twinsoft
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posted on August 7, 2001 12:51:57 PM new
I was watching a CNN article yesterday about the Cisco Systems earnings report. Cisco's report will be announced after the close of market today.
The news article noted that right now Cisco's sales are hurting because their unsold stock (aka, closeout/liquidation) is competing with their new products. This got me thinking about the effect eBay's new B2B sales might have on the tech market. What will happen when Cisco, Sun and other tech companies find themselves in wars on eBay to liquidate old stock? What will happen to the current market for new products?
Look what eBay did for the "fair market value" of collectibles. eBay has created a glut and prices have gone through the floor. What happens when the tech companies find themselves in the same kind of quicksand? Will anyone buy "retail" any more? What will happen to the tech industry as a result of eBay?
I live in Silicon Valley and I can tell you the economy is pretty bleak. Last week there were 13,000 layoffs at two companies alone (including Hewlett-Packard). Everyone pretty much agrees the tech industry is bust. Will eBay be the nail in the tech industry's coffin?
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mballai
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posted on August 7, 2001 12:57:25 PM new
People think eBay has flattened prices. This is not true. It is the widespread availability of products that has changed the playing field. The Internet has opened the door to being able to find and price products. eBay is not always the bottom buck place for something. In many cases prices are way inflated to begin with, so the hotair factor is quickly removed.
The doom of the tech industry is quite premature.
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mrpotatoheadd
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posted on August 7, 2001 01:04:04 PM new
Look what eBay did for the "fair market value" of collectibles. eBay has created a glut and prices have gone through the floor.
Maybe for some collectibles. Unfortunately for me, prices for the ones I collect are higher now than any time in the past three years.
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twinsoft
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posted on August 7, 2001 01:09:12 PM new
Mballai, yes it is the easy availability that has driven down prices. And eBay is smack in the middle of it. Look what eBay has done to every other market. Prices are way down because of the glut of items. New etailers may think there's easy money at eBay, but will they fare better than current eBay sellers who are seeing sales drop by double-digits?
Tech companies that join eBay will struggle to give away their products below wholesale. Those who don't join eBay will sell even less. I'm not saying that's a bad thing, buyer's market and all, but what will be the ultimate effect on the tech industry?
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rubylane
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posted on August 7, 2001 01:11:50 PM new
Now that venture capital has dried up, I think companies are being forced to make sensible decisions about equipment rather than squandering their money like fools, overbuilding their infrastructure, and buying name-brand hardware when commodity products are often just as good.
IMO, there are lots of other things affecting the tech industry besides just eBay. Linux for example. It used to be that old hardware was useless, because the manufacturers controlled & distributed the (proprietary) operating systems as well as the hardware. To obsolete a hardware line, they just flicked a switch in the software and it was no longer supported. The licensing agreements were often worded such that the operating system software was not transferrable, which effectively prohibits a used-equipment market.
In cases where the equipment was purchased used, the cost of re-licensing the operating software was often so ridiculous that it made more sense to buy a new machine WITH the operating software.
Now that Linux is available for nearly every hardware platform, and often runs better than the vendors' own system software, there is no need to license any of the vendor's software when used equipment is purchased. This makes buying used equipment (like Sun/HP) much more attractive.
The Unix/workstation/server vendors have brought this on themselves IMO by never cooperating on an common operating system. *Now* they are all starting to do that with Linux, because I think they see that they are no longer going to enjoy the huge margins necessary to fund system software development inside each company.
Plus with the dot-com collapse, it only makes sense that Cisco would get hurt in a big way.
Jim
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twinsoft
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posted on August 7, 2001 01:17:26 PM new
MrPH, okay maybe bad analogy, because collectibles implies rare or hard to find. But tech hardware is not rare. It is mass-produced. eBay is selling etailers on "last one in's a rotten egg!" but once they find themselves together in the pool, etailers won't fare any better than other eBay sellers. The tech industry is on its last leg and selling closeouts below wholesale on eBay will be their last gasp.
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newguy
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posted on August 7, 2001 01:18:20 PM new
The dotcom fiasco has dumped a lot of hardware onto ebay and other sites. Cisco routers and switches used to be scarce on ebay, now there are 754 results for Cisco routers on ebay alone.
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REAMOND
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posted on August 7, 2001 03:07:22 PM new
Intel has also announced price cuts of 50% on its chips and statted if necessary they will go lower.
An analyst also hit eBay today. Stated that even with eBay going into the real estate biz, still will not reach revenue goals.
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twinsoft
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posted on August 7, 2001 04:29:48 PM new
I believe I heard Intel's profits were down by 50%. Add to that a 50% price cut. Can anybody believe they're not in deep? My point is that the tech market on eBay will quickly become saturated and tech sellers will find themselves giving their stuff away at fire sale prices, like most sellers are doing now. Rubylane mentioned huge margins. Those margins in part went to fund research and development. Can the tech industry survive eBay?
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Internet Pioneers
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quickdraw29
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posted on August 7, 2001 04:49:22 PM new
The only difference between the past and the future is in the past Cisco, Sun and the rest sold their overstocks to liquidators for pennies on the dollar; now they skip the middleman and get up to 7x more than before.
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mballai
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posted on August 7, 2001 05:09:26 PM new
The tech industry's problems stems from a business that is entirely self absorbed. Technology people think that their efforts are all-important, that they can solve anything, and anything technological is inherently superior to something that is not.
I happen to work in Information Technology for a company that has won awards for its use of technology which is at the core of our business. Our stance on tech is rather interesting. We still consider our telephone system more mission critical than our computer systems. In a disaster, the phones must go up first, the computers second.
Very little new technology has any real innovation. If businesses won't buy into it, it doesn't matter how cheap it is.
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twinsoft
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posted on August 7, 2001 05:20:35 PM new
quickdraw29, you anticipated my other question. What happens to "middlemen" such as electronic superstores?
eBay is becoming the "great equalizer" by opening up markets. Will middlemen be simply cut out of the equation?
I remember when I found that my wholesaler was undercutting me on eBay by selling a particular software item at just $2 over wholesale cost. I had to drop the product because it was no longer profitable. (I also dropped the wholesaler.)
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dman3
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posted on August 7, 2001 05:43:11 PM new
Ebay Will never cut out the middle man, Many of them are still doing very well.
Now that a lot of the venture funding has slowed down these tech companies are being forced to use there own Dollars to fund research Some companies actually still had no profit to spend from.
These companies will fall the ones that are left will be stornger and better then before, How every they will have to start from lower projections then they were giveing in the 90s and results will be based on real profit margins.
ALso have to No one is forceing retail to come to ebay, They are all knocking to enter they want a peice of the profits we have been getting this says to me some they what we call small sellers as more sucessfull then them selves...
http://www.Dman-N-Company.com
Email [email protected]
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REAMOND
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posted on August 7, 2001 09:23:19 PM new
The internet IS cutting out the middleman.
In fact eBay joined a lobbying group to try to stop Middleman groups from lobbying legislatures to STOP many products and services from being offered over the internet.
So far car dealers have stopped car makers from selling over the net. Mortgage companies are trying to stop mortgage brokers from offering mortgage loans over the internet and undercutting B & M mortgage companies fees.
Liquor and tobacco distributors are lobbying states to not allow liquors and tobacco products to be sold over the net.
Many states go along with these middleman groups after they realize the tax revenues that can be lost, especially on liquor and cigarettes.
Electronic superstores are also starting to complain as the net is starting to erode their bottom line.
Before it's over, we'll be ordering everything direct from the factory, unless middleman lobbying groups can stop the trend.
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gravid
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posted on August 7, 2001 10:21:41 PM new
And people wonder why the Japanese don't jump in the online world more. The commercial structure in Japan is built around a set of distributors who add 5 or 6 steps of ownership and mark up between the manufacturer and buyer.
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mballai
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posted on August 8, 2001 06:07:19 AM new
Back to the original statement: Cisco says their old stock competes against their new.
1. Who made the old stock? Duh! You made too much so don't complain.
2. Is this any different than any other business. An author's group complained that Amazon's offering of used books hurt new book sales. What they failed to mention was that they already made money on the sales of the old books. Cry me a river.
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