Open for Business

Converge officially rolls out e-marketplace for electronic components

Peabody, MA  August 13, 2001  High-tech e-marketplace Converge today officially launched ConvergeTrade, the company's online e-market for buying and selling inventory from 180-plus different families of electronics products.

The marketplace offers its 1,500 participating online buyers and sellers such Internet trading tools as forward and reverse auctions, negotiable and non-negotiable offers and request-for-quote (RFQ) and request-to-sell (RTS) mechanisms. The marketplace also has on staff market specialists to provide online and phone support.

Despite the current economic downturn and inventory glut in the electronics industry, marketplace participants have completed more than 230 online auctions since May, when Converge upgraded its marketplace's auction service. Collectively, these auctions moved about $16.4 million of inventory in the channel.

"This economic downturn is motivating companies to find new ways to sell and source," said George Devlin, president of Converge. "Even after the markets recover, we'll remember 2001 as the year online trading took its place in electronics industry sales and procurement."

Converge also reported that sellers of computer products have used the marketplace to move excess inventory using forward auctions, with more than 70 percent of all computer product forward auctions finding a buyer. Additionally, Converge also says its three most recent reverse auctions have secured suppliers more than $14.3 million worth of market share.

"The shift in the economy has forced companies to move beyond traditional pricing concerns," said market analyst Grant Johnson of Converge. "Today, manufacturers worry whether their inventory will move at any price. Semiconductor inventories, for example, increased by 17 percent in the fourth quarter and 30 percent in the first quarter to reach their highest levels in more than 12 years. The last time semiconductor inventories reached comparable levels in the late 1980s, chip revenues stagnated for six quarters. Marketplaces and their exchange services, like Converge and ConvergeTrade, have stepped in to bridge this gap."

Converge claims that by using the marketplace, companies can reduce their on-hand inventory by 2 percent and save up to 4 percent through the reduction of excess and obsolete inventory.

ConvergeTrade is the result of the integration of NECX, an independent global electronics exchange recently acquired by Converge, into the Converge marketplace. Last year, NECX moved more than $1 billion of goods globally through the high-tech industry.

The new marketplace includes several upgrades, including the ability to conduct auctions in 15 languages and multiple currencies. Also, participants now can perform what Converge terms "full-service auctions," with the marketplace taking possession of goods from a seller and moving them to the buyer, while also handling financial aspects of the deal. Previously in its online business, Converge only provided matching and escrow services, whereby a licensed escrow agent would hold the funds until the buyer accepted the goods.

Converge traces its online roots back to May 1999, when NECX and Sumitomo Corp. of Japan formed a joint venture to set up an open market exchange for the purchase and sale of electronic components. Offline, Converge boasts more than 20 years experience in the electronics industry through its constituent companies. Today, Converge's participants include a who's who of high-tech heavyweights, such as AMD, Canon, Compaq, Gateway, Hitachi, Hewlett-Packard, Solectron and others. Currently Converge claims to have 6,500 trading partners in its offline and online networks, with about 500 buyers and 1,000 suppliers registered for online events.

Bob Kramich, vice president of marketing for Converge, said the company has been listening to its founders and participants to determine what features to add to its marketplace. "Our founders have been instrumental in shaping our auction services," he said, noting that new features added based on participant feedback have included letting users see bid histories online and providing reports to auction originators can see all the events they have initiated and their results.

Kramich said Converge waited until now to officially launch the marketplace, even though it has been operating since May, because the company wanted to be able to point to results to date. "We worked out a couple kinks and we're starting to get substantial traction, so we wanted to promote the success that we've had," he said. "We wanted to have some proof-points with the announcement and not just talk about brand now."

The ConvergeTrade marketplace runs on technology from VerticalNet, the one-time darling of the New Economy that has more recently focused on providing the infrastructure to run online markets. AMR Research, the Boston-based technology consulting firm, in February rated Converge the leading high-tech and electronics trading exchange in a survey of top exchanges for industry verticals.

Converge charges a fixed fee for services fee for online self-service transactions; for a brokered transaction, where buyers use Converge to handle the deal, the marketplace charges a markup.

The company plans to release an integrated suite of software within a couple months, incorporating the marketplace component with planning, logistics and order-management modules, according to Kramich.