Tuesday Report - May 1, 2001

The weekly newsletter for everyone interested in barter--the world's most versatile business tool!

May 1 , 2001

Excess Inventory Buildup Will Be Around For Several Years

Economists believe that GDP growth will suffer in the months ahead as the technology buildup becomes more pronounced. And there are parallels between today's situation and the real-estate busts of the late 1980s and early 1990s.

Trends are currently unfolding which indicate inventories of everything from computers, routers and fiber-optic networks, to all sorts of internet gear are piling up around the country...with excess amounts reaching $100 billion. (Last year spending on technology equipment reached $677 billion, but is expected to drop 20% this year.)

Expect prices to plummet (computer prices fell by about 40% on an annualized basis in the first quarter of this year...the steepest slide since the Bureau of Labor Statistics began tracking them in 1991) and more barter to be used, as inventories must be moved.

Alsop Says Reality Returning to Venture Capital World

Stewart Alsop, a general partner at Menlo Park (CA) venture firm New Enterprise Associates, says that start-up companies aren't worth what they used to be, and that reality is returning to the marketplace.

According to Alsop it wasn't until January that investors woke up to the cold truth that the heady days (when stock market investors would give multi-billion dollar valuations for new, often profitless, companies) were over.

He points out that so far this year valuations for companies raising their first venture money have fallen about in half. Although it will take some time for entrepreneurs to concede that they're going to have to sell a big stake in their company, in order to raise the money they need...and that learning process is just starting to happen.

The drop in valuations both in public and private markets means the days are over when venture capitalists could give investors a return of 10-times on their money. Returns are expected to fall to historical levels in which venture capitalists quadruple the money they manage.

Advertising In Trade Publications Generates Huge Returns

According to an independent study conducted by Fairfield Research, some 18 million workers regularly made corporate purchases based on seeing an ad run in a trade publication.

Gordon T. Hughes II, President/CEO of American Business Media, said, "This study goes a long way to answer the media buyers' question of, 'What do I get for advertising in trade publications?' We now have a national benchmark of ad-driven sales and can track that for our members just as we track other industry vital signs.

"As well, advertising executives at our members' clients can readily justify their buys with hard figures. Based on this study, their average cost-of-sale is only eight percent." To advertise in the barter industry's only trade publication, BarterNews, see www.barternews.com, click through "Advertising." Closing date for the next available issue is July 15th.

Here And There. . .

Interactive Advertising Bureau reports $8.2 billion online revenue in the U.S. for the year 2000, with barter/trade accounting for 6% of the total revenues. (The percentage increase over the preceding year was markedly lower than historical levels and reflective of the overall slowdown in ad revenue across all media sectors.)
IDC says online customer-acquisition costs will increase from $95 in 2000 to $122 by 2004. The trend driving up the price is the growing competition among e-retailers which will force more spending on marketing to capture customers attention.

(Acquisition cost is calculated by computing a company's total sales and marketing expenses, then dividing by the number of new customers.)
U.S. hotel occupancy rates have dropped significantly during the first quarter; hotel execs now concede that the tide has shifted toward buyers for the first time in many years. Technology-related companies, in particular, have scaled back their travel which is having a ripple effect.

Booking cycles are also showing signs of softening, making it more difficult to determine long-term business forecasts. But hotel companies are optimistic that the third quarter will see strength returning to the market.

(Editor's note: Historically, the first quarter is the slowest time of the year for hoteliers.)
Online operator of auction markets for businesses, FreeMarkets, received notice from the SEC that the warrant granted Visteon (for 1.75 million shares in connection with a service contract signed last year) will be classified as payment for the warrant, rather than payment for services, which therefore lowers the company's income.
Omnicom Group, the parent to three of the world's biggest ad agencies--BBDO Worldwide, DDB Worldwide, and TBWA Worldwide--reported net income fell 34% in the first quarter. (A net of $95.3 million from $143.5 million.) Omnicom also owns a minority interest in one of the major, United States-based corporate barter companies.
Cayman banker John Mathewson, 73, former president of Guardian Bank & Trust in the Cayman Islands, who for years helped Americans hide income from the IRS, recently turned over his records on 1,500 customers the first time the FBI stopped by to chat.

According to Forbes magazine, already 25 of his clients have been nailed. Reportedly, the IRS is making it a national priority to find those who have hidden money in "abusive" trusts...they are determined to disprove the big lie that trust promoters have been telling for years: "The IRS will never know."
The Investment Recovery Association is celebrating its 20th anniversary this year at their May 14-16 conference in Saint Louis. The pro's and con's of the various disposition options available to the investment recovery professional will be covered.

Included will be such topics as internet sales, negotiated sales, sealed bids, consignment sales, auctions, donations, barter arrangements, and scrap sales. The Investment Recovery Association is based in Mission, Kansas. Phone: 913-262-4597.
Global mergers and acquisitions (announced between January 1 and March 30) totaled only $443 billion, down 63% from the record $1.2 trillion in deals for the same period a year earlier, according to figures released by Thomson Financial Securities Data.

Last year nearly 50% of the M&As were concluded without the use of cash, but rather by a pooling of interests--a very dramatic jump from the only 10% non-cash deals in the late '80s during the Milken Junk Bond era.

We welcome your comments, questions, and observations.

? Copyright BarterNews 2003. Redistribution of BarterNews content expressly prohibited without the prior written permission of BarterNews.