Sun's auction adventure

Sun Microsystems CEO Scott McNealy has been preaching the virtues of online auctions for several months - to partners, employees, Wall Street and anyone else who will listen. So when the SunBid auction site opened last week, it was one more step in McNealy's plan to prep Sun for the inevitable - a gigantic online trading floor.

Not all Sun execs, including president Ed Zander, share McNealy's enthusiasm. Indeed, some customers use auction sites to bypass Sun's traditional channels. Nevertheless, Sun is pushing ahead.

Sun began auctioning products through eBay, Mercata and TekSell.com early this year and opened auctions to partners in July. By September, when Sun introduced an Ultrasparc III-based SunBlade workstation that is available only by auction, revenue was approaching $1 million per week.

"This is a new way of thinking about sales - it's so dynamic and event-driven that partners could find new ways to take advantage of it. You could up-sell your customers," says Alex Rublowsky, group manager for Sun's auction program office.

Rublowsky says 45 percent of customers who buy products at auctions are new to Sun, and he wants partners to try auctions and use SunBid. As an enticement, Sun occasionally has offered systems on eBay for $1 with no reserve - or minimum bid. McNealy even autographed several SunBlades to boost sales.

Still, results so far have been mixed. Two customers report buying Sun systems on eBay only because the delivery time for products through Sun's regular channels was weeks too long. Sun has been plagued by backlogs - a situation that has caused some partners to consider porting their software to Linux - but guarantees delivery of auctioned products within 48 hours. "We have money but no time," says Mark Haney, COO of Going4th Energy Systems, a start-up that plans to sell geological and geophysical software.

In addition, Sun product documentation can be spotty on eBay, notes Bill Brown, a VP at Bytronics Inc.

Other partners fear losing hardware sales (and corresponding services revenue) to auctions. A Sun partner who asked not to be named called the hubbub around auctions "much ado about nothing... the whole concept of auctions is predicated on scarcity, not on normal supply."

Nevertheless, the source is concerned that dot-com liquidators will flood the market with Sun products from companies that now are going under. Sun also has leased servers to dot-coms and could be tempted to recover its costs by auctioning them, the partner says.

But Rublowsky says Sun has partners in its auction plans. DoveBid, for instance, will handle Sun's remanufactured systems.