Navigating the New Normal

Photo Credit: Tate Carlson

As the economy struggles to find its footing, there’s often talk about “the new normal.” What will the housing market, the unemployment rate or the long-term prospects for recovery be like? Mike Meshbesher has seen the new normal in the secondary IT hardware market, and it’s like nothing he’s ever seen.

Meshbesher, who is related to attorney Ron Meshbesher of Meshbesher & Spence, has been running a business in secondary hardware since 1998. C-Tech, which occupies office space just down the road from the Minnesota Vikings’ Winter Park facility in Eden Prairie, buys used computer hardware from broker-dealers and small- to medium-sized businesses that want to unload unnecessary equipment. The company also buys equipment from major manufacturers, such as Dell, IBM and HP, when those manufacturers have inventory they no longer want to sell themselves.

Testers break down the equipment and refurbish it if it can be resold. If the equipment isn’t resellable, instead they salvage the valuable components (such as the logic board or the power supply). Then the company resells the usable equipment and parts to other brokerdealers and businesses who are in the market for it. Anything that can be recycled goes to recyclers in the area.

The company has thousands of customers, most of whom are in the U.S., with a smattering overseas (primarily in Europe). Only about 5 percent of U.S. clients are in Minnesota. C-Tech used to handle a lot more desktops and laptops, but today the company primarily buys and sells Intel-based servers because the margins are better. “We handle thousands of Intel-based HP and Dell servers annually,” Meshbesher says. “Our desktop units and parts comprise about 10 percent of our sales. Meshbesher estimates that C-Tech broke down about 700 desktops for part sales last year.

Meshbesher explains that the company has shrunk right along with the industry. Its revenues in 2002 were $15 million, compared with $3 million last year; it had 55 employees at one time but now is down to 8. The economy has certainly changed the secondary hardware market, but so have Google and eBay. “For most of our customers, price is what dictates their purchases, followed by how quickly they can get it,” he says. And with the advent of Google and eBay, Meshbesher says, customers can sometimes find the parts or equipment they want as easily as C-Tech can.

But the market is also reacting strangely to the economic slowdown, and Meshbesher says he hasn’t seen anything like it. “This market has always been recession-proof before, but that’s not the case now,” he says.

Part of that is because there isn’t as much product out there for C-Tech to get its hands on. Companies are hanging on to their older equipment for longer these days, trying to get a little more use out of it before they invest in new equipment. And if C-Tech can’t find hardware to buy, it can’t sell to customers who are looking for it. Yet the usual laws of supply and demand haven’t been working, either. “Traditionally, when supply is low, prices tend to go higher,” Meshbesher explains. “But prices have remained low.”

Despite the poor economy, C-Tech hums along, giving back to the community in a way that it’s uniquely suited to do: donating refurbished computers to schoolchildren who wouldn’t have them otherwise. C-Tech and the Foundation for Eden Prairie Schools set up a program called Computers for Kids in 2009. The plan was to donate at least 100 systems a year for the next three years to Eden Prairie students, and so far Meshbesher has donated about 50 this year—although he has donated more than 200 over the last several years.

C-Tech also does its part to prevent as much of the equipment it can’t sell from going into landfills as possible. Meshbesher has relationships with local EPA-approved recyclers, who then strip the systems down even further to salvage plastics and metals. Meshbesher passes the unsellable equipment to those recyclers for free instead of charging them. “We could ask for money by weight, but it’s more important to us that our recycling partner guarantees that the materials will not end up in a landfill and that they are properly recycled,” he says.