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July 2000

Garage opens to e3000 dot-coms

Corporate-level finance program starts with Smith-Gardner sites

The newest HP corporate kickstart for Internet businesses is available to customers using its oldest business computing platform, as the e3000’s marketing manager secured HP Garage Program funding for Smith-Gardner sites.

“HP’s been rolling out some pretty major programs lately, and the 3000 has been excluded,” Christine Martino said. “We’re focusing on Smith-Gardner because that’s where it makes the most sense. They are marketing to Internet startups. For the most part, our other partners aren’t marketing to Internet startups yet.”

Martino added that the first phase of the Garage program, which provides up to $2 million in startup capital with no payments for the first six months, has been focused on Internet startups. “I think it’s going to expand over time — I don’t know when — to include more of what I’d call legacy people who are moving their business to the Internet.”

The Garage program doesn’t require that a third party software firm be part of the deal, but that’s the arrangement the 3000 community must work under in this first step, Martino added. “Smith-Gardner is the one reseller that can take advantage of that,” she said.

Within a few weeks of the announcement, however, Smith-Gardner was telling investors that it is shifting its focus away from dot-com companies and toward more established retailers.

“There’s exposure with the dot-coms,” said Smith-Gardner VP of Marketing Sharon Gardner. “We’re feeling it, and we’re much more conservative when evaluating the funding a dot-com has before we sell a product. Hopefully some of them will survive and flourish, and others may merge together.”

Smith-Gardner had to write off a large sale of its e-commerce application using an HP 3000 in May, when a dot-com business failed. The move was one of several which led to a forecast of the first quarterly loss for Smith-Gardner since the company went public. Its stock price dropped on the news by 32 percent and remained below $4 a share at presstime; it had traded above $10 a share as late as May 1.

CSY officials expect further announcements of e3000 participation in the Garage Program — different terms to be extended to the “click and mortar” customers combining traditional retail with e-commerce — at the HP World conference in September.

HP’s financial exposure in the Garage Program is something all participating divisions must share. “We have to sign up for the risk to be part of this,” Martino said, “but it’s worth it for someone like Smith-Gardner, who can just blow the roof off if they get set up and want to do it.”

Alvina Nishimoto, the division’s Internet R&D program manager, said the Garage Program’s chief benefit is money without payments at first. The cost of the funding is higher than regular HP financing.

“The terms are attractive, but the actual interest rate is a little higher to offset the risk,” she said. Garage Program funds require no money down and payments are deferred for six months. The funds can only be used to finance HP hardware, software and services, not third-party solutions like the Smith-Gardner application. HP financing under regular terms is available for third-party software.

 


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