Cowan Alexander Equipment Group


Year Founded:

1997

Core Business:

Equipment auctions

Revenues in 1997:

$2 million

Revenues 2000:

$22 million

Revenues in 2001:

$40 million (projected)

Employees in 1997:

2

Employees in 2001:

48

Goal:

To be fast and responsive and to provide maximum recovery and personal attention

Driving Force:

Meltdown of dot-com companies that had purchased loads of state-of-the-art technology

aS DOT-COM DREAMS BECOME cHAPTER 11 rEALITIES, LOCAL AUCTION FIRM THRIVES BY QUICKLY LIQUIDATING ALL THE STATE-OF-THE-ART TOOLS AND TOYS

Some might consider it a morbid job, but Adam Alexander loves to do it.

Alexander makes a living auctioning off the assets of dead or dying dot-coms, and business is booming.

While the dot-com meltdown may be old news, the auctioning of dot-com assets has accelerated in recent months, and Woodland Hills-based Cowan Alexander Equipment Group is at the center of the action.

Sales proceeds from auctions it has handled have soared from about $2 million in 1997, the year the company was founded, to $22 million last year. The company is on track to double that amount this year, according to co-founder Alexander.

From those overall sales, the company is paid a commission, usually around 10 percent. Other sources of revenue for the auctioneer include fees for consulting, appraising and inspection services.

With partner and tech company veteran Don Cowan, who works out of Portland, Ore., longtime auctioneer Alexander has liquidated the assets of about 50 dot-coms from around the country in the past year.

There is apparently no rest for the auctioneer. In the next month, Cowan Alexander plans to auction off assets from another 15 or so dot-coms, including locals SpeedyClick. com, Broadband Sports.com and OnAir.com.

Those ventures hit hard times, but their state-of-the-art servers, networking equipment, PCs, laptops and printers are hardly ready for burial.

While most of the dot-com loot originates in San Francisco and its environs, L.A. provides a solid base of buyers.

“L.A. is by far the best market in this country to sell this kind of equipment because of the volume of people looking to buy and start up new businesses,” Alexander said.

An average auction from one of these dead dot-coms generates gross sales proceeds of half a million dollars, according to Alexander.

Cowan Alexander was founded in 1997 to provide “capital recovery solutions” to an array of companies, not just dot-coms. Because the company specializes in tech equipment, it has become an auctioneer of choice for many dot-coms seeking to liquidate.

Going once

Alexander’s quick jaw and auctioneers’ cry he uses the traditional “open-outcry” approach to auctioning lends itself to more than just chips and servers. Cowan Alexander’s auction in early January of memorabilia from now-demolished Three Rivers Stadium in Pittsburgh brought in approximately $1.1 million. Some 12,000 people attended the auction and almost a third of the more than 5,700 registered participants had winning bids, according to Alexander. A Jumbotron television from the stadium’s Headwaters River Pub sold for $15,000. A home plate used while pitchers warmed up in the Pirates bullpen went for $3,100, and the netting from a foul pole sold for $650. The auction helped the stadium’s owners pay the $5.1 million tab for the implosion.

Cowan Alexander can thank a local basketball player for its most well known auction to date. Dunk.net, the Santa Monica dot-com co-founded by Lakers’ center Shaquille O’Neal, had a few too many plasma screens before it had revenue streams. The management put a call into Cowan Alexander to sell off some of its assets.

“They had beautiful offices and only the best furniture and equipment,” Alexander said. “They had flat plasma screens alone that were worth hundreds of thousands of dollars.”

The phones at Cowan Alexander began ringing off the hook from dot-coms and telecommunications and networking startups beginning in February 2000.

Cyclical markets

“When the Nasdaq went down, we sped up,” Alexander said. “All of a sudden, we started seeing the latest and greatest in tech equipment. It was obvious that VCs were just throwing money at these companies, and they expanded quickly. But what goes up must come down.”

The same, he acknowledged, is true for his equipment auction business.

“At some point, it absolutely has to slow down,” he said. “We’re keeping our eye out and planning accordingly. By summer, we’ll see a slowdown. Right now, we’ve hit a plateau, but it’s still very busy.”

According to Peter Gilhuly, an L.A.-based bankruptcy attorney with Latham & Watkins, “we’re only half way through the meltdown.”

“For about six months, it was a melting dot-com a day calling me,” Gilhuly said. “Now, it’s down to one a week. That’s representative of the market.”

Gilhuly said he often acts as a kind of broker between the dot-coms and auctioneers.

“The auctioneer folks are doing a huge business right now,” he said. “They have a very strong sense of the market value for this stuff.”

It’s essential, Gilhuly said, for auctioneers like Cowan Alexander to move quickly.

“They need to work fast or creditors may wonder if they’re getting the most value,” he said.

That may be why Alexander and his staff took one of their first long weekends off in nearly a year last weekend. But Alexander was already on a plane headed for San Francisco last Tuesday.

“I’m always on a plane,” he said.