From...

April 22, 1999
Web posted at: 2:37 p.m. EDT (1837 GMT)

by Tom Spring

(IDG) -- In an age in which PCs can't be too fast or have too much memory, why should you buy an ancient Pentium II system? Some buyers who march to a slower beat feel that yesterday's technology does just fine, and are happy with refurbished computers retooled for a second life.

"Most people buy way more computer than what they really need," says Charles Kouyoumjian, vice president of Pre-Owned Electronics of Bedford, Massachusetts.

System savings

Buying refurbished PCs saves cash and takes some of the pain out of the depreciation that occurs within months of buying a new PC. It's also safer than taking your chances buying "as-is" used equipment over the Net or through classified ads.

Refurbished, or remanufactured, PCs are sold by independent companies like Pre-Owned Electronics, ReCompute, and Rumarson Technologies, along with original manufacturers like Hewlett-Packard and IBM. The systems offered aren't always out-of-date relics: Often models are still being sold or have only recently been discontinued.

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Composite computers

Have you ever consider buying a Synera PC? If you thought Synera was some off-brand PC maker, think again. It's the name of a computer made by Packard Bell NEC.

Syneras are assembled from salvaged parts from returned PCs and are sold online at Packard Bell's PC Factory Outlet. A recent offering was a 333-MHz AMD-K6-2 system for $660. It included 64MB of memory, a 10GB hard drive, a CD-ROM, a modem, and a 90-day extendable warranty (but not monitor).

Gateway sells refurbished notebooks and desktop PCs. Compaq offers refurbished PCs online and though its Compaq Works outlet in Houston, Texas. Hewlett-Packard's Internet-based HP Shopping Village sells refurbished Pavilions, printers, and monitors.

Most of what Hewlett-Packard sells as refurbished are return items that can't be sold as new. "We usually are just trying to recoup cost and make a small profit," says Ray Aldrich, Hewlett-Packard spokesperson.

Refurbishing reality

One disadvantage to this approach is that most manufacturers' refurbished stock changes constantly with the ebb and flow of overstock and returns. A system you like in the morning might be gone in the afternoon. Another drawback is that discounts on remanufactured models are sometimes only 10 to 20 percent, compared to used equipment, which sells at 50 to 60 percent of its original cost.

"It's not like buying used," Kouyoumjian says. Computers that are refurbished are taken apart, cleaned, checked for reliability, repaired (if necessary), and reassembled.

Pre-Owned Electronics' largest customers are schools, companies, and government agencies where price is a huge concern and cutting-edge technology is not. The refurbished computers it sells mostly come from major company upgrades or lease returns.

Final days for refurbishing?

Analysts can't agree on the impact that plummeting PC prices, narrowing profit margins, and shorter computer life cycles have had on this market.

According to International Data Corporation, sales of used PCs are expected to grow from 5.5 million in 1997 to 11.2 million in 2002.

But Kevin Knox, an analyst with Stamford, Connecticut-based Gartner Group, says PC prices that have dipped into the nadir will crimp refurbished sales. "Why buy used or refurbished? Reasons to buy [refurbished PCs] shrink every time computer prices dip a little lower."

IDC analyst Christine Arrington counters that as prices drop, vendors of used PCs pay less. And as PC life cycles get shorter, the push to replace systems increases.

Competing sales models

Even so, sub-$500 PC makers like eMachines and upstarts like Microworkz, which bundle PCs with Internet service packages, are sure to take a toll on the secondhand market.

Consider ReCompute's $356 deal for a Dell Optiplex XMT. The PC ships with a Pentium-90 processor and comes with 24MB of memory, a 720MB hard drive, a 8X CD-ROM drive, a 56-kilobits-per-second modem, Windows 95, and a one-year hardware warranty.

Then consider Microworkz $299 Webzter Jr., which is powered by a 300-MHz Cyrix chip and includes Windows 98, 32MB of memory, a 3.2GB hard drive, and a modem (but no floppy drive). The package includes a year of unlimited Internet access and a one-year hardware warranty.

ReCompute's owner Brian Kushner has adopted an "if you can't beat 'em, join 'em" attitude. The company is drifting slowly away from selling remanufactured PCs only. ReCompute is now working with Prodigy Internet to bundle two years of Internet access with a remanufactured PC for $39.95 a month. After two years the PC is yours. A monitor isn't included and systems range from Pentium-90 to Pentium-133 systems, Kushner says.

Driving home the point

Buying a refurbished PC is a lot like buying a year-old car. The previous owner takes the largest hit in the depreciation of value. But unlike the case with used cars, the PC hasn't been dated by wear and tear. Instead, technical advances make the largest impact on a system's worth. When you buy a refurbished PC you may not get the latest software, such as Windows 98, for example.