Don’t Settle for Less - Cascade Asset Management · Don’t Settle for Less Understanding Resale...
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Don’t Settle for Less Understanding Resale Values generated from retired IT assets Presented by: Neil Peters-Michaud CEO, Cascade Asset Management October 24, 2007
Transcript of Don’t Settle for Less - Cascade Asset Management · Don’t Settle for Less Understanding Resale...
Don’t Settle for Less
Understanding Resale Values generatedfrom retired IT assets
Presented by: Neil Peters-Michaud
CEO, Cascade Asset Management
October 24, 2007
E-Scrap, Atlanta, October 24, 2007www.cascade-assets.com/e-scrap 2
When it hit me . . .
How can our refurbishedlaptops compete with thisprice for a new laptop?
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Understanding Resale Price Trends
• What the experts have told us
• What our experience tells us
• Can we predict resale values?
• What should we tell companieswho retire IT assets?
• Other Issues & Resources
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They’re worth practically nothing
“Robert Dangelmeyer, a service manager for the DigitalEquipment Corp., said that according to fourcomputer-price databases he had examined,computers tended to lose 80 percent of their market
value in the first year after purchase.Then their worth levels out for a yearor so, he said, before plungingpractically to zero.”
New York Times, March 1998
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Conventional Wisdom
“If stored IT equipment has any resale orrecycling value, it depreciates between 6%and 10% per month.” (November, 2003)
AberdeenGroup is the leading provider offact-based research focused on the globaltechnology-driven value chain.
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Academic Research
Federal Reserve Board
How Fast Do Personal Computers Depreciate?Concepts and New Estimates
May 12, 2004
“Our results show that PCs lose roughly halftheir remaining value, on average, with eachadditional year of use.”
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What does 6% Depreciation Mean?
At 10% per month, an itemwill be worth about 28% ofits present value one yearfrom now.
At 6% per month, an item will be worth50% of its current value in one year.
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In 3 years – there’s nothing left
July, 2006
Expect today’s $500 PC to be worth between $11 - $54 in 3 years
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Is this true for our company?
• Cascade – established in 1999• Customer base
– North American Enterprises– Small and Medium Sized Businesses– Municipal Collections
• Reuse about one-third of collected equipment• Resale Channels: Direct global and national sales,
brokers, eBay, Cascade Marketplace• Rebate Program – we share a percentage of the
actual resale price with our customers
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Desktops and Laptops to Evaluate
• Four Years: Q4, 2003 – Q3, 2007• Good, Working Desktops and Laptops
– Tested to perform to manufacturer specs– Some cosmetic cleaning and repair– No Operation Systems– Predominant Brands, with ~15% White Box desktops
• >53,000 desktops and >8,000 laptops• P3, 450 – 866 MHz• P3, 933 MHz – 1.3 GHz• P4, 1.3 GHz – 2 GHz• P4, 2 GHz and faster
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Resale Value from Desktops
§Desktop resale prices plateau 12 – 18 months (after retirement)
§Average monthly depreciation – 2.0%
Average PC Desktop Resale Values
$-$20$40$60$80
$100$120$140$160$180$200
Q1 200
4
Q2 200
4
Q3 200
4
Q4 200
4
Q1 200
5
Q2 200
5
Q3 200
5
Q4 200
5
Q1 200
6
Q2 200
6
Q3 200
6
Q4 200
6
Q1 200
7
Q2 200
7
Q3 200
7
P3 450-866P3 933-1300P4 1300-1900P4 2000 and Up
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Resale Values from Laptops
§Desktop resale prices plateau 18 - 24 months (after retirement)
§Average monthly depreciation – 2.5%
Average Laptop Resale Prices
$-
$100
$200
$300
$400
$500
$600
Q1 200
4
Q2 200
4
Q3 200
4
Q4 200
4
Q1 200
5
Q2 200
5
Q3 200
5
Q4 200
5
Q1 200
6
Q2 200
6
Q3 200
6
Q4 200
6
Q1 200
7
Q2 200
7
Q3 200
7
P3 450-866 MHzP3 933-1300 MHzP4 1.3 - 1.9 GHzP4 2 GHz +
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Annual Resale Price Drops
Item 1st Year 2nd Year 3rd YearLaptopsP3 450-866 MHz 15% 21% 37%P3 933-1300 MHz 14% 33% 38%P4 1.3 - 1.9 GHz 35% 11% *P4 2 GHz + 27% 30% *
DesktopsP3 450-866 33% 42% -7%P3 933-1300 31% 42% -22%P4 1300-1900 23% 31% *P4 2000 and Up 24% 16% *
Price Drop During Resale Life Cycle
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Price and Quantity TrendsFigure 1: Resale Lifecycle of P4 Desktop PCs (1.6 - 1.8 GHz)
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200
400
600
800
1,000
1,200
1,400
1,600
1,800
Q3 - 2005 Q4 - 2005 Q1 - 2006 Q2 - 2006 Q3 - 2006 Q4 - 2006 Q1 - 2007
Resale Period
Num
ber o
f Uni
ts S
old
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
Res
ale
Pric
e
No. of Units SoldAvg. Resale Price
n = 6,030 desktop computers
§Unit price declines over time
§Number of units of a particular item follows bell curve
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Making Resale Data Useful inForecasting
How can we predict what future values will befor equipment we try to resell?
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Predict Resale Values using Processor SpeedFigure 6: Desktop Processor Speed Effect on Resale Prices
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200
400
600
800
1,000
1,200
1,400
1,600
Q4 -2003
Q1 -2004
Q2 - '04Q3 - '04Q4 - '04 Q1 -2005
Q2 - '05Q3 - '05Q4 - '05 Q1 -2006
Q2 - '06Q3 - '06Q4 - '06 Q1 -2007
Proc
esso
r Spe
ed (M
Hz)
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
Resale Price
Average Processor SpeedAverage Resale Price
n = 53,382 desktop computers
$0.05/MHz
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Predict Resale Values using Processor Speed –not quite for laptopsFigure 7: Laptop Processor Speed Effect on Resale Prices
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200.0
400.0
600.0
800.0
1,000.0
1,200.0
Q4 -2003
Q1 -2004
Q2 - '04Q3 - '04Q4 - '04 Q1 -2005
Q2 - '05Q3 - '05Q4 - '05 Q1 -2006
Q2 - '06Q3 - '06Q4 - '06 Q1 -2007
Proc
esso
r Spe
ed (M
Hz)
$-
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
Res
ale
Pric
e
Average Processor SpeedAverage Resale Price
n = 9,938 laptop computers
$0.14/MHz
to
$0.33/MHz
§Laptop processor speeds up by 266%
§Resale values up 53% over 4 years (but down from peak)
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What’s the line we tell customers?
Knowing what we know– Prices drop over time
– The hype about price drops may be exaggerated
Still want surplus IT assets now –Companies shouldn’t store them ordrag out refresh cycle.
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Consistent Refresh = Predictable Values
Figure 5: Laptop Resale Trends for Enterprise with 3-year Refresh Policy
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200
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600
800
1,000
1,200
1,400
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1,800
2,000
Janu
ary
Februa
ryMarc
hApri
lMay
June Ju
ly
Augus
t
Septem
ber
Octobe
r
Novembe
r
Decembe
r
Avg.
Pro
cess
or S
peed
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
Avg.
Res
ale
Pric
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Avg. Processor Speed (MHz) Avg. Resale Price
Processor Speed Trendline Resale Price Trendline
47 343135 138 14 4141
170 2 69 221 169
boxed numbers = units sold
§The average processor speed resold at Cascade increases
§The average resale price for resold assets is flat
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Consistent refresh = lower ITAM costs
• By retiring equipment on a consistent basis– Reduce storage costs
– Reduce maintenance costs from supporting oldand broken technology
– Reduce compliance costs
– Reduce personal property taxes
• Reduce your costs and keep resale valuesconsistent
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Further Resources & Issues
• Economic Outlook– Global economy’s impact on industry– Decreasing cost of new IT on demand for used IT– Competition and increased supply of used IT
• Fair Market Valuation Tools– Orion Blue Book– Reseller Price Calculators– eBay
• Best Practices to be better than benchmark
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Research and Collaboration Resources
• Original White Paper• Excel data sheets and analysis• Links to research papers
– Resale prices and depreciation– Economic outlook
• Blogs and discussion groups• Links to evaluation tools
www.cascadewww.cascade--assets.com/escrap2007assets.com/escrap2007
