IBM Finds New Profit in Recycling Old Computers

IBM Corp. is wringing new profit from old goods by refurbishing leased computers or cannibalizing them for parts when they're turned in. At a hangar-like facility near Raleigh, N.C., truckloads of used personal computers, laptops and servers pour onto conveyor belts and forklifts. The swift, automated process resembles manufacturing in reverse, the aim being to extract value rather than build it in. The refurbished machines and used parts are sold on auction Web sites and to brokers. IBM, the biggest computer maker, wants to extend the income-producing life of its products and increase its lease program's share of total sales. IBM can offer new equipment on more attractive leasing terms because the company will squeeze more value from a device after it's returned, said Joseph Lane, who oversees IBM's leasing and recovery businesses. In 2001, leases increased to 35% of all hardware sales, from 30% at the end of 2000, Armonk, N.Y.-based IBM said. Global Financing's contribution to third-quarter profit rose to 14% in 2001 from 10% a year earlier. The division produced about 4% of IBM's sales in both periods. The recycling business has a wider profit margin than the leasing side. Together, the two businesses had a third-quarter gross profit margin--the percentage of sales left after deducting production costs--of 51%. Pretax income rose to $314 million from $294 million in the year-ago period.