Let’s say your company recently upgraded a fleet of 450MHz Pentium III desktops to newer, faster processors. What are you going to do with the original chips?
One standard business practice is to slap them into inventory and take a depreciation write-off. This works fine until the auditors ask for a physical count and find that most of the CPUs have mysteriously walked out the door — a common occurrence in businesses, as is hiring a third-party tech firm to do the upgrades and never even wondering where the old processors go. There’s an underlying view in many companies that old desktop hardware is next to worthless, so not a lot of effort goes into tracking, security, or potential resale.
How much of a surprise would it be to find out that a Slot 1 Pentium III/450 is worth upwards of $100 U.S. on the open market — and could in fact be worth more than the new processors you just installed? The same is true for basically any higher-speed (350MHz to 600MHz) Slot 1 Pentium II or III CPU, creating a golden opportunity to make a profit on the upgrade process.
For a single system, selling the old CPU may amount to only a bit of unexpected spending money, but for a firm upgrading 200 or more desktops, we’re talking potentially tens of thousands of dollars — not exactly chump change.
How’s it done? Unless you’ve been living under a rock for the past few years, you’ve heard of the large online auction services such as Amazon, Yahoo, or the largest, eBay — where all manner of goods are bought and sold 24 hours a day, seven days a week. Possibly the most interesting market on eBay is for used hardware, with thousands of items listed on a daily basis and competed for by a huge buying market. (eBay is estimated to have almost 30 million members worldwide).
Historically, previous-generation computer hardware has been very difficult to move, mostly due to the limited market for such equipment. Sure, you could try selling it locally, or even moving larger quantities through a dealer, but the time and effort involved was usually not worth the limited returns. But with online auction houses, buyers and sellers finally have a viable marketplace, where the laws of supply and demand take precedence over standard valuation methods.
How can an “obsolete” processor be worth more than the current prices for new 500MHz to 700MHz Pentium IIIs (or the entire Celeron line), all priced below $100? This price discrepancy reflects the sheer number of older Intel platforms still chugging along, and the incredible demand these buyers exert.
Many Intel ZX, LX, and BX motherboards don’t support the newer P-III Coppermine, and older CPUs are simply not available in the retail channel. So this huge potential upgrade market relies solely on resale channels to fill its needs. Along with being less expensive than buying a new PC, upgrading a CPU is also a “path of least resistance,” where ease of use and potential benefits far outweigh the comparatively high, single-unit price level.
An Offer You Can’t Refuse?
The main areas of online interest tend to be in used processors, motherboards, and memory, since they represent the easiest and most cost-effective upgrades. Add-ons like video or sound cards are more of a buyer’s market, and the last two years’ phenomenal jump in hard disk capacity results in next to no demand for something like a used 10 gigabyte drive. Regardless, a quick search through past auctions can tell you exactly which items are selling, and for how much.
Wherever you find commerce, you’ll find a subsection of society hell-bent on fleecing the unwary, and there are naturally some caveats to taking part in the online auction scene. Most scams take place on the selling side, but be prepared for a few stiffs — bidders who don’t fulfill their end of the bargain or offer excuses along the lines of “the dog ate my homework.” This is nothing that most accounts receivable departments don’t already deal with, of course, and the vast majority of auction buyers pay promptly and courteously for any purchases.
A separate issue is that, while online auctions have grown by leaps and bounds over the years, there are definite signs of growing pains. I’ve heard tons of horror stories involving account management, Draconian auction deletions, and problems with billing; they were all quite amusing, until the day I found myself on the receiving end.
In order to take advantage of automatic credit-card payments, auction sales, or a number of other useful services, you need to supply your credit info. I did just that on eBay, but still had a few questions on invoicing and credit-card updates (my card is coming up for renewal, and I may switch bank plans). So I sent in an inquiry regarding these very simple questions, and received a curt reply that “Your credit card has been removed from your account.” Sure enough, my credit-card info was gone, I was unable to reenter it for a time, and my potential online transactions ground to a halt.
Now I don’t know if this was a misunderstanding, a rogue employee getting his kicks, or the result of routing my e-mail to eBay’s “hire a chicken” outreach program, but it was highly unprofessional at best. If this scenario were played out with a large corporation, the impact would be far worse — for me, it was a minor annoyance, but to a company looking to unload a few hundred processors, it could have amounted to plenty of time and money lost. This isolated incident shouldn’t color your opinion of eBay or other auctioneers, but do understand that online auction houses are usually a bit strained for customer support, and some things just slip through the cracks.
Are you thinking it’s not worth the time and effort to sell off your excess stock? Well, if you plan on assembling a large project team and spending countless hours devising strategies and concocting lavish presentations, it certainly isn’t. Instead, why not just hire a Net-savvy part-time employee or summer intern to handle it with only a modicum of bureaucracy? I know school kids on my block who could take this job and run with it, as long as the corporate mandate was to sell, sell, sell!
Taking losses on older hardware is one of the most troubling aspects of the “new economy,” especially considering the speed at which technology moves. The key to minimizing the downside is to have resale, accounting, and security procedures in effect well before your next major PC replacement or upgrade. Whichever strategy you choose, keep a close eye on excess hardware and have strict tracking procedures, whether the items are in inventory or being worked on by outside consultants — after all, it’s no good counting your chickens only to find that the eggs have wandered off by themselves.
In addition, when negotiating any third-party PC contracts, it’s a good idea to have a grasp of the true market value of the equipment involved in any service contract. Too many times, companies will give old equipment away for free, or make it “part of the deal” in return for a small price break on the contract. In today’s cutthroat environment, there are few firms that can afford to give away a potential revenue source for pennies on the dollar.
Probably the most important point to remember is never to assume that old desktop hardware is worthless, or that there’s no demand for old CPUs, chips, or entire computer systems. Do some quick research online to determine potential resale value, and be wary of taking consultants’ offers on faith. Some of your excess inventory might be a gold mine to potential buyers and an important, overlooked source of revenue to you.
Vince Freeman writes for Hardware Central, an internet.com site where this story first appeared.