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Old Equipment Gets New Life Online

E-commerce: Corporations find that auctioning unneeded assets over the Web dramatically cuts costs and paperwork.


Linda Kelly earns plenty of frequent-flier mileage traveling to corporate auctions where she bids on such industrial-strength used equipment as Class 100 clean rooms and nitrogen belt furnaces. But as the $100-billion business of disposing of excess corporate assets moves online, the Microsemi Corp. executive plans to spend more time in her Santa Ana office.

"Not as much sitting on airplanes, not as many nights spent in hotel rooms--I love it," said Kelly, who conducts major equipment purchases for the semiconductor manufacturer. "This is absolutely the best thing that's happened in this part of the business."

Corporate auctions of old and unwanted assets are being pushed online by the same wave of Internet change that's sweeping through the business-to-business sector. The value of online "B2B" transactions will grow to $2.7 trillion by 2004, up from $17 billion in 1998, according to Forrester Research.

Whether buying raw materials or unloading old machinery, companies such as Ford Motor Co., Boeing Co. and General Electric Corp. expect online marketplaces to dramatically cut paperwork and expenses. Buyers and sellers are betting that corporate garage sales will undergo the same metamorphosis that occurred when EBay Inc. gave consumers a new way to buy and sell Beanie Babies.

Sellers envision a cost-effective way to move aging but still-serviceable equipment out of warehouses--or divert it from the junkyard. Buyers anticipate easier access to auctions now out of geographical or financial reach. But what's uncertain in the fast-changing B2B world is who will control the process: traditional auction houses or online newcomers.

Buyers and sellers won't have to wait long for answers. "We think the winners will be determined in the next nine to 12 months," said Steve Ellis, a San Francisco-based managing director of Bain & Co., a consulting firm. "The key to success is grabbing the right elements from the analog world and making them relevant in the digital world."

Traditional auctioneers are scrambling to keep abreast of technological changes. The Newton Highlands, Mass.-based Industrial Auctioneers Assn. has added a Web site, and the National Auctioneers Assn. invited Inc. and EBay to share their view of the future at last summer's annual meeting.

"Three years ago, 90% of all auction houses were in denial, and most didn't have a Web page," said Kirk Dove, chief auctioneer for Foster City, Calif.-based Dove Brothers, an industrial auction house that in November changed its name to "My guess is that now, fully half still won't believe that you can effectively sell equipment over the Web."

Dovebid hopes to leverage existing contracts with companies such as Raytheon Corp. and General Dynamics Corp. as it moves its operations online. The family-owned business, which recently filed for an initial public stock offering, has drawn nearly $100 million in private funding from investors such as Softbank Capital Partners and Fremont Group.

Turning the 60-year-old auction house into a "dot-com" could be a bumpy process. Dovebid cautions in regulatory filings that it might never become profitable online if it can't quickly establish a dominant position in the rapidly evolving marketplace.

Traditional auctioneers face growing competition from such newcomers as, a San Diego-based company that has hired former automotive industry executive Lee Iacocca as its pitchman.

Such companies as FreeMarkets Inc. also are targeting the online asset disposition business. The Pittsburgh-based company is establishing online marketplaces where buyers and sellers of raw materials can strike deals. But many corporate asset disposition departments report to purchasing, "so there's a natural tie-in, and we've been seriously growing this part of our business since last summer," said FreeMarkets Chairman and Chief Executive Glen T. Meakem.

There are signs that a consolidation already is underway in the fledgling online auction sector. FreeMarkets in March paid $339 million in stock for, an Austin, Texas-based auction house. Dovebid also has been on a buying binge, scooping up auction houses and ancillary businesses it deems necessary for long-term survival.

Competitors also are honing systems to ensure that sellers' and bidders' needs are met. Dovebid, for example, has been geared toward live auctions and is opening them to online bidding. The company also is pursuing the Nasdaq-style system favored by OnlineAssetExchange and FreeMarkets, in which assets are sold around the clock through a bid-and-ask system.

In the past, industrial auctions were severely limited by geography. Equipment placed on the auction block changes constantly, and auctioneers spend heavily to advertise upcoming sales. That's an expensive process, and far-away buyers often remained out of the loop.

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