Fry’s Buys Outpost.com

Fry’s Electronics said Friday it has agreed to buy electronics e-tailerOutpost.com (Nasdaq: COOL) in a deal that includes an immediate US$13million loan.

The all-cash deal values Outpost shares at 25 cents each, for a total of about $8 million. Including the cash loan, the deal is worth about $21 million.

Sunnyvale, California-based Fry’s said the agreement will take effect assoon as a loan made to Outpost by would-be merger partner PC Connection isrepaid. That payback is expected to take place Tuesday.

According to Forrester Research analyst Christopher Kelley, Fry’s goal inmaking the deal is gaining access to Outpost’s customer database, as was the case in Fry’s recent agreement to acquire the now-bankrupt Egghead.com.

Names in the Game

“This shows the power and value of customer information,” Kelley told theE-Commerce Times. “Yes, they get the technology and the expertise of thepeople already working there. But what they’re really after, especially ina slow economy, is the customer dollars.”

Fry’s standing bid for Egghead includes a provision that if a certain number of customers opt out of having their data transferred to Fry’s control, the deal will be called off. A similar clause is likely to be part of the Outpost deal, depending onthe details of Outpost’s Internet privacy policy.

Outpost, which was founded in 1995, says it has about 1.4 million customers worldwide and that its site draws 4 million visitors each month.

Closing In

Kent, Connecticut-based Outpost said it will continue to operate independently from Fry’s after the acquisition closes in the fourthquarter. Outpost chief executive officer Darryl Peck is expected to remain with the company.

For Fry’s, which is privately held, the Outpost pick-up is the second takeover of a pure play e-tailer inas many months. Fry’s $10 million agreement to buy the assets of now-bankrupt software pure playEgghead.com was signed in August and now awaits bankruptcy court clearance.

Privacy Frontier

When it comes to the transfer of online customer data, several Web sites have faced fire from privacy advocates and federal regulators.

Privacy concerns made news early on during the e-commerce shakeout, as thecustomer lists of Toysmart.com andother e-tailers became the focus of court battles. Since then, most onlineretailers have refined their privacy policies regarding the transfer of e-shopper data.

“It really raises some interesting privacy issues,” Kelley said. “And iftoo many customers say they don’t want their information handed over, thatcasts doubt on the value of the deal.”

Late Entry

Fry’s revealed last week that it had joined the bidding for the strugglingOutpost, which has been facing declining sales and a shrinking supply ofcash.

The announcement came days after Outpost and PC Connection revealedthat their merger plans had hit a snag. PC Connection said it would notwaive a condition of the agreement requiring that Outpost meet a minimumvalue level.

The PC Connection takeover would have been worth as much as $25 million,according to documents filed with the U.S. Securities and Exchange Commission (SEC).

5 Comments

  • I personally think that Cyberian’s decision to sell to a private company is just another poor choice for the stockholders. Would I prefer bankruptcy? Yes! Let Cyberian officers lose money with the rest of us.

    • Ditto to Ex-Californian…

      As an ex-Fry’s customer from L.A., I AM permanently boycotting the store. They have the worst service I have ever experienced in my many, many years of shopping. The result of my boycott alone – has cost them close to five thousand dollars in potential revenue (and that was only a one-visit purchase that went to Creative Computers instead). They were harshly written-up as a result of this scenario – but none of that matters. They will continue to not care.

  • Aha! That explains my awful experience ordering hardware through outpost.com.

    Frys is well known for lacking in customer service skills. When I placed an order the first week of September, I was told everything on my list was in stock. It wasn’t. I tried to change my order after they changed the availability, and I was instructed to just refuse the package. Well, the package was left at the front door without a signature! I was instructed to pay for a pick-up and return.

    Then the monitor arrived, and the styrofoam packing INSIDE the box was broken in pieces and had been taped together. The monitor did not work. I was told it was not returnable and I had to send it to Sony for repair. After talking to customer service (a manager was never available) for 2 days I finally got permission to return it. A Customer Service rep actually told me that it’s not fair that they have to take it back because it’s broken! Unbelievable!!

    SHOP LOCALLY. IT’S NOT WORTH GETTING THE RUNAROUND FOR 6 WEEKS!!

  • Fry’s bought a dud. They have a declining customer base because they don’t deliver. I ordered a Handspring visor 3 weeks ago, still don’t have it yet they say 1 to 2 days on the web. Now that I know they have money problems I can figure it out. Handspring probably won’t ship to them! I won’t order there again.

  • Fry’s, with some of the worst customer service in the high tech industry, acquiring Outpost, with some of the very best customer service?!? Let’s hope this isn’t a case of falling to the lowest common denominator. What really made Outpost stand out is that they delivered as promised, with quality, every time.

    Fry’s is a joke in Silicon Valley as an evil you can’t live without – the largest and most diverse source for electronics products and information, but don’t try to get any help there. None of their staff speak English, and the waits are horrendous.

    A running joke is the Fry’s “application form” at http://www.best.com/~braith/frys.htm. (It used to be the only thing you’d find if you searched Web search agents for “Fry’s”.)

    An excerpt:

    [Questions for] Cashiering positions

    1. English is your …

    – Second

    – Third

    – Fourth

    – Next

    …language

    2. You are at a register and the customer’s total is $6.31. The customer hands you a $10.00 bill. You should …

    – Have the customer wait while you call the Federal Reserve to make sure the bill is good

    – Shout, “Check approval please!”

    – Mumble “Customer service…” and stare vacantly into space while waiting for your supervisor

    – All of the above

    3. A customer picks up a can of soda but decides he doesn’t want it while at the register. You:

    – Call Sunnyvale to doublecheck his resale number

    – Call Pepsi to check the expiration date on the soda

    – Refuse to return it because he doesn’t have a receipt

    – All of the above

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