Several months ago, auctioneers routinely sold the assets of bankrupt e-commerce companies for pennies or nickels on the dollar. Top-of-the-line servers with sticker prices of $100,000 or more could be had for less than $15,000. Ergonomic chairs, foosball tables, laptop computers and other dot-com detritus sold for one-tenth or one-twentieth of their original purchase price.
But as publicity surrounding the dot-com demise spreads, crowds are flocking to asset-liquidation sales--and bids are going up. For the past several weeks, auction companies have been taking up the equivalent of several pages of ads in the Sunday edition of the San Francisco Chronicle. Played as both a tragedy and a comeuppance, the phenomenon has been fodder for journalists at ABC News, National Public Radio, The Wall Street Journal and scores of other media outlets.
But the story is changing--quickly. A liquidation event sponsored by Charyn Auctions on Tuesday in San Francisco's warehouse district proved that bargains are becoming scarce as dot-com auctions go mainstream.
There were few true steals among the remains of defunct dot-coms Greenlight.com, eFrontier, BigWords and Creditland. The warehouse was chock-full of corporate mementos--beanbag chairs, maple conference desks, scores of office chairs, hundreds of phones, racks full of computers and computer equipment, odd lots of software, a Ping-Pong table with 10 paddles and a mysterious set of brightly colored, square mattresses that seemed plucked from a nursery school.
A used Panasonic microwave oven went for $40--not bad, but $5 more than the going price at San Francisco's all-purpose community site Craigslist. A severely used Sanitaire vacuum went for $50--about the same price as the current top bid for a similar sucker at eBay. A General Electric refrigerator went for $125--probably more than it would at a garden-variety garage sale.
A Hewlett-Packard 5000N laser-jet printer fetched $600. "This is worse than the police auction," a woman hissed.
Laptops were among the most expensive items at the auction, relative to their sticker price. Only a handful went for less than $700, and most were more than $1,000. A Dell Latitude CPx laptop with a 650MHz Pentium III processor, 256K cache memory, 256MB main memory, a 12GB hard drive, 8MB of video memory, CD-ROM and floppy drives was $1,300. Another Dell CPx laptop with a 650MHz Pentium III processor, 256K cache memory, 128MB of RAM, a 6GB hard drive, 8MB of video memory, CD-ROM and floppy drives was $1,000.
The few good deals were in servers and other high-end equipment that mainstream shoppers wouldn't touch. A Sun Microsystems StorEdge A5100 disk storage array with 14 36GB Fibre Channel 10,000RPM drives went for $4,500. A Sun Ultra 60 workstation with two 360MHz UltraSparc CPUs, 4MB cache memory, 1GB main memory, a 9GB, 7,200-rpm drive, CD-ROM and a Creator graphics card went for $1,750.
Though the latter may have cost $10,000 new, it's important to remember that all auction merchandise is sold "as is." Goods are certified by independent contractors, but the second owner usually has no ongoing manufacturers' warranty.
And none of these prices includes the 12 percent add-on fee that the auction company charges, nor the local sales tax of 8.25 percent. That means all top bidders must actually pay more than 20 percent above the final price on the auction floor.
"The prices are high," admitted David Charyn, who runs the auction company with his auctioneer father, Ronald Charyn. "But that just means we've done our job well. It all depends on where you advertise, your reputation for reliability, the skill of the auctioneer and the buyers...We have VIP brokers who get special invitations. They pick up the prices and take out the slack."
The increasing number of these brokers has also pushed up prices at California dot-com auctions, Charyn said. The VIPs may come from as far away as Florida or elsewhere on the East Coast to find bargains on servers, routers and switches that are available only in enormous quantities in technology hubs such as the San Francisco Bay Area.
But no one pushes up prices like the hordes of first-time auction attendants, and veterans are already lamenting the good old days of three months ago--when they had the auction floor to themselves.
One Bay Area broker bemoaned "folks who don't do their homework" and take bids too high simply because they don't know the retail or wholesale cost of an item. The broker, who has recently attended auctions in Sacramento and Los Angeles, also blamed the media.
"You can't turn around without bumping into a reporter these days," he said, not wishing to have his name associated with yet another auction article. "It's getting ridiculous."
The publicity and crowds have dramatically altered the mood of many liquidation sales.
Once the haunt of hard-core resellers in the computer hardware and office furniture niches, the auctions are now dens of regular folk: morbid onlookers fascinated by the dot-com meltdown, small-business owners, random passersby, even stray joggers. A growing cadre of attendants are avid bargain hunters unfamiliar with auction etiquette: shoppers who normally forage for deals on sofas and pool tables at garage sales, police and charity auctions, and estate sales.
At the Charyn event Tuesday, hundreds of people from all walks of life--some dressed in slacks and Hermes ties, others dressed in shorts and T-shirts from dead dot-coms--flooded the event after reading about it online and in the Chronicle. It was held in a relatively desolate, graffiti-scarred area just down the street from All Auto Dismantlers and M&M Auto Wreckers.
The stuffy warehouse was so packed that the auctioneer had to stop the bidding at least twice to announce that people had parked their cars in front of nearby companies' garage doors and loading docks.
Later, he turned to receive an odd-sounding bid from someone behind him; it turned out to be a baby who squealed with delight while playing near some beanbag chairs that were once the hip additions to a dot-com office. His young parents smiled and shrugged, and the bidding proceeded.
Getting up to auction speed
Shoppers began arriving at 9 a.m. to inspect the merchandise. By the time bidding started at 11 a.m., it was standing room only. The early risers had parked themselves on all the office chairs and couches that would soon be sold.
Each attendant registered for the auction by presenting a business card or driver's license and a $300 deposit on a credit card. Throughout the morning, the line snaked out the door as newcomers tried to get in on the bidding.
The auctioneer intended to get through 100 items per hour but ended up averaging only 60: He had to administer a crash course in bidding for newbies, which slowed down the auction. (Several veterans commented that the swift-talking Charyn seemed a bit slower in his auctioneering banter.)
Seasoned bidders are loath to shout out their bids or place a bid other than what the auctioneer calls. Instead, they casually lift their numbered placard if they're willing to pay the current price. Some tilt their placard or subtly wave a hand at half-staff to entice the auctioneer to cut the increments and slow the price escalation.
But such nuances were lost on first-timers--those who didn't understand the fast-talking auctioneer and yelled out "huh?" and "what?" Cell phones trilled, pagers beeped and one man knocked over a cluster of desk lamps.
One woman raised hackles by continually shouting her price. When the bidding reached $50 for a metal, four-door file cabinet, Charyn upped the ante to $100.
"Sixty!" she yelled. The bidding soon passed $100, then settled at $150.
"Sixty!" the woman yelled again.
"Listen to my increments, ma'am!" Charyn scolded. "We're bidding on my increments, not yours." She soon left, bereft of purchases.
Victims and voyeurism
Clark Gardner was one of the many first-timers attending the auction. The San Francisco resident recently returned from a two-year stint as an elder care worker in Hawaii, and he was eager to witness the dot-com demise he had been reading about. (He also snagged an ergonomic office chair for $50.)
"I keep hearing about all these companies melting down and I think it's fascinating--I just had to check this out," Gardner said.
He pointed to a bank of about 120 phones, including one whose user had written next to the auto-dial buttons "dad," "dad's car," "Aspen Meadows" and "mom in Florida." The person drew a pink palm tree next to the last listing.
Next to the phone bank was an erasable board that still had the remnants of a Greenlight.com meeting on it, including the names of the "Toyota team" (Justin, Jason, Rhonda, Eric, Daryl and Margot), their percentages of deals closed and number of open orders. The "team goal" was mercifully erased.
"What a creepy little feeling you get looking at all this stuff," Gardner said.
Charyn said it's impossible not to get emotionally tugged by the dot-com skeletons that surround him. Although his father founded the business 12 years ago to liquidate assets in the restaurant industry, dot-com assets have become a staple in the past year.
"It's not just another company out of business," the 31-year-old San Francisco resident said. "These people put in 12- to 14-hour days, sacrificed their family and their lives for these businesses... Sometimes we go in and we see the toys and photos on their desks. It's hard not to get personal about it."
But members of the San Francisco-based business, which has 14 full-time workers and 10 part-timers, try to keep a broad perspective about the dot-corpses, chalking up the auctions to the "circle of life" of any business.
"We try to recoup most of the cost of the assets for the (venture capitalists) so that the VC gets some money back and isn't afraid to fund the next start-up," Charyn said. "One hand washes another."