News Takes A Bath As Buy.com Closes
Sydney Morning Herald
Wednesday November 22, 2000
Mr Rupert Murdoch's patchy record on Internet investments suffered another blow yesterday when Australian online retail site buy.com.au closed its doors, retrenching most of its 40 staff.
The decision to close the business was made by the US-based parent, buy.com Inc, which has recently been experiencing difficulties.
The Nasdaq-listed shares, which peaked at $US35.44 on February 8, are now trading at close to $US1.
Insiders said yesterday that the closure came as a ``complete surprise" to most employees, as it had been thought that the business was on track to reach profitability within the next 12 to 18 months.
Launched with much fanfare in May, buy.com.au was advertising in the print media up until a few days ago.
The US decision was said to be related to tensions among the various shareholders in the local operation over further funding, with the US company needing to spend its money at home.
Buy.com chairman and CEO Mr Greg Hawkins said from California that the decision related to ``a different capital market environment in Australia that was not producing the joint venture funding needed to continue operations, and a strategic decision to allocate US working capital to take advantage of the greater opportunity for the domestic business as it ramps up to profitability".
Buy.com.au was a joint venture between US-based buy.com Inc and eVentures, in turn jointly owned by Mr Murdoch's News Corp and Japan's Softbank Corporation. It sold mainly computer hardware and software and consumer electronics.
Mr Murdoch said this week that ``our plans are to spend even less on Internet activity until someone can discover a profitable business model".
News Corp has lost about $US80 million on its investment in health site WebMD. Its losses on the $450 million investment in the joint venture with Softbank will not be known until the next set of results are released.
Mr Andrew Isles, chief executive of eVentures Australia, said yesterday that ``while the company in our view was doing extremely well on all metrics, the cold reality is that we are part of the global reality of buy.com, and it wanted to focus on the US market".
He said that, in the future, ``it is unlikely that we would be doing more 50/50 joint ventures, particularly of the imported model types", saying that they would now be investing only in businesses they could control.
EVentures radically scaled down its first Internet start-up, online home loan company E-Loan, in September after eight months of trading. The set-up costs of the business, a joint venture with US-based E-Loan Inc, were estimated to be about$10 million.
Mr Isles said eVentures was pressing ahead with its other investments, notably online messaging system Message Media, which will launch in February, as well as looking for other venture capital investment opportunities.
Australia's most successful retailer, Mr Gerry Harvey, yesterday expressed little regret over the demise of yet another competitor, saying it was ``about time".
``It's like all the rest of them they go out there and spend all their money on advertising and infrastructure, and now they've lost a heap of money.
``Why, why, why'? This time last year they were all heroes."
WRONG WAY, GO BACK
Aug '99: Mr Andrew Isles appointed Australian CEO of eVentures, formed by News Corp and Japan's Softbank to take US Web brands to three international markets.
Feb '00: E-Loan opens as first joint venture in Australia.
May: Buy.com opens as second joint venture in Australia.
Sept: E-Loan cut back to skeleton staff.
Nov: Buy.com.au closes, troubled US parent wants to focus solely on its home market.
Feb '01: Message Media due to launch as wholly owned eVentures
© 2000 Sydney Morning Herald