Tech Company Barters Warrants To Compete In Competitive Marketplace
aggressive marketing practice by Broadcom, an Orange County, California,
manufacturer of communication chips, makes competing with them very
how it works: when Broadcom begins to negotiate with a privately held
company, it urges the company to strike deals with its customers that
offer warrants in exchange for sales commitments over several years.
Broadcom issues warrants--or rights to buy its stock--to the customers
of the nonpublicly held companies that it acquires, as an incentive
to buy the acquired company's products.
Broadcom for example, bought Altima, they also issued warrants to
buy Broadcom to Altima's customers. Under this scenario, a customer
who gets warrants worth, say, $40 to buy $100 of products, records
the cost of goods at $60, not $100.
that same customer is selling those products for $120, then under
this barter arrangement its gross margin is 50%, compared with 17%
if they didn't get the warrants!
customer not only makes a greater profit but has a significant incentive
to meet the purchase agreement to which they've committed. And Broadcom,
by using warrants in this manner, assures itself of ever-expanding
Strikes Fast Acquiring Assets of Ubarter.com Canada
Canadian Trade Exchange Will Have Immediate Impact On Bottomline
goal of being strictly a dot.com company was the impetus for placing
their Canadian off-line barter operations for sale. Within three weeks
of the announcement, ITEX took immediate action to pick a plum--foiling
several notable competitors. A plum because the price for the substantial
operations was well below the going rate for trade exchanges.
According to ITEX the assets acquired included a customer list of
7,000 members (primary and sub accounts) as well as inventories throughout
Canada, along with the physical assets of the Toronto office.
ITEX's game plan includes not only retaining all current employees
in the Toronto office, but increasing the trade brokering staff. The
transaction was for cash and a note, but did not involve any exchange
of ITEX shares (Pink Sheets: ITEX).
fiscal 2000, Ubarter.com Canada had cash revenues of $1,300,000 and
combined trade volume of more than $30 million.
Christensen, CEO of ITEX, excitedly exclaimed, "The completion of
this acquisition represents the execution of another significant step
in our business plan...the increase in our member base will create
significant numbers of new trading opportunities for our current and
future members, while expanding the revenues of the ITEX Corporation."
And There. . .