One man’s asset recovery is another man’s poison.
Like a stylized garage sale, wireless equipment manufacturers are auctioning off excess inventories, which are being shipped to needy markets in the United States and developing countries in Africa, Asia and Latin America.
Industry sources estimate the business to be worth billions of dollars.
Apart from viewing these auctions as opportunities to redeem some investments in equipment and devices, vendors see them as a way of expanding their market horizons by securing new customers around the world once the economy turns the corner.
Many vendors often incorporate losses incurred from excess inventory into charges and write-downs in their quarterly earnings reports and lose between 30 cents to 50 cents on the dollar of the cost to the auction.
“This is a boom time for us,” remarked David Marchick, executive vice president of Bid4Assets, one of the auctioneers contracted by companies to dispose of assets.
The auctions affect both big and small companies, from Cisco Systems Inc. to CommCo. Technology L.L.C. They also help with disposing assets for companies that have given up the ghost, like Metricom.
“Some of the manufacturers sell direct, depending on the complexity of the product. If it’s simple, they sell,” said Reid Krakower, president and chief executive officer of Asset Recovery Corp., which last week said it was planning to auction off some of Murray Hill, N.J.-based Lucent Technologies Inc.’s equipment. Lucent is selling GSM and wireless local loop equipment, electronic switching equipment, installation and transmission equipment, power distribution equipment, towers, cable and cable accessories, data network gear as well as tools and test sets.
Bid4Assets says its main markets are in the United States, and it targets system integrators and networking companies, while ARC sells mainly to developing countries. Krakower said operators and networking companies Auctions grow in popularity for unloading excess equipment
in the developing countries take advantage of the low prices to build out networks and also store equipment in reserve for future use in terms of replacements and buildouts.
Bid4Assets said it has auctioned Cisco’s and FreeCom’s networking equipment, as well as Sun Microsystems’ servers and general routers. It also sells a garden variety of computers.
The ongoing economic thaw is attracting liquidators to the wireless industry, said Marchik, adding that Bid4Assets has only just recently made forays into the industry.
“In a sour economy this is to be expected. But it will not change the dynamics between the vendors and carriers,” said Christine Loredo, senior analyst with Strategis Group.
Metricom announced on its Web site that it is auctioning off its assets. Metricom is disposing its Ricochet’s high-speed wireless access network and all patents.
iBoth Marchik and Krakower expect to enjoy these transactions for the next 12 to 18 months, when companies may embark on a rebound.
ARC, which has been disposing of wireless equipment since 1998, insists that both the auctioneers and the manufacturers see it as positive activity in the long run.
“It helps widen the market opportunities for our customers,” said Krakower.
“Bid4Assets helps telecom and technology companies, like CommCo, determine the best way to examine the return on the sale of their assets by selling quickly and reaching a larger buyer base for their assets,” said Bid4Assets President Jim Russell.
Manufacturers that want to get rid of their wares often contact the auctioneers, although sometimes auctioneers also contact manufacturers if they have hints that they need to shed inventories.
Once both parties have agreed to sell the equipment, the agent puts an advertisement campaign online and in magazines and newspapers, as well as using direct mail and call centers to invite bidders on a specific date. The bidders respond online by registering and follow other procedures, like paying a deposit. Online bidders are required to pay deposits because of a situation on online auction site eBay where some customers did not come through after they won bids.
The offline auctions are carried out in a variety of settings, including hotels, offices, warehouses and company headquarters.
Krakower said the auctioneers do not just put the product on the auction block before examining them.
“We try to get familiar with the assets in terms of the age, technical aspects and quality, and put together a marketing plan as to where it will be used,” said Krakower.
He said that exercise involves a lot of work, which includes ascertaining how the equipment interfaces with the buyers’ system and whether the purchaser understands “what we are selling.”
He said they find out what the buyers have and how it will be deployed “because credibility is very important.”
Marchik said the going commission for the agents is 10 percent of the sale. “Buyers get a very good discount on the equipment,” he said.
Marchik said half of the equipment they sell is new, right from the box.
“We’ve been busy year in, year out with a variety of transactions,” said Krakower.
