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
When it hit me . . .
How can our refurbished
laptops compete with this
price 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 companies
who retire IT assets?
• Other Issues & Resources
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They’re worth practically nothing
“Robert Dangelmeyer, a service manager for the Digital
Equipment Corp., said that according to four computerprice 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 year
or so, he said, before plunging
practically to zero.”
New York Times, March 1998
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Conventional Wisdom
“If stored IT equipment has any resale or
recycling value, it depreciates between 6%
and 10% per month.” (November, 2003)
AberdeenGroup is the leading provider of
fact-based research focused on the global
technology-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 half
their remaining value, on average, with each
additional year of use.”
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What does 6% Depreciation Mean?
At 6% per month, an item will be worth
50% of its current value in one year.
At 10% per month, an item
will be worth about 28% of
its present value one year
from now.
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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 Operating 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
Average PC Desktop Resale Values
P3 450-866
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$-
P3 933-1300
P4 1300-1900
07
3
20
07
Q
2
20
07
Q
1
20
06
Q
4
20
06
Q
3
20
06
Q
2
20
06
Q
1
20
05
Q
4
20
05
Q
3
20
05
Q
2
20
05
Q
1
20
04
Q
4
20
04
Q
Q
3
20
04
20
2
Q
Q
1
20
04
P4 2000 and Up
Desktop resale prices plateau 12 – 18 months (after retirement)
Average monthly depreciation – 2.0%
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Resale Values from Laptops
Average Laptop Resale Prices
$600
$500
P3 450-866 MHz
P3 933-1300 MHz
P4 1.3 - 1.9 GHz
P4 2 GHz +
$400
$300
$200
$100
Q
1
20
04
Q
2
20
04
Q
3
20
04
Q
4
20
04
Q
1
20
05
Q
2
20
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Q
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20
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Q
4
20
05
Q
1
20
06
Q
2
20
06
Q
3
20
06
Q
4
20
06
Q
1
20
07
Q
2
20
07
Q
3
20
07
$-
Laptop resale prices plateau 18 - 24 months (after retirement)
Average monthly depreciation – 2.5%
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Price and Quantity Trends
Figure 1: Resale Lifecycle of P4 Desktop PCs (1.6 - 1.8 GHz)
1,800
$160.00
1,600
$140.00
1,400
$120.00
No. of Units Sold
1,200
$100.00
Avg. Resale Price
1,000
$80.00
800
$60.00
600
Resale Price
Number of Units Sold
n = 6,030 desktop computers
$40.00
400
200
$20.00
-
$Q3 - 2005
Q4 - 2005
Q1 - 2006
Q2 - 2006
Q3 - 2006
Q4 - 2006
Q1 - 2007
Resale Period
Unit price declines over time
Number of units of a particular item follows bell curve
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Making Resale Data Useful in
Forecasting
How can we predict what future values will be
for equipment we try to resell?
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Predict Resale Values using Processor Speed
Figure 6: Desktop Processor Speed Effect on Resale Prices
n = 53,382 desktop computers
1,600
$80.00
1,400
$70.00
Average Processor Speed
Average Resale Price
1,200
$60.00
1,000
$50.00
800
$40.00
600
$30.00
400
$20.00
200
$10.00
-
Resale Price
Processor Speed (MHz)
$0.05/MHz
$Q4 2003
Q1 - Q2 - '04Q3 - '04Q4 - '04 Q1 - Q2 - '05Q3 - '05Q4 - '05 Q1 - Q2 - '06Q3 - '06Q4 - '06 Q1 2004
2005
2006
2007
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Predict Resale Values using Processor Speed –
not quite for laptops
Figure 7: Laptop Processor Speed Effect on Resale Prices
n = 9,938 laptop computers
1,200.0
$300.00
1,000.0
$250.00
800.0
$200.00
600.0
$150.00
$0.14/MHz
Resale Price
Processor Speed (MHz)
Average Processor Speed
Average Resale Price
to
$0.33/MHz
400.0
$100.00
200.0
$50.00
-
$Q4 2003
Q1 - Q2 - '04Q3 - '04Q4 - '04 Q1 - Q2 - '05Q3 - '05Q4 - '05 Q1 - Q2 - '06Q3 - '06Q4 - '06 Q1 2004
2005
2006
2007
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 or
drag out refresh cycle.
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Consistent Refresh = Predictable Values
Figure 5: Laptop Resale Trends for Enterprise with 3-year Refresh Policy
2,000
Avg. Processor Speed (MHz)
Avg. Resale Price
Processor Speed Trendline
Resale Price Trendline
$450
1,800
$400
boxed numbers = units sold
$350
1,400
$300
1,200
$250
1,000
$200
800
$150
600
Avg. Resale Price
Avg. Processor Speed
1,600
$100
400
135
200
138
47
14
343
41
170
2
69
221
169
$50
41
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-
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 old
and broken technology
– Reduce compliance costs
– Reduce personal property taxes
• Reduce your costs and keep resale values
consistent
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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.cascade-assets.com/escrap2007
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