Cypress To Discontinue Participation In Reverse Auctions
Cypress Semiconductor Corp. (NYSE: CY) today announced that it will no longer participate in reverse auctions - the procurement process whereby suppliers bid against one another in real-time over the Internet for procurement contracts. The process is called a “reverse” auction because prices fall over time instead of rising as they do in traditional auctions. Cypress also does not use the practice in awarding contracts for its own vendors.
The reverse-auction process has numerous drawbacks. It does not allow bidders to realize the full value of their solutions, instead focusing solely on the lowest price as a differentiator. It also devalues collaboration between suppliers and customers that is critical to introducing innovative new products.
“A driving force behind Cypress’s new mission to become the leading supplier of programmable solutions is the ability to obtain more value from our intellectual property,” said Christopher Seams, executive vice president of Worldwide Sales and Marketing for Cypress. “In addition, we pride ourselves on the ability to work with the world’s leading OEMs to develop long-term, strategic relationships that benefit both parties. The reverse auction process is not conducive to either of these important outcomes. It is not good for Cypress, our customers, or our shareholders.”
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