Used test equipment challenges, opportunities

Sept. 1, 2003

Many test equipment vendors over the past 12–18 months have increased publicity for their trade-in/trade-up programs and refurbished equipment sales, even though some of these programs have been in place for years. While the used test equipment market has always existed in one shape or another, the bursting of the telecoms bubble has led to a glut of used equipment on the market. And for the first time, a significant portion of that equipment features latest-generation technology, which has created both a challenge and an opportunity for today's test vendors.

In the communications arena, the used test equipment market may be as big or even bigger than the new test equipment market, contends Sailaja Tennati, test and measurement industry analyst with Frost & Sullivan (New York City). "I don't have a good sense in terms of dollar amounts," she admits, "but my sense is that it's very large and growing at a moderate pace."

The same is true of the refurbished business units of test vendors. According to a source at NetTest (Utica, NY), refurbished equipment accounted for about 10% of the company's total sales last year. And the folks at Agilent Technologies (Palo Alto, CA) say they have about USD50-100 million worth of refurbished equipment in inventory at any given time.

But is selling refurbished equipment a good business strategy? If Tektronix sells a refurbished optical time domain reflectometer (OTDR), for example, doesn't this cut into sales of its new OTDRs? "In a way, vendors are competing with themselves," admits Tennati, "but this is the market reality. It's better to sell something than to sell nothing at all." The key, she says, is to "change this threat into an opportunity."

Selling refurbished equipment can help broaden a vendors' customer base and even lead to new equipment sales. Test equipment when new is sometimes seen as too expensive in the eyes of smaller companies—particularly those in Asia or developing nations—but is much more affordable on the used test market, enabling test vendors to sell to companies that would not normally buy their equipment. Moreover, when the test vendor comes out with an upgraded product, they are more likely to sell the new equipment to these customers since the customers are now familiar with their products and services. "That's why it's not really shooting yourself in the foot if you're a vendor like Agilent selling used test equipment," surmises Tennati.

The glut of late-generation equipment has also put pressure on prices of new equipment; but again, vendors are trying to be savvy about turning an obstacle into an opportunity by integrating value-added features in new equipment that might not have been available even six months ago. The new equipment is more reliable and scalable, and that's the angle test vendors are pushing. "They're telling customers, 'You might pay more for the new equipment, but you get A, B, C, D, E, and F, and in the older equipment, you only get A, B, and C,'" says Tennati.

Also affecting the market are auction houses, liquidations and foreclosures, and especially the Internet, which is "emerging as the new marketplace for test and measurement equipment," says Tennati. A quick perusal of EBay reveals a plethora of products—everything from Agilent oscilloscopes to NetTest DWDM test platforms to EXFO visual fault locators. An Anritsu MW920A OTDR, for example, can be purchased for about USD2,200, even though the seller writes that the device "comes without manuals or documents. Sold as is. Was told it works fine."

That is one of the hazards of purchasing from an online auction site; prices may be 30–50% discounted, but the quality and readiness of the equipment is sometimes questionable, according to NetTest. "A customer can buy from one of these sales channels, but that doesn't mean he or she is also going to get the sales and support," says a NetTest source.

Of course, sales and support are exactly what the test equipment vendor can provide. "We would be ignorant if we didn't acknowledge that in the modern times of the Internet there are multiple ways to acquire a piece of equipment, including Agilent's," contends Hans Stromereder, channels manager with Agilent's Financial Services Unit (Böblingen, Germany). "What we need to do is provide flexible services via those channels and to those end customers." Agilent has entered into a standing relationship with online auction site Dovebid and has even used eBay to dispose of some of its equipment for which there is little demand. "To some degree, those guys are in competition with our own sales force," admits Stromereder, "but there is also an opportunity and a need to collaborate with them."

In the future, this "co-opetition" may also extend to third-party distributors and resellers for whom the current market has become "a bit tight," reports Tennati. That said, distributors and resellers will continue to play an important role, because they have greater penetration into the smaller local markets than a test vendor does.

The bottom line is that there may be a variety of channels and sources from which the customer can purchase used test equipment, but, adds Tennati, "no one can service the customer better than the test vendor."

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