Lower prices for new equipment take toll on Comdisco’s refurb unit

Company decides to sell off refurbishing business

Yet another company has fallen victim to sluggish conditions in the market for refurbished medical equipment. The latest firm to exit the market is technology services giant Comdisco, which announced last month that it plans to divest its medical equipment refurbishing business.

Comdisco is looking for a buyer for its Comdisco Medical Exchange refurbishing unit, as well as its mainframe equipment and leasing businesses. With the sale of these divisions, the Rosemont, IL, firm will concentrate its effort on technology infrastructure products. Comdisco’s medical leasing operation, Comdisco Healthcare, will continue to function as part of the company’s overall leasing operation, according to spokesperson Mary Moster.

The move to sell Comdisco Medical Exchange comes after years of difficult conditions in the refurbishing market, caused primarily by falling prices for new equipment, Moster said.

“The reason we’re getting out of the (equipment refurbishing) business is because, with the prices for new equipment coming down as rapidly as they have, the spread between the cost of a new piece of equipment and a piece of used equipment has really narrowed,” she said. “It’s no longer economically feasible for us (to refurbish).”

Comdisco is only the latest firm to sell off its refurbishing operations because of tight market conditions. Over the past three years, companies such as Ziegler Medical Equipment Group and Finova Medical Systems either shut down or sold off refurbishing operations (SCAN 1/22/97 and 7/31/96). Like Comdisco, these firms cited aggressive cost-cutting by OEMs as the primary reason their refurbishing businesses had become economically untenable.

Comdisco’s Wood Dale, IL, refurbishing facility employs 40 workers, who the company anticipates will be transferred to other departments within Comdisco or will find employment with the division’s eventual owner.

“It’s a great facility, but using it just to refurbish our portfolio, we couldn’t achieve the economies of scale that you need in that operation,” Moster said.

The company is in negotiations with potential purchasers of the facility, and expects to close a sale by the end of its third fiscal quarter (end-June). Comdisco anticipates a one-time pretax charge of $150 million to hit in its most recent fiscal quarter (end-March) as a result of the restructuring, with $20 million of that coming from the refurbishing unit. The sale of Comdisco Medical Exchange should have no appreciable effect on Comdisco’s revenues, Moster said.

Comdisco simultaneously announced that it had completed the purchase of New York City-based Prism Communication Services, a provider of high-speed communications services. The two firms are developing managed network services for voice and data networks.