Subscribe to Inc. magazine

Have I Got A (used) Computer For You!

Advertisement

"Used gold mine . . slashing prices . . . move 'em now. . . " Banners at a used-car lot? No, the high-powered hype from a recent brochure put out by a used-computer dealer.

Even in an industry that thrives on rapid innovation, there has been a substantial market for last year's stuff -- at the right price. Three hundred and fifty or so dealers nationwide sell used hardware, serving a clientele that ranges from the federal government to leasing companies to individual end-users. Although some see the trend starting to peak, 1983 sales of used-computer hardware reached $2.5 billion, according to one dealer's estimate, up from $50 million in 1970.

"The trend toward owning rather than leasing equipment has fed the used-computer market," says Svend Hartmann, president of Computer Merchants Inc., a $5-million used-computer dealer in Chappaqua, N.Y. "As capital investment in computers grew, the used market was bound to come into its own." Used computers can cost from 20% to 50% below the original list price, he says, "giving small businesses an alternative to purchasing new and expensive systems."

Digital Equipment Corp.'s 11-70 minicomputer system, for example, listed for about $180,000 seven years ago. You can take it away today for about $45,000. A word processor built by Wang Laboratories Inc., costing about $35,000 three years ago, can be scooped up today for $16, 00. And a powerful IBM 3081 mainframe, currently selling for about $4 million can be bought for 10% off, even if it has been used for less than a year.

Computer Merchants decided to restrict its business to used IBM computers because in Hartmann's words, "IBM is the most desirable brand with customers, and the easiest to sell." This is mostly due to Big Blue's generous support system, whereby its hardware is entitled to IBM maintenance even after it changes hands Since 1970, Computer Merchants has been putting out a quarterly "blue book," The Computer Price Guide, which costs $32 a year and provides the latest information on IBM products available from dealers and other third-party sources. The guide's number of paid subscribers has grown from about 400 when it first appeared to more than 3,500 today.

"I used to tell people, 'I've got a great used computer for you,' and they'd say, 'A used what?" recalls Adolf "Sonny" Monosson, head of American Computer Group Inc., in Boston, and the doyen of the used byte-cruncher business. "It took a while, but people have come to understand that a technological device actually becomes more reliable with age, because the bugs get worked out."

Monosson has been hawking his secondhand hardwares since 1969, and used to appear regularly at the National Computer Conference wearing a sandwich board advertising his business. "I Pay Cash for Your Excess DEC," said one sign. "The demand for my equipment has remained strong because, even though the hardware itself becomes obsolete, some pieces can still run the latest software," he explains.

In fact, Monosson has sold a used model of one of the oldest commercial computers made. Some eight years ago, he sold a large 1960-vintage Univac for $300,000 to the Jet Propulsion Laboratory in Pasadena, Calif.

For the moment, the used-computer industry is thriving. Computer Merchants expects sales to reach $7 million in 1984, and American Computer's sales were about $25 million in 1983, up from $18 million in 1982.

But that prosperity may well prove ephemeral. Monosson the huckster is also a doomsayer, who thinks the wave is cresting. "As the computer industry undergoes further shakeout and compression, you'll see technological developments drive new computer prices lower than used-computer prices," he says, predicting that sales of used computers will soon peak at around $3 billion, then drop precipitously. He plans to shift out of his current business and diversify into such areas as computer-terminal leasing.

Last updated: May 1, 1984




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: