WESTCHESTER, ILL. (Updated Oct. 27, 2:15 p.m. EDT) — Tim and Nick Stojka have resigned their management jobs at Web pioneer Commerx Inc. Tim Stojka was replaced by an executive who had submitted his resignation just two weeks earlier.
The Stojkas were part of an ongoing management housecleaning, which some sources say was precipitated by Commerx´s largest single stakeholder, Internet Capital Group Inc. But Tim Stojka said he decided on his own to resign.
The Internet holding company wanted managers with more technology expertise, not the plastics background that was the Stojkas´ strength, said San Francisco-based ICG spokeswoman Michelle Strykowski.
"In Commerx´s case, we were looking at ways to find a quicker path to profitability," said Strykowski, whose company has stakes in 77 Web-based companies. "The (Stojka brothers) got Commerx where it is today. Now, it´s a matter of tapping someone with different operating experience and leadership skills."
The Stojkas will retain their seats on the Commerx board of directors, and Tim Stojka will continue to serve as Commerx chairman. Stojka gave up his post as chief executive officer, and Nick Stojka his position of executive vice president.
The brothers will continue their work at Commerx, Tim Stojka said in an Oct. 27 telephone interview. They plan to spend time in the market with customers and raise funds for future growth, he said.
But it was time to hand over management reins to others, he said.
"It was a natural thing to happen," Tim Stojka said. "It´s hard for entrepreneurs like us to be involved in every detail of running a company. The next step for us was to let that go."
The brothers founded and have run Commerx since 1995, including its Commerx PlasticsNet Web site. The Stojkas both resigned their management posts Oct. 24.
Tim and Nick Stojka both voted with the six-member board in the unanimous decision to accept the changes. Other board members include two ICG executives and two private investors.
Commerx Chief Operating Officer Jeffrey Garwood has been named interim CEO. Garwood, a former executive with GE Plastics, had submitted his intent to resign to the Stojkas in early October.
A search for a new CEO, under way the past four months, had contributed to Garwood´s earlier decision to step down, Tim Stojka said.
Now, in a reversal of fortunes, Garwood said he has thrown his hat in the ring to become permanent CEO. An executive search is under way, with the guidance of Wayne, Pa.-based ICG and its recruitment team, Strykowski said.
Garwood said he still is likely to leave the company if he is not named to the top spot at Commerx.
A significant downsizing also continues at the Internet company. Employment had peaked at about 185 in January, when Commerx filed a preliminary registration for an initial public offering. Over the course of the next few weeks, the number of employees will shrink to 115, Garwood said. During the past month, the work force already has been reduced by about a quarter, he added. The organization was a bit top-heavy, he said.
The moves are part of a company realignment that affects all aspects of the organization, Garwood said. Commerx had announced in June that it would shift its focus from an online trading exchange to a software provider to companies for Web-based procurement. By shifting focus to technology, Commerx believes it has found a more profitable model, he said.
The company will continue its PlasticsNet site — one of the first to trade online in plastics — but will put its focus elsewhere, he said.
"The board was involved in what the right structure of the company should be," Garwood said. "We had too many senior managers. It´s no different than what a Dow (Chemical Co.) or a DuPont must do sometimes to realign."
Several plastics executives already have left. They include James Morelli, who had joined Commerx as vice president and general manager for plastics. Morelli had come from AlliedSignal Plastics.
"There will be a lot of shifts that we´re finalizing," Garwood said. "We´re looking at more of a software slant. Those discussions with customers are a bit different than talking about how much polypropylene you´d like."
The Stojka brothers are part of a family that owns Elmhurst, Ill.-based Fast Heat Inc., a maker of hot-runner components. Tim Stojka had been president and CEO of Fast Heat until 1998.
Tim Stojka owns 17.1 percent of Commerx, and Nick has a 14.9 percent share, according to the January filing. Two other Stojka brothers, Dean and John, each own 9.7 percent slices of the company.
As of June 30, ICG owned 39.8 percent of Commerx, Strykowski said. New ownership figures will be released Nov. 8 when publicly held ICG announces third-quarter earnings, she said.
ICG also is high on Garwood´s leadership skills and considers him a strong candidate to become permanent CEO, Strykowski said. Before joining GE Plastics, Garwood spent five years as a management consultant at McKinsey & Co.
The moves at Commerx stem from problems at ICG, said Eric Upin, securities analyst with San Francisco-based Robertson Stephens.
ICG´s long-term viability is an issue, Upin said. ICG lost $186.9 million in the first six months of 2000, and thinning cash flow could make future funding of Web ventures difficult, Upin said. The company is trying to shore up its investments to bring more liquidity, he said.
"ICG needs to get some base hits, and even some doubles and home runs," Upin said.
At the same time, Commerx needed to change its model, said Upin, who covers e-commerce companies. The industry has shifted from trading exchanges — where companies quickly have burned through cash without much return — to a sounder model focused on building Web-based technology at individual companies, he said.
According to its January filing, Commerx lost $12.4 million from its launch in July 1995 through Sept. 30 of last year. The Westchester-based firm recently relocated from Chicago.
The company pulled its IPO registration in early October. Commerx has raised a total of $66 million in private funding, said Chief Financial Officer David Dill. The company recently secured more than $19 million in investments from such companies as Riverside Management Group and MPC Global Corp. Ltd.
But the Stojka brothers, while strong fund-raisers, did not have the expertise to grow the technology side of the business, Upin said.
"Like others, they focused on building a farmer´s market on the Web where buyers and sellers could trade," Upin said. "All of a sudden, it turns out that stuff is really hard and really complicated. The mandate has changed on what it takes to win."