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Technology Stocks : OnSale Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Don Wellington Jr. who wrote (3732)	2/22/1999 3:34:00 AM
From: B. A. Marlow	Read Replies (1) \| Respond to of 4903

You've got a great handle on this stuff, Don. What you say is incisive. I haven't looked at the Price Waterhouse "comfort letter," but from your comments, it's exactly what I would have expected. See, there's never anything new. It's always the same game of 3-Card Monte, and everyone is always a "co-conspirator." As our illustrious president, William Jefferson, said: "Depends on what the definition of is is..." So the words "cost" and "wholesale" are moving targets. Of course they are, this is America! Reminds me of a faux McDonald's ad from an old "Saturday Night Live," I think: "All of the beef in our hamburgers is 100% pure." But that statement allows the hamburgers to be 100%...cardboard! You know, I'm aware that Tech Data had a punk quarter but I haven't gotten into why. See if you can pin down what accounted for mediocre results. Was there a problem with the top line, or was it an earnings disappointment due to shrinking margins or whatever? As you correctly suggest, we should look to Tech Data for clues as to where atCost (and ONSL itself) is going. I could make a case for Tech Data's acquisition of ONSL. Tech Data would be able to sweep it under the rug politically vis a vis its VAR, Systems Integration and Store Front customers. But it wouldn't be of great interest to ONSL shareholders. Who would want Tech Data's currency du jour? As Kaplan almost suggests in the Motley Fool stuff (they did a great job with this series, didn't they?), ONSL's new metaphor is all about "entertainment". Thus, we'd want to morph into the cyberspace side, rather than the bricks and mortar side, of the equation. I can see ONSL off-loading its entire fulfillment system, though. As ONSL's strategic partner, Tech Data could certainly take that on. Another thing the relationship can do is put Tech Data into the consumer electronics business. We're aware that ONSL wants to take on say, the Circuit City and Best Buy crowd. To do that, it needs a consumer electronics distributor for whom to be the front end. Problem is, first line (Sony, JVC, etc.) consumer electronics lines are not really sold through two-step distribution. There are "convenience" distributors out there, but that's just a sideline. The vast majority of the business is factory to retail. So what I'm saying is this: If ONSL wants to sell huge volumes of this stuff, it will want to avoid the inventory and physical distribution problems that Tech Data already obviates for atCost. The way to reconcile it is to put somebody into the consumer electronics distribution business in a big way. Suggest that somebody is Tech Data. BAM