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

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June 13, 2000

In this week's report. . .

  • Entrepreneur expanded business using trade dollars
  • Chipmaker turns to barter for increased sales
  • Economist's prediction off the mark
  • Here and there. . .

This Business Owner Turned $24,000 Trade Dollars Into a $120,00 Cash Savings

An industrious Southern California entrepreneur last year used his trade dollars in a most efficient and profitable manner, saving his company $120,000 cash in the process.

He did so by using trade dollars, rather than cash, when he expanded his business to a nearby city. Thereby taking advantage of an option offered on the rental of 2,000 square feet of office space under a 5-year lease.

He could either rent a "shell" (where he'd have to make all the improvements to the facility) at $1.00 per square foot, i.e. $2,000 a month. Or, he could elect to lease fully-improved quarters at $2.00 per square foot for $4,000 a month.

Before a final decision was made he did some homework, acquiring bids/estimates, to see what the cost would be to bring the space up to standard. The amount totaled $24,000.

Not having this chunk of cash on hand, he contemplated the alternative, shouldering the higher monthly rent. But before throwing-in-the-towel, he picked up the phone and called his local trade exchanges (he's a member of two), to see how they could help him. It was one of the best moves he ever made!

Renovation Accomplished Through Trade Exchanges' Assistance

With the help of the exchanges he obtained carpeting, needed partitions, dropped ceilings, reinforced plumbing, and 220 wiring. Then when moving day came around, all the heavy equipment and furniture was relocated through a mover...also on trade.

Through barter, this entrepreneur saved his company $2,000 a month in rent payments over the 60 month lease. Pocketing $120,000 means lower overhead, thus making his company extremely competitive in the marketplace.

And now, through the continual earning of trade dollars, he's advertising his services in the local media; informing the business community of his new location and superb professional services.

Such success stories are being duplicated across the country by other alert business owners...members of trade exchanges. Of course, not to be overlooked is the fact that he took the necessary action to make it all come together.


Astute Barter Strategy Pushes Huge Volume For Chip Designer

Silicon chip designer Rambus licenses a proprietary technology that speeds data transmission between computer chips. Since it doesn't actually produce any silicon, it relies on other companies to use Rambus' technology in their products.

At the outset, Rambus' technology was well received, and the DRAM community was eager to license the company's design. But the firm's revenue model wasn't a runaway success; few chipmakers were willing to pay the 1% to 2% royalties demanded by Rambus.

The company had to get creative.

Three years ago, Rambus devised separate incentive programs to ensure Intel's endorsement and to get DRAM manufacturers to produce chips with Rambus' technology. The program called for Rambus to issue warrants, totaling 1.4 million shares of stock, to its most loyal customers.

In short, Rambus was bartering with large DRAM manufacturers to churn out Rambus-based memory chips.

In an agreement with Intel, Rambus authorized a contingency warrant for 1 million shares of its stock. Whenever Intel ships at least 20% of its chipsets with Rambus' technology in back-to-back quarters, it can exercise that warrant at a slim $10 per share.

At mid-April levels, the deal could net Intel a cool $150 million. That kind of cash has kept Intel focused on incorporating Rambus' design in its chips...much to the DRAM industry's envy.


Noted Economist Was A Bit Off In His Prediction

It's always interesting to read articles, or books, that have been written years ago by noted authorities (something that isn't done enough), because these "seers" often miss their mark. Which means we should question and think about what is being said, rather than totally accepting it "as fact," just because the author is a notable celebrity.

For example, Paul Krugman, noted international economist and a professor of economics at the Massachusetts Institute of Technology, predicted in a 1990 book he wrote (The Age of Diminished Expectations: U.S. Economic Policy in the 1990s) a continual slide for our economy.

He foresaw that by the year 2000, the U.S. would fall behind Europe and Japan to become the third-ranking economic power. There is no need to belabor the point. Krugman, like all of us, projected into the future based on the "current conditions."

But we don't live in a linear world. In fact, the myriad of changes taking place daily, everywhere in our non-linear environment, is what makes this world so interesting...and so unpredictable! It also is something to keep in mind when others are making predictions.


Here And There. . .

  • Coming...more advertising space to barter. The Phillip Morris company is pulling advertising for Marlboro and its other cigarette brands from 42 magazines that have teen-age readership greater than 15%, as measured by independent market-research firms. Last year Phillip Morris, the nation's largest tobacco company, spent $215 million on advertising its products in magazines.

  • Three Canadian trade exchanges (Andrew Fenyes' Tradewins, Robin Maini's Trade Media Services, and Peter Fenton/Paula McCulloch's Corporate Media Trade) have joined the BarterTrust network. The three exchanges have an aggregate 1,500 clients.

  • At the recent MTV Movie Awards, held June 8, Replay TV Inc. didn't hesitate to "barter" $30,000 worth of its $599 digital video-recorders to the 50 celebrities in exchange for valuable publicity. Getting the company's gear into the hands of A-list stars is a proven marketing ploy that gets the word out., in addition to garnering hundreds-of-thousands of dollars worth of valuable "ink"...stories in the national press.

  • Go2Net.com announced that more than one million members have now registered on their free web hosting and e-business services network. In addition, the company has launched a new HyperMart Business Resource Center (www.hypermart.net) featuring small business services with content from more than twenty business partners. The online barter services will be handled by one of its business partners, Ubarter.com.

  • The Casino Journal Publishing Group of Las Vegas has traded 301,500 restricted shares of common stock for a 60% interest in Poker Digest LLC. Casino Journal Publishing Group publishes the monthly Casino Journal, the main trade publication for the casino industry, as well as two weekly newsletters and two daily newsletters. The company also publishes three consumer-oriented gambling magazines: Casino Player, Strictly Slots and the Atlantic City Insider.

  • ITEX Corporation (ITEX: Pink Sheets), a barter company with domestic and international operations, reported net income of $333,000 or $0.03 per share for the sixteen weeks ended November 20, 1999. (The company reported a loss of $2,190,000 for the same period in 1998.) Revenues from operations increased 1.5% from $4,607,000 to $4,679,000.

    The company recently held its annual brokers' convention at XPU-HA, Quintana Roo, Mexico. Focus at this year's convention was on providing new management tools for the independent licensed brokers, as well as the corporate sales and trade directors, which will enable them to more effectively manage their offices.

 

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