Newegg Going Public This Year

[Matt]

Newegg tech shop sees IPO to fund global expansion

By Doug Young

SHANGHAI (Reuters) - Newegg Inc., an online seller of PCs and computer parts, is aiming for an initial public offering in the next year as it embarks on an aggressive global expansion including a build-up in China, its top executive said on Friday.

The company expects sales across its network to grow 40 percent to $1.4 billion this year, with virtually all of that coming from its home U.S. market, Chief Executive Officer Simon Hsieh told Reuters in a phone interview.

In its first steps onto the global stage, the four-year-old company -- based in City of Industry, Calif., outside Los Angeles -- set up shop in China last year and expects to do a relatively modest 40 million yuan ($4.83 million) in sales there this year, he said.

"At the end of next year, we believe we will expand to Canada, maybe the UK and Japan," he said. "We have very good cash flow, but for expansion to other markets we might need some extra cash funding. That's why we're thinking of an IPO."

He said the company, which has been in the black since its first year, posted a profit of about 1 percent of revenue, or $10 million last year. But the rate is expected to double to 2 percent this year, and grow further still as the company gains economies of scale, he added.

"We have grown the business into a very big size economically, so now...we are getting more marketing power," said Hsieh, a Taiwan native who began his career as an engineer before changing to more entrepreneurial pursuits. "That's why we can grow the margins this year."

Newegg, which fancies itself among a new generation of savvier dot-coms after the initial round of failures after 2000, is positioning itself as a middleman between consumers and major makers of computers and computer parts.

Its list of more than 600 suppliers includes chipmakers Intel Corp. and Advanced Micro Devices, computer makers Acer Inc. and component makers BenQ and ATI Technologies, among others.

The company builds warehouses in the markets it enters and uses those to stockpile goods from suppliers, allowing it to ship usually within 24 hours of receiving an order, Hsieh said. The company now has seven U.S. warehouses, with plans for three more by the end of this year.

Newegg is in the process of building a similar China support network, with one warehouse already in Shanghai and plans for three more in the next year.

All told, the company expects to spend $50 million in the next five years for its China expansion, Hsieh said.

"We believe China will become the second biggest computer market," he said. "We won't hesitate to invest in China because we think this is a good market."

China is already the world's number two computer market after the United States, with 2005 shipments expected to grow 13 percent this year to about 18 million units, according to International Data Corp.

Do-it-yourself computers, also known as gray boxes, are particularly popular in the market due to their low cost and ability to be easily customized.

(Additional reporting by Yanina Zhao in Beijing)

http://today.reuters.com/sponsoredby/Veriz...A-NEWEGG-DC.XML

This should be quite interesting and a good for the people who missed the google IPO.

[Andrew Lyle Global Moderator]

"At the end of next year, we believe we will expand to Canada, maybe the UK and Japan," he said. "We have very good cash flow, but for expansion to other markets we might need some extra cash funding. That's why we're thinking of an IPO."

thank god! bye bye tiger direct, hello Newegg Canadian edition

[antoxicion]

awesome !

[insurektion]

i cant believe i had to be poor for the google ipo. I could hit paydirt.

[quick]

Thats great... Hope nothing changes prices/service wise...

[RootWind]

Nice nice. I wonder how well they will do overseas.

[shihchiun]

Thats great... Hope nothing changes prices/service wise...

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Yeah.

[Gelob]

Man they need to go local...

[Pink Floyd Veteran]

they have wonderful prices but I hate buying computer parts from somewhere not near me. This is just a matter of if the piece isnt good. Pay for piece, pay for mailing, bah, too much troubles

[Matt]

Man they need to go local...

586158978[/snapback]

they wont. store fronts are too expensive atm. plus theres too much competition right now with frys and best buy.

[itsnotabigtruck]

I don't know if this is good or bad. This probably means the prices will go up under pressure from greedy investors.

[quick]

they have wonderful prices but I hate buying computer parts from somewhere not near me.  This is just a matter of if the piece isnt good.  Pay for piece, pay for mailing, bah, too much troubles

586158992[/snapback]

Very true, i try to buy stuff locally that im unsure about, or that i might not want to keep...

Otherwise if its something i know for sure i want, and it is good quality i buy it online provided its not too big (shipping costs) and there is a big enough savings buying it online if its a few dollars difference i will buy it local.

That being said i have bought so much stuff online from there and other places like zipzoomfly.com.

And about them going local, there is no point... it would cost them 100+ times more plus the prices go up. They have to build the store, stock it with inventory, and ship the inventory to each store vs. online stock in central location and buyer pays shipping.

[chmsant]

wooo, to get a hold of some shares of this.... (rushes to evaluate portfolio)

[Matt]

I don't know if this is good or bad. This probably means the prices will go up under pressure from greedy investors.

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that didnt happen with walmart. investors want the prices to stay low and profits high.

[Nexus-]

they have wonderful prices but I hate buying computer parts from somewhere not near me.  This is just a matter of if the piece isnt good.  Pay for piece, pay for mailing, bah, too much troubles

586158992[/snapback]

I find that newegg has cheaper prices after checkout (the original price+the shipping) over local stores like best buy and Fry's Electronics. I find that fry by far rips a hole in the wallet (price in store+tax) compaired to buying online.

[kak]

I'm not to savvy with this kind of stuff. Is there any kind of requirement to be able to buy shares if/when they go public?

[chmsant]

yes there are certian requirements, like knowing high ranked ppl in the business world. Usually the IPO shares are quickly bought up by big companies, which in turn turn around and sell them to smaller companies, and eventually they make their way down to individual investors. (a very simplified version of what happens)

[Toastyone]

(Y) Yay! :p Great news not just the "going public" but the fact that they are moving out of the US to the whole world

[Steven]

Newegg rocks. (Y)

[L3thal Veteran]

Newegg is an awesome company. Hope they are doing the right move here by doing such a thing.

[MEMO.INC]

I hope they start shiping outside the US

[BroChaos Veteran]

i dunno, call me crazy, but i feel a bust. can't really say why, just a feeling.

[Matt]

i dunno, call me crazy, but i feel a bust.  can't really say why, just a feeling.

586160229[/snapback]

care to explain just a little?

[Steven]

i dunno, call me crazy, but i feel a bust.  can't really say why, just a feeling.

586160229[/snapback]

with newegg's strong success in the US I can't see how they would fail by going global. :)

[TruBD]

damn, i had no idea these guys were that big