Unlocking value from used gear

By Adam Gifford

The lease term is at an end.

The equipment, which was state of the art two years ago, is just not right for the new applications.

The technology refresh clause is invoked, but what happens to the old gear?

How much residual value leasing companies can extract from used equipment is a key factor in determining how much they must charge at the front end, and therefore how competitive they are.

Jay Howard, Comdisco's regional marketing manager, is blunt. The leasing business is all about securing a flow of second-hand equipment.

"Globally we are set up very successfully to remarket that gear."

That can involve refurbishing the equipment and releasing at a lower cost. It could involve straight sales or auctions.

At the moment, Comdisco's auctions on the North Shore are moving hundreds of older PCs and monitors being pulled out of sites it has won the leasing contract on, such as Telecom and Air New Zealand.

Many of these end up being sold to students or for home users who want something which works for $500 or so.

"We are selling 486s in lots of 30, 40, 50 at a time," Mr Howard said.

"We haven't actively gone out and marketed it as a thin client solution, but integrators are wrapping services around Citrix Winframe, and running it through 486s."

Kate Thomson, of Hewlett Packard, said ex-lease equipment was sent to a remarketing centre in Melbourne.

"That enables us to retain a greater residual position. It is refurbished to an as-new standard and warranted, which allows us to obtain a much higher price," she said.

Equipment which is not snapped up locally is sent to emerging markets such as China.

Rentworks, which at present has 175,000 desktop PCs out on lease, also watches residual value carefully. Often it is a matter of moving equipment such as servers around an enterprise: fit to function.

"We manage the life of an asset, not just the funding, so we are looking for opportunities where the asset can be of use," said operations manager Malcolm Coutts.

Many of the older PCs will end up bundled with servers in a package for schools.
Robin Isaac from Encore Computer Auctions on-sells equipment for IBM Credit and other leasing firms in auctions throughout the lower North Island and the South Island.

Encore ran auctions in Auckland last year but closed them because of "lack of interest from the Auckland public," Mr Isaac said, although they were considering a return.

He said auctions were a good place to pick up gear at a true market price, not just second-hand stuff but new end-of-run PCs, printers and peripherals.

"We don't own the gear so we can't offer any warranty, but we try to check it out and get it up and running.

"We are there representing vendors and making sure they get the best deal, so they will continue to give us surplus stock to sell."