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Technology Stocks : OnSale Inc.
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To: Martin Milani who wrote (3585)1/23/1999 11:40:00 AM
From: Brian H.   of 4903
 
Martin,

Trust me, no company can buy at cost and sell at cost and stay in business long. There is one company that is close to that, and they are successful due to the sheer volume of product and incredible pricing models and inventory systems in place. That company is Wal-Mart, and they operate on margins in the %2 - %3 range, but look at the amount of sales they have to generate to be so successful.

Even if ONSL could operate at 2% - 3% margins, they do not have the sales to support those margins, not even close. Wal-Mart has sales of around $120 Billion.

Why do major resellers have to counter it. They would be crazy to even try to counter something that would cause them to lose money. ONSL even said they do not know if this NEW model will work. They did state that "We will have an idea in two months".

Again, what I am really concerned with is by using this new model, we are now going from a projected +$.03 EPS for 1999 to a -$.90 EPS for 1999. That right there shows that they are in trouble and unable to make money with margin levels so low. I still am very disappointed that they didn't stick with what they knew best and try to build that "AUCTIONS". Now they are trying to play catch up in a segment of business they are not familiar with. (JMHO).

Good Luck.

Brian H.
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