP was
instrumental in assisting the Company with selling the jointly developed
products to SAP's customer base.  From 2000 to 2002, SAP accounted for a
significant portion of the Company's license revenue.  However, these
royalty payments declined in the past two years with the decline of the market
for electronic marketplace solutions.  In 2003, 2002 and 2001, SAP reported
royalties to the Company of approximately $4.1 million, $26.1 million and$79.1 million, respectively, of which license revenues were approximately
$0.4 million, $19.7 million and $68.3 million, respectively.

Over time, the relationship with SAP has changed and each company has phased
out the jointly developed Enterprise Buyer procurement products and replaced
such products with its own successor procurement products.  In addition,
the market for the Marketset suite of products has declined substantially over
the past two years with the decline in the electronic marketplace sector.  In
November 2003, SAP and Commerce One terminated the commercial relationship.  As
a result, the Company recognized only $0.4 million in license revenue from SAP
in 2003 and does not expect to receive any license revenue in 2004 or
thereafter.

Historically, the Company has also generated revenue from its relationship
with SAP by providing technical customer support and maintenance services to
joint customers.  This revenue represented approximately 4% of the Company's
support and maintenance revenues in 2001, 11% in 2002 and 13% in 2003.  As a
result of the termination of the SAP relationship in November 2003, the Company
does not expect to receive revenues, if any,  from SAP for technical support and
maintenance in 2004 or thereafter.

During the years ended December 31, 2003, 2002 and 2001, the Company
recognized revenues with Covisint, LLC (Covisint), a business-to-business
electronic marketplace for the procurement of goods and services by automakers,
their suppliers and others.  The Company holds a two percent equity
interest in Covisint.  In addition, the Company recently settled a payment
dispute with Covisint and terminated the existing Technology Agreement with
Covisint in December 2003, and received a total payment of $4,650,000 in January
2004 (See Note 11).  In exchange for such payment, the Company entered into a
new license agreement which licenses to Covisint certain software which had been
licensed to it under the prior Technology Agreement.

During the years ended December 31, 2003 and 2002, the Company recognized
revenue from transactions with NTT Corporation (NTT).  A member of the
Company's Board of Directors currently serves as an executive of an NTT
subsidiary.

Amounts included in the consolidated financial statements in connection with
the related party transactions described above are as follows (in
thousands):

`Years Ended December 31,
                                               -------------------------------
                                                 2003       2002       2001
                                               ---------  ---------  ---------
Revenues:
    SAP...................................... $   4,068  $  26,149  $  79,111
    Covisint.................................     2,905      5,011     12,885
    NTT......................................       419        862      5,745
                                               ---------  ---------  ---------
    Total.................................... $   7,392  $  32,022  $  97,741
                                               =========  =========  =========
Professional consulting costs
  included within Cost of services:
    SAP...................................... $     149  $   2,237  $   1,367
                                               =========  =========  =========`

`December 31,
                                               --------------------
                                                 2003       2002
                                               ---------  ---------
Accounts receivable:
  SAP........................................ $      --  $      38
  Covisint (1)...............................     3,740      1,709
                                               ---------  ---------
  Total...................................... $   3,740  $   1,747
                                               =========  =========
Deferred revenue:
  SAP........................................ $      --  $  10,204
  NTT........................................       850        934
                                               ---------  ---------
  Total...................................... $     850  $  11,138
                                               =========  =========
Other current liabilities:
  SAP........................................ $      --  $     418
                                               ---------  ---------
  Total...................................... $      --  $     418
                                               =========  =========`

(1) Includes $800,000 of unbilled accounts receivable as of December 31, 2002.

11. STOCKHOLDERS' EQUITY

As of December 31, 2003, the Company has authorized 300,000 shares of series A
preferred stock, par value .0001 per share, none of which are issued and
outstanding, 100,000 shares of series B preferred stock, par value .0001 per
share, all of which are issued and outstanding, and 49,600,000 shares of
undesignated preferred stock, none of which are issued and outstanding.

REDEEMABLE CONVERTIBLE PREFERRED STOCK

On July 10, 2003, the Company issued 100,000
shares of its Series B Preferred Stock, and five-year warrants to purchase
2,209,945 shares of its common stock, in exchange for $9.8 million in cash, net
of issuance costs of $0.2 million.  The Series B Preferred Stock is initially
convertible into approximately 4,297,748 shares of our common stock at a
conversion price of $2.3268 per share. The exercise price for the warrants is
$2.715 per share and they were immediately exercisable upon issuance.

The holder of the Series B Preferred Stock and warrants has registration
rights that require the Company to file and have declared effective and maintain
the effectiveness of a registration statement with the SEC to register the
resale of the common stock issuable upon conversion of the Series B Preferred
Stock and the common stock issuable upon exercise of the warrants.  In the event
the Company is unable to cause the registration statement to be declared
effective by January 6, 2004, cash penalties of $5,000 per day are due to the
holder during the period commencing on January 7, 2004 and ending on the date
the registration statement is declared effective by the SEC. Under EITF 00-19,
the ability to register stock is deemed to be outside of the Company's control.
Accordingly, the initial fair value of the warrants of $3.6 million was recorded
as an accrued warrant liability in the consolidated balance sheet, and will be
marked to market at the end of each quarter.  At December 31, 2003, the warrant
liability was adjusted to its new fair value of $1.9 million as determined by
the Company, resulting in a gain of $1.7 million, which has been reflected in
the interest income and other, net, on the consolidated statement of operations
(see Note 7).

The initial value attributed to the Series B Preferred Stock of $6.4 million
represents a discount from its initial conversion value of $9.7 million. In accordance
with EITF 00-27, "Application of Issue No. 98-5 to Certain Convertible
Instruments," which provides guidance on the calculation of a beneficial
conversion feature on a convertible instrument, the Company has determined that
the Series B Preferred Stock had a beneficial conversion feature of $3.3 million
as of the date of issuance. The Company recorded this beneficial conversion
feature as a deemed dividend upon issuance.

As described below, the holders of the Series B Preferred Stock may require
the Company to redeem its shares upon certain events, including failure to cause
a registration statement to be effective by April 5, 2004, at a redemption price
equal to the greater of 120% of the original purchase price plus any accrued and
unpaid dividends or the value of the Series B Preferred Stock on an as-
converted-to-common stock basis. Since the Company has not yet been able to cause a
registration statement to be declared effective, the Company determined,
as of December 31, 2003, that it was probable that effectiveness would not be obtained prior to the deadline, and
that the Series B Preferred Stock should be stated at its redemption value at
December 31, 2003. Accordingly, the Company has recorded a deemed dividend
charge of $6.3 million in order to accrete the Series B Preferred Stock to its
$12,480,000 redemption value at December 31, 2003, which includes $400,000 of
dividends accrued through December 31, 2003. (See Note 16).

The following is a summary of the rights of Series B
Preferred Stock:

Dividends: The holders of the Series B Preferred Stock
are entitled to cumulative dividends.  For the first two years that the Series B
Preferred Stock is outstanding, dividends accrue at 8% per annum and they are
paid in kind by increasing the stated value of each share of Series B Preferred.
After two years the dividends are payable in cash or in kind at our option, and
the interest rate increases by 1% each calendar quarter up to a maximum of
14%.

Conversion: The holders of the Series B Preferred
Stock may convert their shares into common stock at any time at the conversion
price, subject to adjustment for stock splits, stock dividends,
recapitalizations and the like. We may convert the Series B Preferred Stock into
common stock beginning July 10, 2005 so long as: (i) our common stock is trading
at $4.65 or more for 20 consecutive trading days and (ii) a set of additional
conditions are met including: the continued effectiveness of a registration
statement for the common stock issuable upon conversion of the Series B
Preferred Stock and exercise of the warrants, continued listing of our common
stock on the Nasdaq National Market or the Nasdaq SmallCap Market, compliance by
us with procedures for delivery of share certificates upon the holders' prior
requests to convert shares of Series B Preferred Stock or exercise their
warrants and other conditions, all of which must have been met during the 90 day
period before conversion is sought.  No holder of Series B Preferred Stock may
convert into our common stock or exercise warrants for our common stock if to do
so would mean such holder would then own more than 4.99% of the Company's
outstanding common stock.

Redemption: The holders of the Series B Preferred
Stock may require the Company to redeem their shares upon a change of control
(including a merger, acquisition or sale of all or substantially all of our
assets) and if the Company defaults on certain obligations under the transaction
documents including failure to cause the registration statement to be effective
by April 5, 2004 and other events (similar to the additional conversion conditions described
above), at a redemption price equal to the greater of 120% of the original
purchase price plus any accrued and unpaid dividends or the value of the Series
B Preferred Stock on an as-converted-to-common stock basis based on the closing
bid price of our common stock on the day prior to the default or change of
control.  The Company may redeem the Series B Preferred Stock beginning July 10,
2005 for 120% of the purchase price for the Series B Preferred Stock plus
dividends paid in kind and any accrued but unpaid dividends, subject to
compliance with conditions similar to the conversion conditions described above.
The Company may also redeem the Series B Preferred Stock at any time upon a
change of control, at the greater of (i) 120% of the purchase price plus
dividends paid in kind and any accrued but unpaid dividends and (ii) the closing
bid price of the common stock issuable upon conversion of the Series B Preferred
Stock on the day before the announcement of the change of control, subject to
compliance with conditions similar to the additional conversion conditions
described above.

Change of Control without Redemption: Upon a change of
control in which the holders of the Series B Preferred Stock are not redeemed,
the holders of the Series B Preferred Stock are entitled to receive a security
from the acquiring entity that is substantially similar to the Series B
Preferred Stock pursuant to a written agreement that is reasonably acceptable to
the holders of the Series B Preferred Stock.

Voting Rights and Liquidation Preference: The holders
of the Series B Preferred Stock are entitled to vote with the Company's common
stock holders on an as converted to common stock basis, provided that, no single
holder of Series B Preferred Stock may vote more than 4.99% of the Company's
outstanding shares.  The approval of a majority of the Series B Preferred Stock
is required before the Company may issue any capital stock that is senior or
pari passu to the Series B Preferred Stock or take other actions which adversely
affect or impair the rights or relative priority of the holders of the Series B
Preferred Stock relative the holders of the Company's common stock.  The Series
B Preferred Stock is senior to all of the Company's capital stock and it has a
per share liquidation preference equal to the greater of (i) the initial
purchase price plus any accrued and unpaid dividends and (ii) the value of the
Series B Preferred Stock on an as converted to common stock basis based on the
closing bid price of the Company's common stock on the day prior to the
liquidation.

STRATEGIC RELATIONSHIP WITH SAP AG

On September 18, 2000, the Company entered into agreements with SAP AG to
jointly develop and deliver the next generation of e-business marketplace
solutions.  In connection with those agreements, the Company issued 505,955
shares of common stock to SAP AG for an aggregate purchase price of $250
million.

Subsequently, in 2001, the Company sold an additional 4,748,477 shares of its
common stock to SAP for an aggregate purchase price of approximately $225
million.

In connection with the Company's issuance of common stock to SAP, the Company
entered into various agreements that restrict SAP's ability to acquire more than
23% of the Company's outstanding common stock or otherwise attempt to acquire
control of the Company, limit its transfer of the shares of common stock that it
purchased from the Company and, in very limited ways, affect SAP's ability to
vote its shares of the Company's  stock.  The Company also granted SAP
certain rights to require it to register the resale of its shares of the
Company's common stock, certain pro rata rights to acquire additional shares of
the Company's common stock and the right to have a designee appointed to the
Company's board of directors or to send an observer to its board of directors
meetings.  As of December 31, 2003, SAP has not exercised its right to have
such a designee appointed, but has exercised its right to send an observer to
the Company's board of directors meetings.

Certain of the transfer restrictions imposed upon SAP's ability to sell the
Company's common stock expired upon the termination of the SAP relationship in
November 2003 and most of the remaining transfer restrictions will terminate on
June 28, 2004.  The standstill restrictions imposed upon SAP, as well as
their pro rata rights, will also terminate on June 28, 2004.

As of December 31, 2003, through its purchases from the Company and on the
open market, SAP beneficially owned approximately 20% of the Company's
outstanding common stock.

PREFERRED STOCK RIGHTS AGREEMENT

In March 2001, the Board of Directors of the Company approved a
Preferred Stock Rights Agreement (the Rights Agreement). Under the Rights
Agreement, Commerce One issued a dividend of one preferred share purchase 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 trade 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 $700. 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 an unsolicited third party acquirer, for
shares of Commerce One or of the third party acquirer 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 Agreement was not adopted
in response to any effort to acquire control of the Company.

REORGANIZATION INTO A HOLDING COMPANY STRUCTURE

During 2001, the Company completed its reorganization into a holding company
structure.  As part of the reorganization, the Stockholders of the "old"
Commerce One (now the wholly-owned subsidiary Commerce One Operations, Inc.)
became stockholders of the "new" Commerce One.

In December 2000, Commerce One Operations, 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 business-to-business electronic
marketplace for procurement of goods and services by automakers, their suppliers
and others. In connection with the formation of Covisint, under the terms of a
Formation Agreement, Commerce One Operations agreed to undergo a corporate
restructuring into a holding company.

In July 2001, Commerce One Operations completed the reorganization into a
holding company structure by means of a merger with and into a wholly-owned
subsidiary of Commerce One, pursuant to an Agreement and Plan of Merger, dated
April 25, 2001 by and among Commerce One, New C1 Merger Corporation and
Commerce One Operations.

Upon completion of the reorganization, Commerce One Operations became a
wholly owned subsidiary of Commerce One and changed its name to Commerce One
Operations, Inc. Holders of Commerce One Operations common stock (and the
associated right under Commerce One Operation's stockholder rights plan)
received one share of Commerce One common stock for each share of Commerce One
Operations common stock (and associated right) held by such stockholder prior to
the reorganization.

Commerce One continued the business of Commerce One Operations as the parent
holding company of Commerce One Operations.

On the completion of the reorganization, Commerce One received an aggregate
two percent equity interest in Covisint. Upon the execution of the Formation
Agreement, Commerce One issued 1.44 million shares of its common stock to
Ford and 1.44 million shares of its common stock to GM.  Under the
terms of the Formation Agreement, half of each of Ford's and GM's shares were
held in escrow and were released to Ford and GM in December 2002.  GM has
since sold all of its shares.  Prior to the reorganization, the Board of
Directors issued a dividend of one right under Commerce One's Preferred Stock
Rights Agreement per share of common stock held by Ford and General Motors.

In addition, pursuant to a Standstill and Stock Restriction Agreement entered
into between Commerce One, Commerce One Operations, Ford and GM, all of the
shares of stock issued to Ford and GM were generally subject to transfer
restrictions for three years subject to certain exceptions. Ford and GM also
agreed to certain "standstill" restrictions that generally limited 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. These transfer restrictions and voting
obligations terminated in December 2003.  Under a Registration Rights Agreement
entered into between Commerce One, Ford and GM, Ford and GM are entitled to
registration rights generally beginning in December 2003, subject to certain
exceptions.

STOCK OPTIONS

In 1997, the Company adopted the Commerce One 1997 Incentive Stock Option
Plan, which was amended and restated in 1999 (the 1997 Plan).  In 1999, the
Company adopted the 1999 Nonstatutory Stock Option Plan (the 1999 Plan). In
connection with various acquisitions, the Company assumed the VEO and
CommerceBid stock option plans in 1999, the Mergent and AppNet stock option
plans in 2000 and the Exterprise stock option plan in 2001. The Company
terminated all the assumed plans upon their assumption and no further options
will be granted under them. As of December 31, 2003, the Company reserved
an aggregate of 8,013,246 shares of common stock for issuance pursuant to all of
its stock option plans.

All employees, including without limitation, independent contractors and
directors, are eligible to receive awards under the 1997 Plan.  Options
granted under the 1997 Plan may be either incentive stock options or non-
qualified stock options. The exercise price of incentive stock options granted
under the 1997 Plan may not be less than the fair market value of the shares of
the Company's common stock on the date of grant. However, the administrator of
the plan shall determine the exercise price of non-qualified stock options. The
option holder may exercise unvested options and obtain shares of stock that are
subject to a repurchase option by the Company at the original exercise price in
the event of the employee's termination.

Options granted under the 1999 Plan may only be non-qualified stock options
and the plan administrator determines the exercise price of the stock
options.

Under the Company's 1999 Director Option Plan, 81,000shares of common
stock have been reserved for grants of stock options under such plan. As of
December 31, 2003, options to purchase 72,000 shares have been
granted.  No grants were made pursuant to this plan in 2002 or 2003.

In January 2004, the Company adopted the 2004 Inducement Plan (the 2004
Plan).  Only new employees are eligible to receive awards under this plan, and
options granted under the 2004 Plan may only be non-qualified stock options.
The administrator of the plan determines the exercise price of the stock
options.

The 1997 Plan, 1999 Plan and 2004 Plan are administered by the Board of
Directors and/or the compensation committee of the Board of Directors.

A summary of the Company's stock option activity under all plans is set forth
below:

`Weighted-
                                                              average
                                                              Exercise
                                                 Number of     Price
                                                  Shares     Per Share
                                                -----------  ----------
Outstanding at December 31, 2000..............   4,591,122  $   354.90
         Granted..............................   4,896,003       44.30
         Exercised............................    (429,331)      16.20
         Canceled.............................  (3,684,763)     404.70
                                                -----------
Outstanding at December 31, 2001..............   5,373,031       58.90
         Granted and assumed..................   3,783,592        4.82
         Exercised............................    (215,382)      14.68
         Canceled.............................  (2,635,911)      57.42
                                                -----------
Outstanding at December 31, 2002..............   6,305,330       28.56
         Granted..............................   4,079,460        2.02
         Exercised............................    (140,791)       1.60
         Canceled.............................  (5,495,601)      19.52
                                                -----------
Outstanding at December 31, 2003..............   4,748,398  $    13.61
                                                ===========  ==========
Exercisable and vested at December 31,
 2003.........................................   2,001,027  $    24.69
                                                ===========  ==========
Outstanding shares of common stock subject
 to forfeiture at December 31, 2003...........      37,079
                                                ===========`

`Options Exercisable
                              Options Outstanding                and Vested
                     ------------------------------------  ----------------------
                                   Weighted-
                                    average    Weighted-               Weighted-
                                  Remainging    average                 average
      Range of                    Contractual   Exercise                Exercise
      Exercise                       Life        Price                   Price
       Prices          Number       (Years)    Per Share     Number    Per Share
  -----------------  -----------  -----------  ----------  ----------  ----------
 $   0.33 - 1.59        359,114          9.1  $     1.56     151,570  $     1.52
     1.63 - 1.63        707,500          9.2        1.63     294,789        1.63
     1.67 - 2.12        657,087          9.7        2.12      55,536        2.12
     2.14 - 2.71        835,177          9.4        2.67      40,908        2.28
     2.75 - 3.84        927,187          8.8        3.55     458,451        3.47
     3.90 - 28.10       614,519          7.6       15.20     513,297       16.27
    32.60 - 56.10       540,666          7.5       40.20     387,922       39.90
    58.40 - 701.88      106,790          6.5      231.08      98,196      232.19
 $ 746.25 - 746.25          358          6.3      746.25         358      746.25
                     -----------  -----------  ----------  ----------  ----------
                      4,748,398          6.8  $    13.61   2,001,027  $    24.69
                     ===========  ===========  ==========  ==========  ==========`

RESTRICTED COMMON STOCK

In 2001, the Company issued 187,915 restricted shares of common stock to
certain employees.  The shares of restricted common stock vest ratably over
a two year period and are subject to forfeiture if an employee ceases employment
prior to that time.  In 2002, 39,786 shares of restricted common stock were
forfeited due to the cessation of employment by certain employees.  In
2003, the remaining 7,117 shares of unvested restricted stock were forfeited due
to the cessation of employment by certain employees.  As a result, as of
December 31, 2003, no shares of restricted common stock were outstanding.

1999 EMPLOYEE STOCK PURCHASE PLAN

Under the 1999 Employee Stock Purchase Plan, ("ESPP Plan"), the Company
issued 186,352 shares of common stock at a weighted average price of $2.16 per
share, 358,760 shares of common stock at a weighted average price of $6.32 per
share and 291,330 shares of common stock at a weighted average price of $40.00
per share, in 2003, 2002 and 2001, respectively.  As of December 31,
2003, 1,935,674 shares of common stock have been reserved for issuance under the
ESPP Plan.  Eligible employees may purchase common stock at 85% of the
lesser of the fair market value of the Company's common stock on the first day
of the applicable two-year offering period or the last day of the applicable six
month purchase period.

DEFERRED STOCK-BASED COMPENSATION

The Company did not record new deferred stock compensation in 2002 or
2003.  During 2002, the deferred stock compensation recorded in relation to
the restricted stock awards and options assumed in acquisitions in previous
years was reduced by $3.0 million and $50.7 million, respectively, representing
the deferred stock compensation recorded that was forfeited by employees upon
termination of their employment.
In the year ended December 31, 2001, the Company recorded deferred
stock compensation of approximately $16.3 million representing the difference
between the exercise price and the deemed fair value of restricted stock granted
to employees and options assumed in connection with the acquisitions.
These amounts were being amortized by charges to operations over the vesting
periods of the individual stock options and restricted common stock awards.
Such amortization amounted to approximately $3.4 million, $8.7 million and $98.3
million for the years ended December 31, 2003, 2002 and 2001, respectively.
In September 2003, the Board of Directors approved the acceleration of vesting
of certain "out-of-the-money" employee stock options related to the prior
acquisitions of Exterprise, Mergent and AppNet.  As a result of the full vesting
of these stock options, the Company does not expect to incur any future
additional charge to stock compensation expense for deferred compensation
related to these prior acquisitions.

WARRANTS

On July 10, 2003, the Company received a $10 million investment from BayStar.
Under the terms of the Company's purchase agreement with BayStar, Commerce One
issued 100,000 shares of  its Series B Preferred Stock, and five-year warrants
to purchase 2,209,945 shares of Commerce One common stock.  The Series B
Preferred Stock is initially convertible into approximately 4,297,748 shares of
the Company's common stock at a conversion price of $2.3268 per share. The
exercise price for the warrants is $2.715 per share.

On December 31, 2003, the Company issued secured promissory notes in the
aggregate principal amount of $5.0 million and warrants to ComVest and DCC for
an aggregate purchase price of $5,000,100.  The Notes bear interest at a rate
varying from 6% to 10% over the term of the Notes, are due on March 31, 2005 or
sooner upon the occurrence of certain events of default or other events, and are
secured by certain of the Company's assets.  The Warrants are exercisable to
purchase an aggregate of 2,568,494 shares of the Company's common stock, at an
exercise price of $.0001 per share, for a period of one year following the
financing.  The Company may repurchase up to 513,699 shares if it repays the
Notes on or before April 30, 2004 and other conditions are met.  Upon an event
of default, the Notes become convertible, subject to certain limitations, into
shares of the Company's common stock at a conversion price based on the market
value of the common stock at the time of the default. (See Note 7)

12. INCOME TAXES

The following is a geographical breakdown of consolidated loss before income
taxes by income tax jurisdiction (in thousands):

`Years Ended December 31,
                                                 ---------------------------------
                                                   2003       2002        2001
                                                 ---------  ---------  -----------
United States.................................. $ (61,410) $(589,572) $(2,626,787)
Foreign........................................     1,252         37       51,689
                                                 ---------  ---------  -----------
Total.......................................... $ (60,158) $(589,535) $(2,575,098)
                                                 =========  =========  ===========`

There has been no provision for U.S. federal or state income taxes for any
period as the Company has incurred operating losses in all periods.  During the
year ended December 31, 2003, the Company recorded a state income tax benefit of
$1.5 million.  During the years ended December 31, 2003, 2002 and 2001, the
Company recorded a foreign income tax benefit of $0.9 million, and tax
provisions of $0.3 million and $9.0 million, respectively.   The tax benefits
recorded in 2003 resulted from the Company's cessation of business in certain
foreign jurisdictions, the business retraction in other foreign jurisdictions
and the favorable settlement of certain state tax issues.  The foreign income tax provisions
recorded in 2002 and 2001 relate to taxes withheld from customer payments and
remitted to foreign taxing jurisdictions on the Company's behalf and income
taxes generated in certain foreign jurisdictions.

A reconciliation of income taxes at the statutory federal income tax
rate to net income taxes included in the accompanying statements of operations
is as follows:

`Years Ended December 31,
                                                 ---------------------------------
                                                   2003       2002        2001
                                                 ---------  ---------  -----------
US federal tax benefit at statutory rate.......     (35.0)%    (35.0)%      (35.0)%
State..........................................      (6.4)%     (5.2)%       (5.2)%
Foreign........................................      (1.4)%      0.1 %        0.3 %
Acquisition related charges....................       8.7 %     30.2 %       30.0 %
Other..........................................       1.8 %       -- %         -- %
Valuation allowance............................      28.4 %     10.0 %       10.2 %
                                                 ---------  ---------  -----------
Total..........................................      (3.9)%      0.1 %        0.3 %
                                                 =========  =========  ===========`

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows (in thousands):

`December 31,
                                                 --------------------
                                                   2003       2002
                                                 ---------  ---------
Deferred tax assets:
  Net operating loss carryforwards............. $ 419,729  $ 359,687
  Capitalized research and development.........    10,140     14,838
  Deferred revenue.............................     1,685      8,972
  Tax credit carryforwards.....................    13,017     13,155
  Accrued costs and expenses...................    (3,890)     7,609
                                                 ---------  ---------
Deferred tax assets............................   440,681    404,261
Less: valuation allowance......................  (440,059)  (400,298)
                                                 ---------  ---------
Total deferred tax assets......................       622      3,963
Deferred tax liabilities:
  Other identified intangibles.................      (622)    (3,963)
                                                 ---------  ---------
Total deferred tax liabilities.................      (622)    (3,963)
                                                 ---------  ---------
Net deferred tax assets........................ $      --  $      --
                                                 =========  =========`

Realization of deferred tax assets is dependent upon future earnings, if any,
the timing and amount of which are uncertain. Accordingly, the net deferred tax
assets have been fully offset by a valuation allowance. The valuation allowance
increased by $39.8 million, $100.4 million and $154.0 million during 2003, 2002
and 2001 respectively.

The tax benefits associated with employee stock options provide a deferred
tax benefit of $0.6 million as of December 31, 2003, which has been fully
offset by a valuation allowance and will be credited to additional paid-in
capital when realized.

As of December 31, 2003, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $1.2 billion,
which expire in the years 2009 through 2023.  The Company also had net operating
loss carryforwards for state income tax purposes of approximately $232.5
million, and other states of approximately $185.7 million, expiring in the years
2003 through 2023.  In addition, the Company had federal and state tax credit
carryforwards of approximately $8.8 million and $6.5 million, respectively,
which expire in the years 2013 through 2023.

Utilization of the Company's net operating loss and tax credit carryforwards
may be subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and similar state provisions.
Such an annual limitation could result in the expiration or elimination of the
net operating loss and tax credit carryforwards before utilization.  Although
the Company has not completed a determination of such ownership change
limitations, management believes it is probable that net operating loss
utilization will in fact be significantly limited due to these provisions.

13. PROFIT SHARING PLAN

The Company has a profit sharing plan and trust under Section 401(k) of
the Internal Revenue Code that covers substantially all employees. Eligible
employees may contribute amounts to the plan via payroll withholdings, subject
to certain limitations. The Company did not match contributions by plan
participants during the year ended December 31, 2000. The Company began
matching employee contributions on January 1, 2001, but terminated the matching
of employee contributions on May 31, 2002.

14. REVENUE BY GEOGRAPHIC AREA

Revenue was derived from customers in the following geographic areas (in
thousands):

`Years Ended December 31,
                                                 ---------------------------------
                                                   2003       2002        2001
                                                 ---------  ---------  -----------
United States.................................. $  19,175  $  68,419  $   270,630
Europe, Middle East and Africa.................    12,742     30,805       83,361
Asia Pacific...................................     3,245      5,304       28,319
Other Americas.................................     1,076      1,001       26,259
                                                 ---------  ---------  -----------
                                                $  36,238  $ 105,529  $   408,569
                                                 =========  =========  ===========`

15. BUSINESS COMBINATION

EXTERPRISE, INC.

Effective May 25, 2001, the Company acquired Exterprise, Inc. ("Exterprise"),
a provider of platform solutions that enable the development and deployment of
e-commerce applications.  The acquisition was structured as a common stock
for common stock merger and has been accounted for as a purchase
transaction.  The purchase consideration was approximately $66.3 million
consisting of approximately 720,000 shares of common stock with a fair value of
approximately $60.7 million, assumption of option to acquire approximately
25,800 shares of common stock with a fair value of $2.5 million and transaction
costs of approximately $3.1 million.

The Company estimated that approximately $4.5 million of the $66.3 million
purchase consideration represented purchased in-process research and development
that had not yet reached technological feasibility and had no alternative future
use.  Accordingly, this amount was charged to operations during the
year.

The total purchase cost for the Exterprise acquisition has been allocated to
the acquired assets and assumed liabilities based upon estimates of their fair
value.  The following table depicts the total purchase cost and the
allocation thereof (in thousands):

`Cash........................................... $     554
Accounts receivable............................       106
Assumed liabilities............................    (6,103)
Deferred compensation..........................     2,181
Intangible assets:
  Assembled workforce..........................     3,508
  Purchased technology.........................     5,187
  Patents......................................     1,018
  Goodwill.....................................    55,307
                                                 ---------
Total intangible assets........................    65,020
Purchased in-process research and
  development charged to operations in 2001....     4,548
                                                 ---------
Total purchase cost............................ $  66,306
                                                 =========`

In 2002, substantially all of the purchased intangibles were written off
(See Note 4).

16. SUBSEQUENT EVENTS

On March 14, 2004, the Company completed a Consent and Agreement with the
holder of the Series B Preferred Stock and related warrants to modify the
holder's registration rights (see Note 11).  The modification provides a 90-day
extension to July 5, 2004, of the date upon which the holder can demand
redemption in the event the Company is unable to have declared effective and
maintain effectiveness of a registration statement with the SEC to register the
resale of common stock issuable upon conversion of the Series B Preferred Stock
and common stock issuable upon exercise of the warrants. Penalties for failure
to cause the registration statement to be declared effective of $5,000 per day
have also been waived through July 5, 2004. The Series B Preferred Stock is now
redeemable at the option of the holder on July 5, 2004, in the event the Company
is unable to cause the registration statement to be declared effective prior to
that date. As consideration for this agreement, and in full satisfaction of
related penalties of $375,000 incurred by the Company from January 2004 through
date of the modification, the Company will pay the holder $200,000 on or before April 1,
2004, and issue the holder 500,000 unregistered shares of the Company's common
stock with an value of $930,000 based on the price of the Company's common stock
at the time the modification was completed. As a result, the Company will record
a charge to common shareholders of $1.1 million in the three-month period ending
March 31, 2004.

17. SELECTED QUARTERLY COMBINED FINANCIAL DATA (UNAUDITED)

A summary of the Company's quarterly financial results
follows (in thousands, except per share data).

`YEAR ENDED DECEMBER 31, 2003
                                                       Quarter Ended
                                         -------------------------------------------
                                                               September   December
                                         March 31    June 30      30          31
                                                               (Restated)
                                         ---------  ---------  ---------  ----------
Total revenues......................... $  13,109  $   8,301  $   5,722  $    9,106
Total cost of licenses and services....     9,163      6,406     12,434       8,494
Loss from operations...................   (29,878)    (7,987)   (20,943)     (6,290)
Net loss applicable to
  common shareholders..................   (29,328)    (6,065)   (26,754)     (5,245)
Basic and diluted net loss per share...     (1.00)     (0.20)     (0.84)      (0.20)

                                                YEAR ENDED DECEMBER 31, 2002
                                                       Quarter Ended
                                         -------------------------------------------
                                                               September   December
                                         March 31    June 30      30          31
                                         ---------  ---------  ---------  ----------
Total revenues......................... $  31,755  $  27,837  $  26,423  $   19,514
Total cost of licenses and services....   174,476     21,950     17,337      46,876
Loss from operations...................  (213,481)   (62,696)   (36,585)   (281,455)
Net loss applicable to
  common shareholders..................  (211,681)   (62,333)   (36,341)   (279,482)
Basic and diluted net loss per share...     (7.36)     (2.15)     (1.25)      (9.57)`

(1) This amount differs from the originally reported net loss of $24.4
million as a result of the Company's restatement to increase the recorded amount
of deemed dividend on the preferred stock issued in connection with the BayStar
financing. This deemed dividend was comprised of an embedded beneficial
conversion feature and adjustment amortization of the discounted value initially
assigned to the preferred stock to conversion value.

(2) This amount differs from the originally reported net loss per share of
($0.77).

On January 30, 2003, Commerce One announced that it had discovered that it
had overstated the Company's stock compensation expense for the quarters ended
March 31, 2002, June 30, 2002 and September 30, 2002, resulting in a net loss
for those periods that was less than previously reported.  The stock
compensation expense for these periods was lower than previously reported by
approximately $10.6 million in the third quarter of 2002, $8.8 million in the
second quarter of 2002 and $8.9 million in the first quarter of 2002.  This
overstatement related to non-cash stock compensation expenses for certain
employees from prior acquisitions no longer employed with the Company, but for
whom the Company continued to amortize the expense.  After adjusting the
results in these quarters to correctly reflect the lower expense, the adjusted
net loss on a GAAP basis for the third quarter of 2002 was reduced to $36.3
million or $1.25 per share, for the second quarter of 2002 was reduced to $62.3
million or $2.15 per share and for the first quarter of 2002 was reduced to
$211.7 million or $7.36 per share.  The Company also discovered that it had
overstated its deferred stock compensation expense for the fiscal years ended
2000 and 2001 by amounts that were immaterial to the financial results for those
periods.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

In October 2003, Ernst & Young LLP resigned as our independent accountant
following the completion of its review of our Form 10-Q for the quarter ended
September 30, 2003.  Ernst & Young has indicated that it intends to continue
to assist us as appropriate with our pending Registration Statement on Form S-3
(File No. 333-108144).

Ernst & Young's reports on our financial statements for fiscal years 2002
and 2001 do not contain an adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting
principles.

For our fiscal years 2002 and 2001, and through October 13, 2003, there were
no disagreements with Ernst & Young on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of Ernst & Young
would have caused Ernst & Young to make reference thereto in its report on
the financial statements for such years.

A copy of a letter from Ernst & Young addressed to the SEC indicating
Ernst & Young's agreement with the above statements was filed as Exhibit
16.1 to a current report on Form 8-K filed with the SEC on October 20, 2003.

Subsequently, on December 10, 2003, the audit committee of our Board of
Directors engaged BDO Seidman, LLP as our new independent accountant to audit
our financial statements. BDO Seidman has not audited our financial statements
in the two most recent fiscal years or any interim period. We did not consult
with BDO Seidman regarding any accounting, auditing or financial reporting
matters prior to engaging the firm to audit our financial statements.

In connection with our filing of a current report on Form 8-K filed with the
SEC on December 17, 2003 announcing the engagement of BDO Seidman, we requested
that BDO Seidman review the Form 8-K and provided BDO Seidman with the
opportunity to furnish us with a letter addressed to the SEC containing any new
information, clarification of our expression of its views, or the respects in
which it did not agree with the statements made by us.  BDO Seidman advised us
that it had reviewed the Form 8-K filing and had no basis on which to submit
such a letter.

ITEM 9A. CONTROLS AND PROCEDURES

Our management evaluated, with the participation of our Chief Executive
Officer and our Chief Financial Officer, the effectiveness of our disclosure
controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) under the
Exchange Act, as of December 31, 2003.  Based on this evaluation, our Chief
Executive Officer and our Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to ensure that information we
are required to disclose in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms.

There were no changes in our internal controls over financial reporting
during the quarter ended December 31, 2003, that have materially affected, or
are reasonably likely to materially affect, our internal controls over financial
reporting.

PART III

ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item with respect to identification of
directors and officers is incorporated by reference from Commerce One's
definitive Proxy Statement ("Proxy Statement") for the Annual Meeting of
Stockholders currently scheduled to be held on May 26, 2004 under the captions
"The Board" and "Executive Officers and Key Employees," respectively.

The information required by this item with respect to the information
required under Item 405 of Regulation S-K is incorporated by reference from
the Proxy Statement under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance."

The information concerning our Code of Business Conduct and Ethics required
by this item is incorporated by reference from the Proxy Statement under the
caption "Code of Business Conduct and Ethics".

The information concerning our audit committee and audit committee financial
experts required by this item is incorporated by reference from the Proxy
Statement under the caption "Board and Committee Meetings".

ITEM 11.
EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from the
Proxy Statement under the caption "Executive Compensation."

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required under this item is incorporated by reference from
the Proxy Statement under the captions "Security Ownership of Management and
Principal Stockholders" and "Equity Compensation Plans."

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this item is incorporated by reference from
the Proxy Statement under the captions "Certain Relationships and Related
Transactions" and "Compensation Committee Interlocks and Insider
Participation."

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this item is incorporated by reference
from the Proxy Statement under the caption "Principal Accountant Fees and
Services".

PART IV

ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) DOCUMENTS
FILED AS PART OF THE REPORT

1. FINANCIAL STATEMENTS

Our consolidated financial statements are set forth in Item 8 of this Annual
Report on Form 10-K.

2. FINANCIAL STATEMENT SCHEDULES

The following financial statement schedule of Commerce One for each of the
years ended December 31, 2003, 2002 and 2001 should be read in conjunction
with the Consolidated Financial Statements, and related notes thereto, of
Commerce One.

Schedule II-Valuation and Qualifying Accounts

Schedules other than those listed above have been omitted as they are either
not required, not applicable, or the information has otherwise been shown in the
consolidated financial statements or notes thereafter.

3. EXHIBITS

The exhibits listed on the accompanying index to exhibits immediately
following the financial statement schedule are filed as part of, or incorporated
by reference into, this Form 10-K.

|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                   
|3.1(1)         |  | Restated Certificate of Incorporation.                                                                                                                                                                                                                                                                            
|3.2(2)         |  | Certificate of Amendment, dated September 16, 2002 to Restated
Certificate of Incorporation.                                                                                                                                                                                                                      
|3.3(10)        |  | Amended and Restated Bylaws.                                                                                                                                                                                                                                                                                      
|4.1(1)         |  | Specimen Common Stock Certificate.                                                                                                                                                                                                                                                                                
|4.2(21)        |  | Amended and Restated Preferred Stock Rights Agreement, dated as
of December 31, 2003, between Commerce One, Inc., and Equiserve Trust Company,
NA..                                                                                                                                                               
|4.3(18)        |  | Certificate of Designations, Preferences and Rights of the
Series B Convertible Preferred Stock.                                                                                                                                                                                                                  
|10.1(3)        |  | Form of Indemnification Agreement between the Registrant and
each of its directors and officers.                                                                                                                                                                                                                  
|10.2(3)        |  | Form of 1997 Incentive Stock Option Plan and form of agreements
thereunder.                                                                                                                                                                                                                                       
|10.3(3)        |  | Form of 1999 Employee Stock Purchase Plan and form of agreements
thereunder.                                                                                                                                                                                                                                      
|10.4(4)        |  | 1999 Nonstatutory Stock Option Plan and form of agreements
thereunder.                                                                                                                                                                                                                                            
|10.5(3)        |  | Form of 1999 Director Option Plan and form of agreements
thereunder.                                                                                                                                                                                                                                              
|10.6           |  | 2004 Inducement Plan.                                                                                                                                                                                                                                                                                             
|10.7           |  | 2004 Inducement Plan - Notice of Grant of Stock Purchase
Right.                                                                                                                                                                                                                                                   
|10.8           |  | 2004 Inducement Plan - Stock Option Agreement.                                                                                                                                                                                                                                                                    
|10.9(18)       |  | Registration Rights Agreement, dated July 10, 2003, by and
between Commerce One, Inc. and the investor named therein (BayStar Capital II,
L.P.).                                                                                                                                                                  
|10.10(18)      |  | Securities Purchase Agreement, dated July 10, 2003, by and
between Commerce One, Inc. and the investor named therein (BayStar Capital II,
L.P.).                                                                                                                                                                  
|10.11(18)      |  | Warrant to Purchase Common Stock, dated July 10,
2003.                                                                                                                                                                                                                                                            
|10.12(21)      |  | Note and Warrant Purchase Agreement, dated December 31, 2003, by
and among ComVest Investment Partners II LLC, DCC Ventures, LLC, Commerce One,
Inc., and Commerce One Operations, Inc.                                                                                                                           
|10.13(21)      |  | Senior Secured Non-Convertible Promissory Notes issued on
December 31, 2003.                                                                                                                                                                                                                                      
|10.14(21)      |  | Warrants to Purchase Common Stock, dated December 31,
2003.                                                                                                                                                                                                                                                       
|10.15(21)      |  | Security Agreement, dated December 31, 2003, by and among
ComVest Investment Partners II LLC, Commerce One, Inc., and Commerce One
Operations, Inc.                                                                                                                                                               
|10.16(21)      |  | Pledge Agreement, dated December 31, 2003, by and between
ComVest Investment Partners II LLC and Commerce One Operations, Inc.                                                                                                                                                                                    
|10.17(21)      |  | Guaranty, dated December 31, 2003, by and among ComVest
Investment Partners II LLC, DCC Ventures, LLC, and Commerce One Operations,
Inc.                                                                                                                                                                          
|10.18(21)      |  | Registration Rights Agreement, dated December 31, 2003, by and
among ComVest Investment Partners II LLC, DCC Ventures, LLC, and Commerce One,
Inc.                                                                                                                                                                
|10.19(3)       |  | Master Software License and Services Agreement between the
Registrant and NTT Communications, dated April 16, 1999.                                                                                                                                                                                               
|10.20(3)       |  | Stock Purchase and Master Strategic Relationship Agreement
between the Registrant and NTT Communications, dated June 1999.                                                                                                                                                                                        
|10.21(5)       |  | Amended and Restated Standstill and Stock Restriction Agreement
by and among Commerce One, Inc., New Commerce One Holding, Inc. and SAP AG dated
June 28, 2001.                                                                                                                                                   
|10.22(5)       |  | Investor Rights Agreement by and between Commerce One, Inc., New
Commerce One Holding, Inc. and SAP AG dated June 28, 2001.                                                                                                                                                                                       
|10.23(6)       |  | Formation Agreement dated December 8, 2000 by and among Commerce
One, Inc., Ford Motor Company, General Motors Corporation, New Commerce One
Holding, Inc. (solely for the purposes of Section 11.3 thereof) Daimler Chrysler
AG and (solely for the purposes of section 2.4, 11.2 and 11.9 thereof) Covisint
LLC.
|10.24(6)       |  | Standstill and Stock Restriction Agreement dated December 8,
2000 by and among Commerce One, Inc., Ford Motor Company, General Motors
Corporation and New Commerce One Holding, Inc.                                                                                                                              
|10.25(6)       |  | Registration Rights Agreement dated December 8, 2000 by and
among Commerce One, Inc., Ford Motor Company, General Motors Corporation and New
Commerce One Holding, Inc.                                                                                                                                           
|10.26(20)      |  | Settlement Agreement dated December 30, 2003 by and between CVX
Holdco LLC, Commerce One Operations, Inc., Commerce One, Inc. and Covisint
LLC.                                                                                                                                                                   
|10.27(20)      |  | Covisint Master Software License Agreement.                                                                                                                                                                                                                                                                       
|10.28(9)       |  | Strategic Alliance Agreement dated September 18, 2000 by and
between Commerce One, Inc., SAP and SAP Markets, Inc.                                                                                                                                                                                                
|10.29(10)      |  | Strategic Alliance Agreement Amendment No. 2, dated April 10,
2001 by and between Commerce One Operations, Inc., SAP and SAP Markets,
Inc.                                                                                                                                                                        
|10.30(10)      |  | Strategic Alliance Agreement Amendment No. 3, dated June 29,
2001 by and between Commerce One Operations, Inc., SAP and SAP Markets,
Inc.                                                                                                                                                                         
|10.31(12)      |  | Strategic Alliance Agreement Amendment No. 4, effective as of
January 1, 2002 by and between Commerce One Operations, Inc., SAP and SAP
Markets, Inc.                                                                                                                                                             
|10.32(14)      |  | Strategic Alliance Agreement Amendment No. 5, effective as of
December 20, 2002, by and between Commerce One Operations, Inc., SAP and SAP
Markets, Inc.                                                                                                                                                          
|10.33(15)*     |  | Strategic Alliance Agreement Amendment No. 6, effective as of
November 13, 2003, by and between Commerce One Operations, Inc., SAP and SAP
Markets, Inc.                                                                                                                                                          
|10.34(8)       |  | Form of Change of Control Severance Agreement.                                                                                                                                                                                                                                                                    
|10.35(8)       |  | Form of Amendment No. 1 to Change of Control Severance
Agreement.                                                                                                                                                                                                                                                 
|10.36(11)      |  | Employee Loan Agreement between Commerce One, Inc., and Dennis
H. Jones, dated August 22, 2001.                                                                                                                                                                                                                   
|10.37(13)      |  | Separation Agreement by and between Commerce One Operations,
Inc. and Dennis H. Jones, dated June 20, 2002.                                                                                                                                                                                                       
|10.38(19)      |  | Eighth Amendment to Sublease, dated October 1, 2003 by and
between Commerce One Operations, Inc., Commerce One, Inc. and PeopleSoft, Inc.
and executed November 10, 2003 by Commerce One and November 21, 2003 by
PeopleSoft.                                                                                     
|10.39          |  | Addendum to Eight Amendment to Sublease, dated October 1, 2003
by and between Commerce One Operations, Inc, Commerce One, Inc. and PeopleSoft,
Inc. and executed November 10, 2003.                                                                                                                               
|10.40          |  | Promissory Note between Commerce One, Inc. and PeopleSoft, Inc.
executed December 31, 2003.                                                                                                                                                                                                                       
|10.41 (22)     |  | Consent and Amendment Agreement between Commerce One, Inc. and
BayStar Capital II, L.P. dated March 14, 2004.                                                                                                                                                                                                     
|10.42 (22)     |  | Registration Rights Agreement between Commerce One, Inc. and
BayStar Capital II, L.P. dated March 14, 2004.                                                                                                                                                                                                       
|21.1           |  | List of Subsidiaries of Registrant.                                                                                                                                                                                                                                                                               
|23.1           |  | Consent of BDO Seidman, LLP, Independent Auditors.                                                                                                                                                                                                                                                                
|23.2           |  | Consent of Ernst and Young, LLP, Independent
Auditors.                                                                                                                                                                                                                                                            
|24.1           |  | Power of Attorney (see signature page)                                                                                                                                                                                                                                                                            
|31.1           |  | Certification of the Chief Executive Officer of Commerce One
pursuant to section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                                                   
|31.2           |  | Certification of the Chief Financial Officer of Commerce One
pursuant to section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                                                   
|32.1           |  | Certification of the Chief Executive Officer and Chief Financial
Officer of Commerce One pursuant to section 906 of the Sarbanes Oxley
Act.                                                                                                                                                                       



|(1)  |  | Incorporated by reference to Commerce One's Form 8-A (File No.
000-32979) filed on July 11, 2001.                                                                                  
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                    
|(2)  |  | Incorporated by reference to Commerce One's Form 8-K (File No.
000-32979) filed on September 19, 2002.                                                                             
|     |  |                                                                                                                                                                                    
|(3)  |  | Incorporated by reference to Commerce One's Registration
Statement of Form S-1 (File No. 333-76987), declared effective July 1,
1999.                                              
|     |  |                                                                                                                                                                                    
|(4)  |  | Incorporated by reference to Commerce One's Form S-8 (File No.
333-33328), filed on March 27, 2000.                                                                                
|     |  |                                                                                                                                                                                    
|(5)  |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 333-58558), filed on July 10, 2001.                                                               
|     |  |                                                                                                                                                                                    
|(6)  |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 000-26453), filed on December 29, 2000.                                                           
|     |  |                                                                                                                                                                                    
|(7)  |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-26453), filed on August 14, 2000.                                                          
|     |  |                                                                                                                                                                                    
|(8)  |  | Incorporated by reference to Commerce One's Annual Report on
Form 10-K (File No. 000-26453), filed on April 2, 2001.                                                               
|     |  |                                                                                                                                                                                    
|(9)  |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-26453), filed on November 14, 2000.                                                        
|     |  |                                                                                                                                                                                    
|(10) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on August 14, 2001.                                                          
|     |  |                                                                                                                                                                                    
|(11) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on November 14, 2001.                                                        
|     |  |                                                                                                                                                                                    
|(12) |  | Incorporated by reference to Commerce One's Annual Report on
Form 10-K (File No. 000-32979), filed April 1, 2002.                                                                  
|     |  |                                                                                                                                                                                    
|(13) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on August 14, 2002.                                                          
|     |  |                                                                                                                                                                                    
|(14) |  | Incorporated by reference to Commerce One's Annual Report on
Form 10-K (File No. 000-32979), filed March 31, 2003.                                                                 
|     |  |                                                                                                                                                                                    
|(15) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on May 15, 2003.                                                             
|     |  |                                                                                                                                                                                    
|(16) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on August 14, 2003.                                                          
|     |  |                                                                                                                                                                                    
|(17) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on November 14, 2003.                                                        
|     |  |                                                                                                                                                                                    
|(18) |  | Incorporated by reference to Commerce One's Form 8-K filed on
July 11, 2003.                                                                                                       
|     |  |                                                                                                                                                                                    
|(19) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K  (File No. 000-32979), filed on December 17, 2003.                                                          
|     |  |                                                                                                                                                                                    
|(20) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 000-32979), filed on January 6, 2004.                                                             
|     |  |                                                                                                                                                                                    
|(21) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 000-32979), filed on January 8, 2004.                                                             
|     |  |                                                                                                                                                                                    
|(22) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K filed on March 16, 2004.                                                                                    
|     |  |                                                                                                                                                                                    
|*    |  | Portions of this exhibit have been omitted pending a
determination by the Securities and Exchange Commission as to whether these
portions should be granted confidential treatment.

|(b)                       |  | REPORTS ON FORM 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                          |  | Reports on Form 8-K were filed on October 20, 2003 and December
17, 2003.  We furnished to the SEC reports on Form 8-K on October 3, 2003 and
October 31, 2003.  The October 20, 2003 Form 8-K was for the purpose of
announcing the resignation of Ernst and Young as our independent accountant.
The December 17, 2003 Form 8-K was for the purpose of announcing the engagement
of BDO Seidman as our new independent accountant and our agreement with our
former Pleasanton, California landlord to pre-pay our remaining $5.6 million
rent obligation.  The October 3, 2003 Form 8-K was for the purpose of furnishing
the press release updating our financial guidance for the quarter ended
September 30, 2003 and our commitment to ongoing cost-cutting measures. The
October 31, 2003 Form 8-K was for the purpose of furnishing the press release
announcing our results for the quarter ended September 30, 2003.
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c)                       |  | EXHIBITS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|See Item 15(a)(3), above.
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(d)                       |  | FINANCIAL STATEMENT SCHEDULES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|See Item 15(a)(2), above.



SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



Dated: March 19, 2004



| | COMMERCE ONE, INC. |                                      
| | ------------------ | -------------------------------------
| | By:                | /s/ MARK B. HOFFMAN                  
| |                    | Mark B. Hoffman                      
| |                    | Chairman  and Chief Executive
Officer
| |                    |                                      



POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Charles Boynton and Mark Hoffman, his or her
attorneys-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any amendments to this Annual Report on
Form 10-K, and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and conforming all that said attorney-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



|Signature              |  | Title                                                                                          |  | Date          
|---------------------- |  | ---------------------------------------------------------------------------------------------- |  | --------------
|                       |  |                                                                                                |  |               
|/s/ MARK B. HOFFMAN    |  | Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)                |  | March 19, 2004
|Mark B. Hoffman        |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ CHARLES BOYNTON    |  | Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |  | March 19, 2004
|Charles Boynton        |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ JOHN V. BALEN      |  | Director                                                                                       |  | March 19, 2004
|John V. Balen          |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ KENNETH C. GARDNER |  | Director                                                                                       |  | March 19, 2004
|Kenneth C. Gardner     |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ STEWART SCHUSTER   |  | Director                                                                                       |  | March 19, 2004
|Stewart Schuster       |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ IRV LICHTENWALD    |  | Director                                                                                       |  | March 19, 2004
|Irv Lichtenwald        |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ TOSHIMUNE OKIHARA  |  | Director                                                                                       |  | March 19, 2004
|Toshimune Okihara      |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ JACK ACOSTA        |  | Director                                                                                       |  | March 19, 2004
|Jack Acosta            |  |                                                                                                |  |               
|                       |  |                                                                                                |  |               
|/s/ ALEX S. VIEUX      |  | Director                                                                                       |  | March 19, 2004
|Alex S. Vieux          |  |                                                                                                |  |               

---

COMMERCE ONE, INC.

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSACCOUNTS RECEIVABLE ALLOWANCES - (in thousands)Allowance for Doubtful Accounts:               Charged
                                              (Released)                Balances
                                 Balances at   to Costs                    at
                                  Beginning      and      (Deductions)   End of
                                  of Period    Expenses   Recoveries     Period
                                 -----------  ----------  -----------  ----------
Year ended December 31, 2001... $     2,740  $   32,924  $   (21,880) $   13,784
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2002... $    13,784  $   (5,454) $    (5,862) $    2,468
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2003... $     2,468  $   (2,723) $     1,103  $      848
                                 ===========  ==========  ===========  ==========


Allowance for Product and Service Returns:
                                                                        Balances
                                 Balances at   Charged                     at
                                  Beginning   (Released)  (Deductions)   End of
                                  of Period   to Revenues Recoveries     Period
                                 -----------  ----------  -----------  ----------
Year ended December 31, 2001... $       500  $    7,807  $    (5,014) $    3,293
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2002... $     3,293  $      222  $    (2,479) $    1,036
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2003... $     1,036  $   (1,162) $       304  $      178
                                 ===========  ==========  ===========  ==========


Allowance for License Performance Claims:
                                               Charged                  Balances
                                 Balances at  (Released)                   at
                                  Beginning    to Costs                  End of
                                  of Period   of Revenues Deductions     Period
                                 -----------  ----------  -----------  ----------
Year ended December 31, 2001... $       --   $    7,000  $       --   $    7,000
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2002... $     7,000  $     (701) $    (3,802) $    2,497
                                 ===========  ==========  ===========  ==========
Year ended December 31, 2003... $     2,497  $      --   $    (2,497) $      --
                                 ===========  ==========  ===========  ==========
EXHIBIT INDEX

|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                   
|3.1(1)         |  | Restated Certificate of Incorporation.                                                                                                                                                                                                                                                                            
|3.2(2)         |  | Certificate of Amendment, dated September 16, 2002 to Restated
Certificate of Incorporation.                                                                                                                                                                                                                      
|3.3(10)        |  | Amended and Restated Bylaws.                                                                                                                                                                                                                                                                                      
|4.1(1)         |  | Specimen Common Stock Certificate.                                                                                                                                                                                                                                                                                
|4.2(21)        |  | Amended and Restated Preferred Stock Rights Agreement, dated as
of December 31, 2003, between Commerce One, Inc., and Equiserve Trust Company,
NA..                                                                                                                                                               
|4.3(18)        |  | Certificate of Designations, Preferences and Rights of the
Series B Convertible Preferred Stock.                                                                                                                                                                                                                  
|10.1(3)        |  | Form of Indemnification Agreement between the Registrant and
each of its directors and officers.                                                                                                                                                                                                                  
|10.2(3)        |  | Form of 1997 Incentive Stock Option Plan and form of agreements
thereunder.                                                                                                                                                                                                                                       
|10.3(3)        |  | Form of 1999 Employee Stock Purchase Plan and form of agreements
thereunder.                                                                                                                                                                                                                                      
|10.4(4)        |  | 1999 Nonstatutory Stock Option Plan and form of agreements
thereunder.                                                                                                                                                                                                                                            
|10.5(3)        |  | Form of 1999 Director Option Plan and form of agreements
thereunder.                                                                                                                                                                                                                                              
|10.6           |  | 2004 Inducement Plan.                                                                                                                                                                                                                                                                                             
|10.7           |  | 2004 Inducement Plan - Notice of Grant of Stock Purchase
Right.                                                                                                                                                                                                                                                   
|10.8           |  | 2004 Inducement Plan - Stock Option Agreement.                                                                                                                                                                                                                                                                    
|10.9(18)       |  | Registration Rights Agreement, dated July 10, 2003, by and
between Commerce One, Inc. and the investor named therein (BayStar Capital II,
L.P.).                                                                                                                                                                  
|10.10(18)      |  | Securities Purchase Agreement, dated July 10, 2003, by and
between Commerce One, Inc. and the investor named therein (BayStar Capital II,
L.P.).                                                                                                                                                                  
|10.11(18)      |  | Warrant to Purchase Common Stock, dated July 10,
2003.                                                                                                                                                                                                                                                            
|10.12(21)      |  | Note and Warrant Purchase Agreement, dated December 31, 2003, by
and among ComVest Investment Partners II LLC, DCC Ventures, LLC, Commerce One,
Inc., and Commerce One Operations, Inc.                                                                                                                           
|10.13(21)      |  | Senior Secured Non-Convertible Promissory Notes issued on
December 31, 2003.                                                                                                                                                                                                                                      
|10.14(21)      |  | Warrants to Purchase Common Stock, dated December 31,
2003.                                                                                                                                                                                                                                                       
|10.15(21)      |  | Security Agreement, dated December 31, 2003, by and among
ComVest Investment Partners II LLC, Commerce One, Inc., and Commerce One
Operations, Inc.                                                                                                                                                               
|10.16(21)      |  | Pledge Agreement, dated December 31, 2003, by and between
ComVest Investment Partners II LLC and Commerce One Operations, Inc.                                                                                                                                                                                    
|10.17(21)      |  | Guaranty, dated December 31, 2003, by and among ComVest
Investment Partners II LLC, DCC Ventures, LLC, and Commerce One Operations,
Inc.                                                                                                                                                                          
|10.18(21)      |  | Registration Rights Agreement, dated December 31, 2003, by and
among ComVest Investment Partners II LLC, DCC Ventures, LLC, and Commerce One,
Inc.                                                                                                                                                                
|10.19(3)       |  | Master Software License and Services Agreement between the
Registrant and NTT Communications, dated April 16, 1999.                                                                                                                                                                                               
|10.20(3)       |  | Stock Purchase and Master Strategic Relationship Agreement
between the Registrant and NTT Communications, dated June 1999.                                                                                                                                                                                        
|10.21(5)       |  | Amended and Restated Standstill and Stock Restriction Agreement
by and among Commerce One, Inc., New Commerce One Holding, Inc. and SAP AG dated
June 28, 2001.                                                                                                                                                   
|10.22(5)       |  | Investor Rights Agreement by and between Commerce One, Inc., New
Commerce One Holding, Inc. and SAP AG dated June 28, 2001.                                                                                                                                                                                       
|10.23(6)       |  | Formation Agreement dated December 8, 2000 by and among Commerce
One, Inc., Ford Motor Company, General Motors Corporation, New Commerce One
Holding, Inc. (solely for the purposes of Section 11.3 thereof) Daimler Chrysler
AG and (solely for the purposes of section 2.4, 11.2 and 11.9 thereof) Covisint
LLC.
|10.24(6)       |  | Standstill and Stock Restriction Agreement dated December 8,
2000 by and among Commerce One, Inc., Ford Motor Company, General Motors
Corporation and New Commerce One Holding, Inc.                                                                                                                              
|10.25(6)       |  | Registration Rights Agreement dated December 8, 2000 by and
among Commerce One, Inc., Ford Motor Company, General Motors Corporation and New
Commerce One Holding, Inc.                                                                                                                                           
|10.26(20)      |  | Settlement Agreement dated December 30, 2003 by and between CVX
Holdco LLC, Commerce One Operations, Inc., Commerce One, Inc. and Covisint
LLC.                                                                                                                                                                   
|10.27(20)      |  | Covisint Master Software License Agreement.                                                                                                                                                                                                                                                                       
|10.28(9)       |  | Strategic Alliance Agreement dated September 18, 2000 by and
between Commerce One, Inc., SAP and SAP Markets, Inc.                                                                                                                                                                                                
|10.29(10)      |  | Strategic Alliance Agreement Amendment No. 2, dated April 10,
2001 by and between Commerce One Operations, Inc., SAP and SAP Markets,
Inc.                                                                                                                                                                        
|10.30(10)      |  | Strategic Alliance Agreement Amendment No. 3, dated June 29,
2001 by and between Commerce One Operations, Inc., SAP and SAP Markets,
Inc.                                                                                                                                                                         
|10.31(12)      |  | Strategic Alliance Agreement Amendment No. 4, effective as of
January 1, 2002 by and between Commerce One Operations, Inc., SAP and SAP
Markets, Inc.                                                                                                                                                             
|10.32(14)      |  | Strategic Alliance Agreement Amendment No. 5, effective as of
December 20, 2002, by and between Commerce One Operations, Inc., SAP and SAP
Markets, Inc.                                                                                                                                                          
|10.33(15)*     |  | Strategic Alliance Agreement Amendment No. 6, effective as of
November 13, 2003, by and between Commerce One Operations, Inc., SAP and SAP
Markets, Inc.                                                                                                                                                          
|10.34(8)       |  | Form of Change of Control Severance Agreement.                                                                                                                                                                                                                                                                    
|10.35(8)       |  | Form of Amendment No. 1 to Change of Control Severance
Agreement.                                                                                                                                                                                                                                                 
|10.36(11)      |  | Employee Loan Agreement between Commerce One, Inc., and Dennis
H. Jones, dated August 22, 2001.                                                                                                                                                                                                                   
|10.37(13)      |  | Separation Agreement by and between Commerce One Operations,
Inc. and Dennis H. Jones, dated June 20, 2002.                                                                                                                                                                                                       
|10.38(19)      |  | Eighth Amendment to Sublease, dated October 1, 2003 by and
between Commerce One Operations, Inc., Commerce One, Inc. and PeopleSoft, Inc.
and executed November 10, 2003 by Commerce One and November 21, 2003 by
PeopleSoft.                                                                                     
|10.39          |  | Addendum to Eight Amendment to Sublease, dated October 1, 2003
by and between Commerce One Operations, Inc, Commerce One, Inc. and PeopleSoft,
Inc. and executed November 10, 2003.                                                                                                                               
|10.40          |  | Promissory Note between Commerce One, Inc. and PeopleSoft, Inc.
executed December 31, 2003.                                                                                                                                                                                                                       
|10.41 (22)     |  | Consent and Amendment Agreement between Commerce One, Inc. and
BayStar Capital II, L.P. dated March 14, 2004.                                                                                                                                                                                                     
|10.42 (22)     |  | Registration Rights Agreement between Commerce One, Inc. and
BayStar Capital II, L.P. dated March 14, 2004.                                                                                                                                                                                                       
|21.1           |  | List of Subsidiaries of Registrant.                                                                                                                                                                                                                                                                               
|23.1           |  | Consent of BDO Seidman, LLP, Independent Auditors.                                                                                                                                                                                                                                                                
|23.2           |  | Consent of Ernst and Young, LLP, Independent
Auditors.                                                                                                                                                                                                                                                            
|24.1           |  | Power of Attorney (see signature page)                                                                                                                                                                                                                                                                            
|31.1           |  | Certification of the Chief Executive Officer of Commerce One
pursuant to section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                                                   
|31.2           |  | Certification of the Chief Financial Officer of Commerce One
pursuant to section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                                                   
|32.1           |  | Certification of the Chief Executive Officer and Chief Financial
Officer of Commerce One pursuant to section 906 of the Sarbanes Oxley
Act.                                                                                                                                                                       



|(1)  |  | Incorporated by reference to Commerce One's Form 8-A (File No.
000-32979) filed on July 11, 2001.                                                                                  
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                    
|(2)  |  | Incorporated by reference to Commerce One's Form 8-K (File No.
000-32979) filed on September 19, 2002.                                                                             
|     |  |                                                                                                                                                                                    
|(3)  |  | Incorporated by reference to Commerce One's Registration
Statement of Form S-1 (File No. 333-76987), declared effective July 1,
1999.                                              
|     |  |                                                                                                                                                                                    
|(4)  |  | Incorporated by reference to Commerce One's Form S-8 (File No.
333-33328), filed on March 27, 2000.                                                                                
|     |  |                                                                                                                                                                                    
|(5)  |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 333-58558), filed on July 10, 2001.                                                               
|     |  |                                                                                                                                                                                    
|(6)  |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 000-26453), filed on December 29, 2000.                                                           
|     |  |                                                                                                                                                                                    
|(7)  |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-26453), filed on August 14, 2000.                                                          
|     |  |                                                                                                                                                                                    
|(8)  |  | Incorporated by reference to Commerce One's Annual Report on
Form 10-K (File No. 000-26453), filed on April 2, 2001.                                                               
|     |  |                                                                                                                                                                                    
|(9)  |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-26453), filed on November 14, 2000.                                                        
|     |  |                                                                                                                                                                                    
|(10) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on August 14, 2001.                                                          
|     |  |                                                                                                                                                                                    
|(11) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on November 14, 2001.                                                        
|     |  |                                                                                                                                                                                    
|(12) |  | Incorporated by reference to Commerce One's Annual Report on
Form 10-K (File No. 000-32979), filed April 1, 2002.                                                                  
|     |  |                                                                                                                                                                                    
|(13) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on August 14, 2002.                                                          
|     |  |                                                                                                                                                                                    
|(14) |  | Incorporated by reference to Commerce One's Annual Report on
Form 10-K (File No. 000-32979), filed March 31, 2003.                                                                 
|     |  |                                                                                                                                                                                    
|(15) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on May 15, 2003.                                                             
|     |  |                                                                                                                                                                                    
|(16) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on August 14, 2003.                                                          
|     |  |                                                                                                                                                                                    
|(17) |  | Incorporated by reference to Commerce One's Quarterly Report on
Form 10-Q (File No. 000-32979), filed on November 14, 2003.                                                        
|     |  |                                                                                                                                                                                    
|(18) |  | Incorporated by reference to Commerce One's Form 8-K filed on
July 11, 2003.                                                                                                       
|     |  |                                                                                                                                                                                    
|(19) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K  (File No. 000-32979), filed on December 17, 2003.                                                          
|     |  |                                                                                                                                                                                    
|(20) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 000-32979), filed on January 6, 2004.                                                             
|     |  |                                                                                                                                                                                    
|(21) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K (File No. 000-32979), filed on January 8, 2004.                                                             
|     |  |                                                                                                                                                                                    
|(22) |  | Incorporated by reference to Commerce One's Current Report on
Form 8-K filed on March 16, 2004.                                                                                    
|     |  |                                                                                                                                                                                    
|*    |  | Portions of this exhibit have been omitted pending a
determination by the Securities and Exchange Commission as to whether these
portions should be granted confidential treatment.