Used network gear is a growing market

If you're in the market for a Catalyst 6500 switch from Cisco Systems but cannot afford one, you are a potential customer for the...

If you're in the market for a Catalyst 6500 switch from Cisco Systems but cannot afford one, you are a potential customer for the emerging networking resale market.

Santa Barbara-based Network Hardware Resale is one of about 20 companies across the US that resell used or surplus Cisco hardware, as well as networking gear from some Cisco competitors such as Extreme Networks and Juniper Networks.

NHR had a booth at Networld+Interop in Las Vegas this week, right next to one belonging to a competitor, Optimum Data. Other competitors include National Lan Exchange and Recurrent Technologies.

However, the largest number of resales of networking equipment and components are probably conducted over eBay, said Zeus Kerravala, an analyst at Yankee Group.

Business is growing at NHR, which is privately held and reaped $50m in sales in 2003, a number that should grow to US$75m in 2004 and hit $150m by 2007. NHR chief executive officer Chuck Sheldon said customers are attracted by the possibility of buying hardware at prices that are 50% to 90% below original prices.

For example, Cisco's Catalyst 6500 switch might cost $100,000 at NHR, down from perhaps $200,000 at list price, NHR account representative Kyle Jolly said.

One NHR customer, a senior networking engineer at a global telecommunications service provider who asked to be identified only by his first name, Larry, said he has purchased up to $700,000 in used or surplus Cisco gear from NHR in the past two years with no problems.

He bought Catalyst 6509 and 6513 switches to use for customer order processing and similar tasks, and he said he would not hesitate to buy equipment for use in the service provider's network.

Larry said his bosses were "concerned at first" when they heard he was considering buying used gear, but he won reassurances from NHR that persuaded them to authorise the purchases. He estimated he has saved up to 70% over the cost of buying new, and the boxes are used in production "side by side" with new gear for which he paid full price.

NHR estimated that the secondary equipment market is worth about $1bn a year, although Yankee's Kerravala said the number is probably half that.

Matt Hamblen writes for Computerworld

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