Monday December 13, 3:19 pm Eastern Time
Company Press Release
Egghead.com Financial Analyst/Investor Advisory
Dear Egghead shareholders:
MENLO PARK, Calif.--(BUSINESS WIRE)--Dec. 13, 1999-- With the Egghead/Onsale merger complete, we are about to embark on a series of visits to institutional investors with an update on the new company. I have chosen this unusual format - an open letter to shareholders - so that you will also be informed about the main points in our presentation.
As you may know, the merger was legally completed on Friday, November 19, 1999. What you may not know is that we were able to fully integrate our web sites and related operations over that same weekend, and launched our newly combined site on Monday, November 22. This was a tremendous accomplishment, reflecting the efforts of our staff, who worked through the weekend executing a carefully orchestrated hour-by-hour plan to make this happen at ``Internet speed.'' By Monday morning, former customers of both companies were able to use their existing accounts to place orders; customer service inquiries were consolidated to our new joint customer service facility; and new orders were routed to the appropriate warehouse facilities. Within days, we converted all on-line and off-line advertising to a single message under the Egghead.com brand: ``The Computer Store Inside Your Computer.''
Due to the fact that we merged and changed our name at the same time, some of the common sources of stock and financial information are still sorting out their systems to show correct current and historical data. We are working diligently to identify all places in which misinformation may appear and to get these corrected as soon as possible.
The major uncertainty in the merger process was whether we would realize the expected benefits in increased traffic and sales. I'm happy to report initial success in these areas, as follows.
Immediately following the merger, daily traffic to our merged site rose to meet our expectations for the combined site. We believe this places us among the top retail web sites. For reference, the latest Media Metrix figures available (October, 1999) show that we reached 4.5% of World Wide Web users (combining unduplicated visitors to Egghead.com and Onsale), well ahead of Beyond.com (3.4%), Dell (3.3%), Buy.com (3.2%) Ubid (2.8%), Value America, (1.2%) Microwarehouse (1.0%) and Cyberian Outpost (1.0%)(a).
Much of our product sales are inventoried and handled by third parties. Since the merger, this ``virtual inventory'' category has grown to over 60% of product sales.
Equally important, Media Metrix monthly usage figures for October show that Onsale visitors spent more time at our pre-merger web site - 27 minutes per visitor per month - than at other major retail web sites such as Dell (20 minutes), Ubid (17 minutes), Value America (14 minutes), Amazon.com (13 minutes), Buy.com (12 minutes) Priceline (12 minutes), and Beyond.com (4 minutes)(a).
We believe that visitors spend a large amount of time at our site because we provide the products, information, and services that warrant their ongoing time and attention. For example, we offer a differentiated selection of products. In addition to selling tens of thousands of new technology products, we provide our audience with access to a wide variety of surplus goods not available elsewhere, including computers, consumer electronics, sporting goods, and even excess vacations. We further monetize our traffic with higher-margin non-product revenue, such as online advertising and affiliate partnerships like our co-branded credit card agreement with First USA.
Note that our core audience is the small-to-medium business buyer, and home office customer. This is reflected in the October 1999 Media Metrix World Wide Web Audience Ratings Report for time spent at our site (pre-merger, Onsale) from work (35 minutes) vs. from home (15 minutes) and explains the high spending patterns of our customer base. Pre-merger, Onsale customers making one or more purchases spent an average of $765 in their first year as a customer, with the top 10% averaging $3,950.
Although the quarter is far from complete, it is clear that our revenue growth to date reflects our expectations for the merger. We remain very comfortable with our previously stated investor sales guidance for the fourth quarter. Full financial results of the fourth quarter for the newly merged company will be available in February when we report earnings.
Other post-merger statistics of interest are that our combined database contains 2.7 million people registered to bid or buy, and our combined direct marketing email list has grown to 3.2 million unique addresses.
Our goal going forward is to be the leading business-to-business Internet destination for buying technology products and services. The new Egghead.com is off to a great start, with the traffic, sales, staff, and capital to take a leadership position in our market segment.
Jerry Kaplan CEO, Egghead.com
Note (a): All Media Metrix data from Media Metrix October 1999 World Wide Web Audience Ratings Report.
Egghead.com (Nasdaq:EGGS - news) is a leading Internet retailer of new and surplus computer products, consumer electronics, sporting goods, and vacation packages. Through its auction site - Onsale.com - the company offers bargains on excess and closeout goods and services. Egghead.com combines broad selection, low prices, and excellent service to provide an outstanding online shopping experience for businesses and consumers. Egghead.com is located on the Internet at www.egghead.com.
Egghead.com and Onsale are registered trademarks of Egghead.com, Inc. All other companies and their brand names mentioned are trademarks or registered trademarks of their respective holders.
This press release contains ``forward-looking'' statements, including projections about our business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements that we ``expect'', ``plan'', ``estimate'', ``anticipate'' or ``believe'', are forward-looking statements. These forward-looking statements are based on information available to us at the time of this release and we assume no obligation to update any such forward-looking statements. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations as a result of numerous factors. For example, we may not achieve the expected benefits of the merger, gross margins can fluctuate reflecting the mix of products sold and the mix of non-product revenue, and the figures for web site visitors and visitor minutes can shift rapidly. These and other risks and uncertainties associated with our business are detailed in our most recent Form 10-K and Form 10-Q, which are on file with the SEC and available through www.sec.gov.
Robin Christie, 650/470-2452