The two companies, which both recently posted significant quarterly losses, signed a merger agreement valued at about $400- million. They plan to operate the business under the name Egghead.com, with the auction and sale of surplus goods handled under the Onsale.com banner.

The move could have positive implications for Tech Data Corp., which handles the distribution for Onsale, and Ingram Micro Inc., which has a distribution contract with Egghead.

The merger's impact on Tech Data should be positive, said Joel Pitt, analyst at CreditSuisse First Boston Corp., New York. "I can't see how it could disadvantage Tech Data," he said. "What it does is it makes Onsale a bit larger."

Tony Ibarguen, Tech Data's president and chief operating officer, said he expected no major changes in his company's relationship with Onsale. About the deal itself, Ibarguen said, "It should be positive in terms of giving Onsale more scale and more recognition and presence with the Egghead name in the marketplace."

The deal blends two top technology resellers with little overlap to create a clear market leader, said Onsale Chief Executive Jerry Kaplan. "On the Internet, brand and scale matter," he said.

Onsale had extensive conversations with Clearwater, Fla.-based Tech Data before agreeing to merge with Egghead, said Jeff Sheahan, chief operating officer at the Internet reseller.

"We spoke with Tech Data and I personally spoke with Tony [Ibarguen] before announcing the deal," Sheahan said. "Onsale is very pleased with its relationship with Tech Data and plans to continue working with them."

The combined companies said they expect to rank No.1 in traffic among online technology resellers.

They also expect to acquire other companies that complement their existing technology product offerings, Sheahan said.

However, Menlo Park, Calif.-based Onsale has posted eight straight quarterly losses, and Egghead, Vancouver, Wash., has posted nine consecutive losses.

Egghead, once a staple in the brick-and-mortar computer retail market, closed the remainder of its 156 retail sites last year and moved all of its business online. Onsale recently attempted to boost profits with its atCost program, which allowed consumers to buy products at wholesale prices.

Both companies' stocks have lost about two-thirds of their value since last November. They believe their combined strengths in customer service and brand recognition will help the stock regain some of its value, said Egghead.com's Chief Executive George Orban.

Intensified competition and irrational pricing behavior are reasons to expect future consolidation, said Ken Cassar, analyst at New York-based research firm Jupiter Communications.