Buying and Selling of Used Computers Can Be Haphazard
As they say, one man’s junk can be another man’s treasure. And just because it’s high-tech equipment we’re talking about, doesn’t mean the adage doesn’t hold true.
Consider, for example, Sang Chen. The Los Angeles college student is trying to sell his 2-month-old IBM Personal System/2 computer. Why is he selling a machine that cost him well over $3,000? He needs a car these days and, besides, he isn’t taking computer courses in school anymore.
Greg Garland, a Beverly Hills small-business owner, is trying to peddle a “brand new, never used” Apple IIc. Why? He acquired the system with accumulated charge card “points,” only to discover that it couldn’t do anything he needs to do. “And to think we could have used our credits for an Hawaiian vacation,” Garland grouses.
Fickle students and grumbling small business owners are hardly the only players in the used computer market. Retailers and brokers claim that their customers include the nation’s 100 largest industrial companies--and even President Reagan’s office, which reportedly bought several secondhand IBM desktop models to handle a recent congressional letter writing campaign.
Although still a disorganized, decentralized and somewhat declasse operation, the used computer business is enjoying heady times.
Fueled by a continuing flow of new technology and increasing confidence among buyers, sales of all types of used computers and their accessories are expected to reach as much as $6 billion this year, according to the National Assn. of Computer Dealers. Of that amount, $1.8 billion will be spent for personal computers, the largest and fastest growing segment of the market.
“It’s a very exciting time for the used computer market because of all the new machines coming to the market,” says David Flaschen, an analyst with Dataquest, a Silicon Valley market research firm. “Industry and individuals are making the transition, and they have to do something with their old machines.”
And that, increasingly, means selling them. Although established resale operations have long been in place for the large mainframe and mini computers, unloading a personal computer is still not an easy proposition for the average individual or small businessman.
Unlike the automobile industry, the personal computer marketplace typically shuns trade-in deals, leaving the would-be seller to negotiate a maze of deal making that typically ends with the seller placing a classified ad in a local newspaper or Pennysaver shopper. Other alternatives include attending one of the many street corner swap meets advertised each month in local newspapers or striking a deal with a family member, co-worker or friend.
Well-Stocked Warehouse
“There’s a huge demand and supply for used computers but there’s no real sales system in place to handle it,” says Fred Brown, a Santa Barbara used high-tech equipment broker. “It’s guerrilla warfare out there.”
One of the combatants is Century Computer, which has a 57,000-square-foot warehouse in Marina del Rey stacked with used minicomputers. Michael Wolf, founder and president of the firm, claims to sell about $2 million worth a month to a variety of businesses in Southern California.
The National Assn. of Computer Dealers estimates that nearly 70% of all used PC sales are handled between individuals. Of the remainder, used equipment retailers handle 6% and brokers about 5.5%. Corporations, unloading their own gear, account for about 16% of the sales, usually to their employees or other companies. A very small percentage of the deals include performance guarantees or warranties, and it’s generally a “buyer beware” market.
Brown is especially critical of the manufacturers who have largely refused to underwrite or even sanction a true trade-in or trade-up program for retailers. Occasionally a maker will offer to accept trade-ins, as IBM did recently. But Brown argues that the deals are so geared to pushing sales of new machines that the value of the older machine is deliberately set below what the market might be willing to pay.
Alex Randall, owner of the Boston Computer Exchange, an equipment brokerage, cites a recent example from the IBM trade-in program in which IBM allowed a credit of about $1,200 towards the purchase of a new PS2 for an older machine Randall said he was selling for at least $3,000. “No wonder there were so few takers,” he observes.
IBM has acknowledged that the trade-in program was not a record breaker. But insiders report that the computer company is considering extending the premium until the end of the year to boost PS2 sales.
Despite its current informality, the used personal computer marketplace may soon get some organization. However, it won’t necessarily be designed to help the individual buyer and seller.
The desk tops of corporate America, which buys millions of personal computers every year, are nearly saturated with these machines. So what happens when corporations are interested in graduating to the latest technology? In the past, they’ve relied on a corporate trickle-down plan: passing the slowest and oldest machines down the ladder to lower-ranking employees.
Now, these corporations are selling their excess personal computers, just as they have sold their outdated mainframes and minis for the last decades in what are typically called “asset conversion programs.” And these corporate deals are typically going to the well-established brokers of the larger computers, a field that includes some of the biggest names in American business, such as Ford Motor Co.’s United States Leasing Co. unit.
The trend has not been lost on Businessland, the nation’s largest retailer of desktop computers to corporations. Brian Leeland, a vice president of the San Jose-based company, said the firm is seriously studying the possibility of entering the used computer market as a means of helping customers unload their unwanted machines.
“It’s inevitable that we’ll get involved,” Leeland says. “It’s just a question of when.”
And with Businessland, can the other computer chains be far behind?
Ross Dove, owner of a San Francisco area auction house specializing in high-tech equipment, says the competition is only beginning to heat up.
“This is a billion-dollar industry with no Merrill Lynch or Coldwell Banker to broker the sales,” Dove says.
Still, Dove doubts that used computer dealers are going follow the path of Century 21 real estate brokers. “I can’t imagine,” he says, “that my future includes running around in a gold coat.”
Boston Computer Exchange:A Short History of Prices
1987 and 1986 prices are final prices of summer.
Machine Oct. 14 1987 1986 Original IBM PC 076 $625 $775 $1,250 $2,270 IBM XT 086 1,075 1,350 1,950 3,170 IBM XT 089 1,300 1,600 * 3,170 IBM AT 099 2,050 2,500 3,490 5,170 IBM AT 239 2,600 2,800 * 5,570 IBM AT 339 2,900 n/a n/a 7,690 IBM PS/2 Model 30 1,575 n/a n/a 2,570 IBM PS/2 Model 50 (20 meg) 2,350 n/a n/a 3,870 IBM PS/2 Model 80 (40 meg) 4,100 n/a n/a 7,270 Compaq Portable I 775 800 1,250 2,199 Compaq Plus (20 meg) 1,100 1,350 2,100 3,399 Compaq Portable II (20 meg) 1,850 1,800 * 3,999 Compaq Portable 286 (20 meg) 2,075 2,325 3,200 5,499 Compaq Deskpro (20 meg) 1,025 1,300 1,775 3,345 Compaq Deskpro 286 (40 meg) 2,575 2,825 2,350 5,499 Compaq Deskpro 386 (60 meg) 4,500 4,525 * 7,299 Macintosh 512 725 825 1,300 2,495 Macintosh Plus 1,100 1,425 1,950 2,199 Macintosh SE 1,950 2,000 * 2,770 Macintosh II (80 meg) 5,250 4,200 * 6,370 Apple IIgs (10 meg) 1,425 800 * 2,399 Apple IIe 675 700 995 1,345 Apple IIc 475 625 950 1,400 Apple Laserwriter Plus 2,600 3,300 3,800 5,299 Apple Imagewriter II 375 n/a n/a 595 Leading Edge Model D 575 n/a n/a 1,495 NEC Multispeed EL 900 n/a n/a 2,495 Zenith 181 1,050 n/a n/a 2,199 Toshiba T3100/10 1,750 2,600 * n/a
*Computer not sold this year. n/a Data not available.
Source: Boston Computer Exchange
