Used-gear vendor shines in tough times

Used-gear vendor shines in tough times

Despite the current spending environment - and because of it - the demand for used networking equipment is strong, according to a US reseller of "de-installed" gear.

While manufacturers of new equipment are recording steep losses and laying off thousands of employees, Somera Communications, a 6-year-old company specialising in used equipment sales and service, just wrapped up a record quarter.

Service providers might be spending less, but that means they're attracted to bargains when they do loosen their purse strings.

"It's a challenging market time, but Somera has thrived and grown smoothly," says Jeff Miller, Somera's executive vice president for sales and marketing. "Due to the abundance of excess equipment, it's a more acceptable, sought-after solution."

Lots of excess networking equipment has hit the market in the past year, due to the collapse of the dot-coms and the competitive local exchange carriers. Somera sells this equipment back into carrier networks and also provides installation, integration and testing.

It's been a lucrative business so far. The company has posted 24 straight quarters of profitability, and record revenue of $US60 million in the second quarter. Somera expects revenue for the year to grow 7 per cent to 10 per cent over 2000.

Somera stocks it own inventory and also picks from a "virtual" inventory of assets owned by carriers and service providers. Somera either acquires this equipment for its own stock or re-markets it jointly with the carrier.

The sales split is usually 60/40 in favor of the carrier under this arrangement, Miller says.

Somera also "redeploys" equipment on behalf of its carrier customers. When Alltel needed to turn up wireless service in a different region, Somera's distribution center in Atlanta collected the carrier's Lucent and Motorola analog cell sites and reconfigured, reinstalled and redeployed them in a different region for a fee.

Since the dot-com and CLEC implosion, however, used equipment has been showing up on online auction sites like eBay with markdowns of as much as 90 per cent. Miller says the impact of this to Somera's business has been immaterial.

"Is there overlapping? Absolutely," he says. "But we understand the technology, we represent the manufacturer warranty and we stand behind the equipment," in addition to providing deployment, integration and testing services.

Has the bad economy been a bottomless bowl of cherries for companies like Somera? No. Somera had its own downsizing in March, cutting 10 per cent of its staff.

But when spending is tight and bargain hunting is in season, Somera bags the big game.

"In many aspects, we are thriving," Miller says.

"We're atypical in the marketplace today and enjoying that."

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