December 16, 1999 5:10 PM PST
Sun tries new sales channel: eBay
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In an experiment to see if Sun can reach new customers, the Palo Alto, Calif.-based company began a test program to sell a few of its servers and workstations at the popular online auction site, spokesman Doug van Aman said. The Unix computer maker quietly put more than two dozen brand-new servers and workstations up on the auction block Tuesday under the seller's name of "auctions.sun.com."
"It boils down to testing the waters. Nobody really knows who the people are out there," van Aman said.
"We suspect...the customers we'd attract at eBay are not the people attracted by the channel," he said, referring to the network of independent companies that usually sell Sun equipment.
Online auctions are common for PCs, gadgets and other relatively inexpensive equipment, but selling $15,000 Unix servers is a departure for this growing practice. Though occasional examples of expensive hardware can be found on auction sites, this appears to be the first time a big-name company has started selling current high-end products on an auction site.
Typically, expensive server systems come packaged with a lot of hand-holding, advice, installation help, technical support and other services. But through eBay, all the buyer gets is the usual Sun technical support and warranty.
Selling out-of-date or refurbished hardware at cut rates is nothing new, but Sun is selling brand-new products still being manufactured for the company's current product line, van Aman said. "It's not a clear-out. It's not inventory that we have sitting in a warehouse," he said.
Sun, well-known to corporate buyers, likely is trying to tap into small and medium-sized businesses, said Jill Frankle, an analyst at Gomez Advisors.
"They don't really have anything to lose," Frankle said.
Selling on San Jose, Calif.-based eBay's site is a new twist in Sun's efforts to keep ahead of its primary competition in selling Unix systems. IBM and Hewlett-Packard have been using marketing campaigns and sales force incentives to dislodge Sun from the top of the totem pole in the Unix server market, while Sun has been discounting hardware and dangling lucrative carrots before its own salespeople.
An IBM representative said Big Blue is considering using auction houses to sell its products--but only excess inventory and products being retired. "We would never take a new product and put it there," the representative said.
HP was stronger in its condemnation of the eBay concept.
"It looks like a pretty risky play," said Patrick Rogers, marketing manager of HP's top-end HP 9000 servers. "We could use this as an opportunity to recruit Sun's channel partners."
In addition, customers buying these expensive systems are going to have to be able to get by without much assistance, Rogers said. "You're going to have to be pretty confident when you buy these systems that you know how to set it up," he said. "They're fairly complex systems. It's not like a PC."
eBay spokeswoman Kristin Seuell said Sun's move doesn't mark the beginning of a new strategy at eBay of catering to merchants instead of ordinary people. "Our priority remains person-to-person trading," she said, noting that many smaller companies sell goods through eBay.
Sun notified eBay of the decision to sell computers on its site, but didn't make the move in partnership with the auction house, Seuell said.
Up for auction were 10 single-processor E250 mid-range Unix servers with a starting price of $6,500, another 10 two-processor E250 servers with a starting price of $15,500, and six low-end Ultra 5 workstations with a starting price of $995--less than 40 percent of the list price.
There were many bids for the Ultra 5 workstations, but as of today, only one person had put in a bid for a $15,500 server.
Today, Sun added some newer items, including 11 batches of 100-MHz JavaEngine motherboards for $35,000 to $40,000. The boards, which unlike the computers are discontinued products, are designed for use in special-purpose computers such as kiosks, Sun representatives said.
One of the factors Sun is keeping track of is the pace of bidding and the eventual price, Frankle said. "It's not going to be economical selling these things way below cost," she said.
Sun runs a modest risk of angering the companies that sell its systems because they may fear they're being bypassed, Frankle said.
But Sun isn't too worried--finding this out is one of the purposes of the test, van Aman said. "We don't think this is a replacement for any of our channel partners. We believe the customer segment is different," van Aman said.
In any case, Sun sells its hardware directly off its Web site.
Sun will put new items up on eBay after the holidays, different configurations of what's currently at the site, van Aman said.
Though Sun is selling comparatively expensive systems on eBay, it's not likely that the top-end machines will show up in online auctions, van Aman said.
"I don't think we'll see an E10000 on there any time soon," he said, referring to Sun's top-end servers, which typically cost more than $1 million.
Onsale also auctions computer hardware, but likewise focuses more on low-end systems. In addition, Onsale actually buys the equipment from the manufacturer before auctioning it off.