Tradex Technologies

» see tradex.com as it lived, on the wayback machine

~ the goodbye ~

Tradex sold software that let companies buy things from other companies. That is the entire product. A plastics distributor or a metals mill would stand up an online marketplace where its suppliers and its buyers could transact, and Tradex, written in Java by a Swiss founder out of Tampa, Florida, supplied the machinery underneath. Eighteen such marketplaces ran on it, MetalSite and PlasticsNet among them, along with procurement for American Express and something like fifty large corporate buyers.

Daniel Aegerter founded it in 1996, at twenty seven. B2B was the part of the dot-com boom that professional investors took most seriously, on the reasonable argument that business purchasing was a vastly larger flow of money than consumer retail and vastly less of it had moved online. Every vertical was going to get a trading hub. Somebody had to supply the hubs. For about eighteen months, Tradex was one of the few companies that credibly did.

The boom I could see from Turkey was made of consumer websites, the ones with television advertising and a mascot. Tradex sold none of that and had no surface a teenager on a home connection could ever have touched. When the crash arrived it reached me as a stock market story on the news, about American companies I had never used, and this is one of the ones underneath that story. I only learned the name existed while going through what Ariba bought.

~ the chronicle ~

~ the number ~

Ariba announced the deal in december 1999 at about 1.9 billion dollars in stock. Stock deals get agreed in shares rather than dollars, so the price was really 19 million Ariba shares, and between the handshake and the closing Ariba's share price kept climbing the way everything did that winter. By 8 march 2000 those shares were worth 5.6 billion dollars. The number roughly tripled while the lawyers were working, and it made the purchase one of the largest software acquisitions anyone had recorded to that point.

The Nasdaq peaked two days later. Ariba booked around 3.1 billion dollars of goodwill and intangibles across its fiscal 2000 acquisitions, and by the quarter ending 31 march 2001 it was writing 1.4 billion of the Tradex portion straight off. Twelve months separate the biggest number in the company's history from the admission that most of it was never there. Aegerter's paper fortune fell to roughly 500 million Swiss francs, which is a real fortune and also a 90 percent haircut, and he put 120 million of it into a family investment office and went on with his life.

~ what it became ~

The technology was not the problem, and it did not disappear. Tradex went into Ariba's marketplace product, Ariba survived the bust as a working procurement business, and SAP bought the whole thing in 2012 for 4.3 billion dollars, which is less than Ariba paid for this one component in 2000. Large companies do run their purchasing through software of exactly this kind today. The thesis was right.

What died on 8 march 2000 was the company, and what the record keeps instead is the arithmetic. A four-year-old firm in Tampa was worth 5.6 billion dollars for a few days because of the price of somebody else's stock, and a year later the buyer was formally recording that it had overpaid by more than a billion. Nobody involved did anything wrong at any single step. That is the uncomfortable part.

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