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Arrow’s Latest Online Venture – Virtual Chip Exchange, Arrow Electronics

Arrow’s Latest Online Venture – Virtual Chip Exchange, Arrow Electronics – Company Business and Marketing

Heidi Elliott

Arrow Electronics Inc. has taken the next step in its Internet strategy.

The Melville, N.Y.-based company has acquired a minority equity position in Virtual Chip Exchange, a European-based Internet site that sells excess electronic components inventory.

Virtual Chip Exchange (www.virtualchip.com) was launched in November 1998. So far, it has registered 1,100 members to buy and sell excess components, and boasts of having 500,000 part numbers valued at $500 million for sale online. Virtual Chip Exchange estimates monthly revenue of $1 million.

Virtual Chip Exchange was initially formed as a partnership between Consumer Electronic AG, a components trading company, and Mediagrif Interactive Technologies, a Montreal-based developer of e-commerce applications. Arrow did not disclose the amount it has invested in Virtual Chip Exchange.

Virtual Chip Exchange is competing for an estimated $30 billion in excess components inventory in the hands of electronic equipment manufacturers worldwide. The large value of this inventory, which is comprised of millions of different part numbers, is creating an opportunity for a virtual market to bring buyers and sellers together. The exchange also provides market availability for components and pricing information by part-type.

There are many competitors crowding the Internet in hopes of tapping into e-commerce dollars, including Digital Market, QuestLink Technology, Fairmarket, NECX Direct, NetBuy and USBid. They offer a myriad of services such as online component data sheets, cross- referencing, parts-procurement, pricing and inventory availability of electronic components, and the capability to make purchases online.

This is Arrow’s third venture into online component sales, and is part of a multipronged approach to online business that Stephen Kaufman, company chairman and chief executive officer, disclosed in April, after announcing the company’s joint venture with rival Avnet Inc., called ChipCenter LLC.

“The smart money players will place several bets (on the Internet),” Kaufman said shortly after ChipCenter was unveiled. “You can put all your money on one number, or spread it around on groups of numbers.” He indicated Arrow would make more Internet moves by the end of this year.

“We believe that the Internet offers the opportunity to facilitate the disposal of excess inventory that an OEM may have in a faster, more transparent manner than the alternative way-selling it to a broker for ten cents on the dollar,” Kaufman said of the exchange. “The Internet will bring more direct contact between buyers and sellers of this inventory. Many of our customers have asked for our help with this, but we did not want to become brokers. This responds to the imbalance in inventory in their own shops through production spikes. The Internet is a more credible and professional way to do this.”

“With our minority investment, Arrow will be in a position to help influence the growing Internet market for excess inventories to the benefit of customers worldwide,” added Tom Hallam, president of Arrow’s Internet Business Group, “Our customers have told us that they need a professional, credible, quality-controlled worldwide marketplace to resell excess inventories, and we are committed to assuring that Virtual Chip Exchange fills that need.”

COPYRIGHT 1999 Cahners Publishing Company

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