The bones of the dot-bomb
A new tradition has arisen in Austin (and other places): the high-tech auction. There are companies that make a living auctioning off the bones of dead dot-coms. They come in every few months and sell off all the computers, network equipment, phone equipment, and in some cases even furniture, of failed high-tech companies. The banks and other creditors recover some small part of their investments, and the local populace and surviving businesses get some bargains.
I've been to several of these in the past six months, and sometimes the bargains are quite dandy. Personally, I got a computer, a real server-type, industrial-strength computer system with redundant everything and RAID disk controller, for less than a third of its original cost. The system had formerly been owned by a small ISP (Internet Service Provider), but I don't think it had ever seen production use. (Didn't have the right software on it.)
The method used is well, maybe pretty standard for this type of auction, I don't know. All of the items are listed in a catalog. If there are a number of identical items, they are listed together and treated as a group. Bidding commences. The high bidder on the item can take as many as he/she wants at that price, from one up to the whole group. If there are any of the group left after the first sale, then there is another round of bidding, but for a larger quantity. The high bidder has to take like five or ten at a time at the re-bid price. Eventually, all the items are gone, and a few million dollars have changed hands.
The booty at one of these auctions typically includes serious quantities of geek toys: about a hundred server computers, two to three hundred desktops, one to two hundred laptops, various networking equipment, printers, copiers, sometimes office furniture, like that. Some of the equipment is a couple years old, some newer, depending on when the particular dot-com bought the equipment and when it died. The more recent stuff is probably six-months-ago-cutting-edge, and some of it is older, but cheaper.
An truly Texas incident happened at one of these recently. The auction was selling off the assets of Agilion and a number of other dot-coms. It was held in the ex-Agilion building. It was so successful that the news covered it and some civil servant noticed. Seems that Agilion had neglected to pay the real estate taxes on the building last year, and owed the city/county/state/somebody $65,000. Somebody, somewhere in a public office building sees this news report about the assets of Agilion being sold off. Not so fast, there, mister. The city/county/state/somebody wants its cut. So the sheriff shows up to keep any more assets from being removed until the tax bill is paid. What to do? The company that owes the taxes is bankrupt, gonzo. The auction company is there acting on behalf of the creditors, mainly banks. The creditors don't want to give up any money. Well, after a few hours of standoff, the auction company finally footed the bill. I never heard if the taxes actually came out of their 10% or if they got reimbursed by the creditors. Regardless, it was a pretty fun media event. And you can bet that there is a new clause in all the auctioneer's contracts.
Just to give you an idea what a successful business this is, the same company recently held an auction in Pittsburgh. At Three Rivers Stadium, no less. They audience was 12,000 people, with 5,600 registered bidders, of whom 1,900 bought something. Yikes. When they first came to Austin, they could fit into a hotel ballroom. After a few successful times, they moved to much larger rooms. The last one I went to had over a thousand people, including a couple hundred who stood for hours after the chairs ran out. But twelve thousand is ridiculous.
The particular company that does the Austin auctions is from Silicon Valley, and they do many more of them there, of course. The auctioneers joke, grimly, "If you don't see what you want today, we'll be back in a month to auction off six more companies. I just don't know what their names are yet."
Copyright (C) 2000, 2001, 2002, Richard Ball Landau. All rights reserved.
2002-03-01
