While most cable-equipment vendors are focused on the industry’s inexorable conversion to digital gear, a few companies continue to make good money on the analog side.
Those are the firms who reserve all or part of their business day repairing, refurbishing, reselling or properly disposing of everything from headends to legacy set-tops, so operators of all sizes can continue to service the customers who are just not subscribing to cable’s new wave.
“It’s a very good business for us,” Addvantage Technologies Group CEO Ken Chymiak said. His Oklahoma-based company, in addition to its trade in digital equipment, is an authorized reseller of legacy Scientific-Atlanta Inc. and Motorola Inc. analog gear.
Addvantage reported $33.3 million in sales volume last year — 10% to 15% of which was from analog equipment.
“In every headend in the country, there’s legacy equipment. There’s still VideoCiphers out there that in 1985, people were saying would be gone in 10 years,” said Chymiak, referring to set-tops made by Motorola predecessor General Instrument Corp.
Operators find it’s too expensive to change out a whole line of boxes at once, especially if the field equipment is still functioning properly, he said.
Addvantage’s 130,000 square feet of warehouse space contains equipment dating back to the days of 220-MHz systems.
To improve the bottom line, many operators have cut back on their in-house stock of analog boxes, because they know Addvantage has a ready store of converters that are ready to ship, Chymiak said.
For large orders, the company may even be able to get equipment into the field faster than the original manufacturer, which requires a purchase order and time to build the boxes, he added.
Manufacturers “only have a large number of boxes on hand if somebody made a mistake,” he said.
STARTED IN ’85
Chymiak and his brother, company chairman Dave Chymiak, got into the hardware business in 1985 when they bought bankrupt Tulsat, a home satellite-dish supplier, and adopted that name as a doing-business-as moniker.
Since then, the Chymiaks have survived by “continuing to stay ahead of the curve,” anticipating operators’ equipment needs and taking advantage of changes in the industry.
For example, when S-A downsized a few years ago, Addvantage hired some of the workers for its hardware-repair business.
Chymiak expects revenue for the repair business to surge soon, because equipment installed during the upgrade wave which began five years ago will soon be coming out of warranty.
System-level asset disposition managers are now finding old analog boxes where the HDTV and digital video recorder models need to go. So Chymiak is earning money on both ends of many transactions: charging for the removal of older analog stock while shipping out newer analog or digital boxes.
“You need a lot of volume to make it a sweet business, and it’s getting there,” the executive said.
10 CENTS A BOX
There is even a market for the oldest analog equipment, though not always in this country, other cable-gear brokers said.
Firms like Cable Equipment Locators in Indianaola, Pa., buy some of the oldest equipment in order to refurbish it.
Boxes that once sold new for $100 to $200 — the value of which are now fully depreciated by an operator — are sold to brokers like the Pennsylvania firm for 10 cents to 25 cents apiece, said president Harvey Harris.
His firm then cleans and refurbishes the boxes, selling them overseas for $5 to $10 per unit.
Though the equipment is old, Harris doesn’t see his business slowing down anytime soon.
“Three years down the line, the whole market could be different,” he said, putting a whole generation of “old” digital technology in the resale pipeline.
Even when the equipment is too old to try to resell, there’s money to be made in recycling.
LORDS OF DESTRUCTION
GCI, a 12-year-old company in Chattanooga, serves the hardware-destruction niche. President Michael Bradshaw said GCI is paid to take shipments of dated equipment from the nation’s largest cable operators.
Working with a goal to reduce electronic hardware waste to the nation’s landfills by 30% to 40%, GCI has contracted with San Jose, Calif., firm Fox Electronics to pick cable boxes clean of their nonproprietary recyclable parts.
The boxes are also processed to remove lead-based components that might contaminate the environment.
“There are 100,000 different small circuit boards that can be remarketed” from converters, Bradshaw said.
GCI arranges to pick up the load from the operator (150,000 pounds of goods is an average shipment), has it shipped to Fox and provides the operator with a detailed settlement report, insuring the cable company that the boxes will not return as pirate hardware.
GCI takes its role as guardian seriously.
“We even have an Internet camera so [customers] can watch their shipment coming in and being processed,” Bradshaw said.
The appetite for destruction is growing, “but we can handle just about an unlimited amount,” he said.