When Pro QC Studio, a Web design firm, went looking for new office equipment, they didn't have to go far. A failed dotcom company, Huelink, was selling computers and equipment it had just bought last year.
"They stocked their office with top-of-the-line computer equipment," said Chris Cottorone, sales and marketing director at Pro QC. "We got some good deals."
Pro QC was able to replace 30 percent of the work stations in its office from Huelink, and does not plan to purchase any more equipment for at least another year. Although Cottorone chalked up the sale as a good deal for his company, it's not good for the struggling personal computer industry.
PC sales have been sluggish since the middle of last year, and the entire industry, from Taiwan's semiconductor manufacturers and motherboard makers to the big resellers like Compaq, is suffering.
According to market researcher International Data Corp (IDC), the average selling price of a PC shot up during the period starting from third quarter 1999 through the middle of 2000, the height of the dotcom boom. New dotcom companies flush with investor cash were paying top dollar for the latest equipment.
Consumer interest in the Internet also spiked, as the amount of people going online doubled or tripled in many countries -- further driving up PC and laptop sales.
Computer sales in the first half of the year last year grew so fast, more than 23 percent higher than the year before, and companies began stocking inventory for an expected selling bonanza in the second half of the year. Back to school sales in the third quarter and Christmas in the fourth quarter usually make the second half of the year the hottest time for computer sales. Manufacturers stocked up on components and stores filled shelves and warehouses in preparation for the onslaught. It never came.
Instead, the NASDAQ began to falter, and venture capitalists demanded to see some return on their investments. According to a Web site that specializes in tracking failed dotcoms, fuckedcompany.com, over 1,500 companies with multi-million investments -- many of them with hundreds of millions of dollars in venture capital cash -- have gone under since the dotcom bomb exploded last year.
People lost interest in the Net, and computer sales in the second half of the year failed miserably to live up to expectations. The buildup, the warehouses full of computers and factories stacked high with components, however, have killed PC sales this year.
The price of 64 megabit, industry standard computer memory chips, for example, hit a high of US$9 last July -- when optimism over second half of the year sales was at its height. Now these chips are almost being given away, selling at or near the cost of manufacturing, around US$2.20 per chip. And companies worldwide have spent the last few months lowering their earnings forecasts.
Now, not only has the Internet frenzy cooled and softened demand for new computers by dotcom firms and consumers alike, but also failed dotcoms are filling the marketplace with their used equipment. The computers, Internet servers, routers and other office equipment -- usually cutting edge technology -- is being resold for a fraction of its cost, and it is good equipment.
When the investment money ran dry for Huelink, the dotcom firm that sold its computers to Pro QC, the company became just the latest example of why the ongoing slump in PC sales will continue well into the second half of the year.
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