VideoIn fact, there are so many questions to be asked about how to dispose of old equipment that it amounts to its own form of ROI analysis. When it comes to choosing an asset-disposition firm, for example, do you go with a deep-pockets vendor like IBM or choose a smaller and likely more economical local outfit? Should you insist on indemnification against environmental liability? Should you be concerned that the gear might be shipped overseas, where in the absence of strict regulation the equipment winds up an environmental pollutant and occupational hazard? And just how much does the disposing corporation want to spend to destroy drive data? Depending on the methodology, drive destruction can cost from $30 to $80 per unit. Could it be that the best idea is to just park the old gear in a utility closet, putting off the costs and risks of disposal?
Already, the National Safety Council estimates, more than 150 million obsolete PCs are gathering dust in warehouses, storerooms, and closets as they await decisions on disposal. IBM's Ferguson knows of one potential customer who was using an entire floor of a Times Square office building to store old equipment. Marveling at the waste, she observes: "That's expensive real estate." And while storage may make sense if the equipment is still being depreciated — since disposal would require a write-down of the residual asset value — most idle PCs have already been written down. Meanwhile, companies are often responsible for paying state or local property tax on idle assets, she warns.
IBM expanded its asset-recovery offering two years ago, a move that seemed both a natural outgrowth of its end-of-lease Global Asset Recovery Services business and, perhaps, a sign of the times. IBM had already built up a vast refurbishing infrastructure, along with ties to dealers and brokers that could help move old equipment.
With so much old equipment out there, and customers less eager to snap up new gear, the company saw a new opportunity; it expects $50 million in revenue from its asset-recovery program this year. It also plans to take back roughly 300,000 PCs of all makes, a small piece of a fast-growing market. Last year, more than 56 million PCs were disposed of, which is more than were sold.
To date, asset recovery has been a market with many small or regional players but no giant. IBM clearly hopes to change that, with not only its reach but also its breadth of services. Customers typically qualify for one or more of four options. If their equipment retains market value, they can accept a fixed price for the lot or enter into an agreement in which they get 70 percent of any proceeds IBM can generate through either resale of the systems or components and raw materials. If there is no resale value but some modest salvage value, IBM will simply take away the equipment at no cost. If the equipment is pure junk, IBM will charge 26 cents a pound to take it off their hands. Ferguson says the business is currently divided about evenly among the four options.
IBM leverages its size in other ways as well. Its financial muscle allows it to offer indemnification against environmental liability, an issue that companies will have a difficult time grappling with because the EPA itself admits the Superfund law is unclear on this point. (To date, most Superfund sites predate the era of the PC, but Jason Swift of the EPA says that "awareness is rising" within the EPA regarding the problems posed by discarded electronics.) And IBM's ability to collect and dispose of assets on a global basis makes it attractive to multinationals that want to deal with a single service provider.
IBM is not the only major computer vendor to get into the asset-disposition business. Hewlett-Packard also has a network of facilities that can break down old computers into components, and the company emphasizes its environmental friendliness. RenÉe St. Denis, product recycling solutions manager at HP, says that to avoid electronic waste exports, "our goal is to process the material where it is used." HP is also working to reduce the number of plastics used in its computers, because plastics separation is one of the most difficult aspects of computer disposal. But the company does not offer environmental indemnification. HP argues that Superfund laws allow the government to go after anyone involved in the ownership chain of polluting materials. The EPA has initiated enforcement actions against several universities in this regard; the lack of clear precedents makes this a risk-management issue that companies must confront.
Although IBM and HP bring broad capabilities to the emerging asset-disposition business, most other large computer manufacturers have some form of take-back program. In fact, analysts say that companies can often get more for used PCs if they're willing to change vendors, because competing vendors will take the machines at a loss in order to win business.
If all else fails, there's always eBay. In January, the company created ebaybusiness.com, a dedicated site for (mostly) small businesses to buy computers and other equipment. eBay says it sells more than 2,000 computer systems and 15,000 related products on the site every day, and that 60 percent of the computers sold are used, while another 14 percent are refurbished. IBM, HP, Dell, and many other companies use eBay as a channel for overstocked and refurbished gear, but 90 percent of the sellers are small merchants or individuals. Is there room for a broad swath of Corporate America to unload equipment this way?
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