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VerticalNet agreed in November 1999 to acquire NECX Exchange for $10 million in cash and approximately $95 million in VerticalNet stock, a deal valued at about $105 million. VerticalNet aimed to pair its business-to-business online communities with NECX’s electronics sourcing, distribution and exchange capabilities, making it easier for engineers and purchasing professionals to find and trade components.
What was NECX Exchange?
NECX was an electronics distributor and online exchange focused on semiconductors, computer systems and subassemblies. Its NECX Global Electronics Exchange, launched with Sumitomo Corp. earlier in 1999, enabled anonymous internet transactions and offered human assistance around the clock, six days a week.
NECX reported $350 million in gross revenue and $37 million in gross profit for 1998. VerticalNet’s 1999 description cited 18,000 global trading partners and access to more than three million products. Those figures show that VerticalNet was acquiring an operating business with established trading relationships and distribution expertise, not simply a website.
Why did VerticalNet buy NECX?
VerticalNet’s model centered on online communities organized around business sectors. It wanted to extend that model into advanced technology and communications by adding the ability to source and trade physical products. NECX brought electronics-market knowledge, a trading network and logistics capabilities that could turn community interest and buyer-seller connections into transactions.
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The two businesses addressed overlapping but distinct needs:
| Dimension | VerticalNet | NECX |
|---|---|---|
| Audience | Members of industry-specific business communities | Electronics engineers and procurement professionals |
| Core function | Industry content, community and online lead generation | Component sourcing, brokerage, logistics and exchange operations |
| Scale cited at the time | A portfolio of online communities; the cited announcements do not give a comparable revenue figure | $350 million in 1998 gross revenue and $37 million in gross profit, reported by NECX; 18,000 trading partners and access to more than three million products, cited by VerticalNet in 1999 |
| Monetization emphasis | Community and software-platform economics | Transactions and electronics distribution |
VerticalNet planned to place NECX Exchange within its Advanced Technologies Group. NECX’s market expertise and operational capacity were intended to support transactions across VerticalNet’s communities. The broader late-1990s business-to-business internet strategy was to connect industry information and networking with online commerce.
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NECX president Larry Marshall described the intended result as a “true ‘one stop shop’” for spot and open-market customers. VerticalNet CEO Mark Walsh said the combination was expected to improve liquidity and reduce distribution and procurement costs for the electronics trading community. These were stated goals; the available contemporaneous accounts do not establish whether the integration achieved them.
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How much did VerticalNet pay?
EE Times reported on November 16, 1999, that the agreed consideration was $10 million in cash plus approximately $95 million in VerticalNet stock, or roughly $105 million in total. The companies expected the transaction to close by the end of 1999. The cited report describes the announced deal terms, not a later audited valuation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happened to NECX after the acquisition?
VerticalNet later sold NECX to eHitex, which renamed itself Converge. In December 2000, eHitex announced an agreement to acquire NECX from VerticalNet for $60 million in cash, a 19.9% equity interest in Converge and a board seat for VerticalNet.
At the time of the sale announcement, Converge described NECX as matching buyers and sellers of electronic components and computer systems, with more than $1 billion in annual trading across North America, Asia and Europe. That figure describes NECX’s reported trading volume at that point, not revenue or profit.
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