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Technology Stocks : eBay - Superb Internet Business Model -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Jay who wrote (533)	10/27/1998 7:51:00 PM
From: Doug Fowler	Respond to of 7772

Jay: Quite frankly, I don't pay much attention to the Eggheads, Onsales, Cyberian Outposts, etc. They are in absolute cutthroat price competition in a market where inventory loses value on a daily basis. They have to deal with returns, low margins, etc. It is a commodity business, plain and simple. eBay doesn't care whether prices drop. They always get a listing fee, and they get a commission if the item sells. Their gross margins were at 84 percent last quarter, and I expect them to be 90 percent with a year or two. If I were going to invest in something similar, I would look at something like PC Connection. They've been in business a long time, they are ramping their Internet business slowly, but the vast majority of their sales come from the people calling in. I often buy from PC Connection, after finding the item on their web site, but I always call in my order (and sometimes get them to come down in price). (And they ARE profitable.) Now, if one of these companies were to ALTAR their model, and act as a cheap middleman to the manufacturers, where the manufacturers drop shipped when the middleman takes the order, and the middleman takes a small cut, without ever touching inventory, THAT would be a model worth considering investing in. Essentially, what I just described is what eBay does for a wide range of sellers (who happen to be mostly little guys). However, they are NOT doing this for major manufacturers like IBM, Compaq, HP, Sony, Microsoft, etc. Seems like there could be an opportunity....