Top exec says making a profit from asset disposition got ‘harder and harder’
Arrow Electronics CEO and President Mike Long on Thursday explained the distributor’s decision to scrap its IT asset disposition (ITAD) business, saying the complex matter of reselling old gear and sharing revenue with users, known as “clawback,” became increasingly unprofitable over the past decade.
The Lowdown: Long’s comments came in an earnings call, transcribed by Seeking Alpha, during which the CEO talked about the decline of the “buy to sell” ITAD model, something Arrow had invested in mightily over the past 10 years. Long said the shifting value proposition of ITAD didn’t come as a surprise. “We really did see this coming and put some things into place to help that,” he said.
The Details: “If you remember when we got it, [ITAD] was a business that really benefited customers to get rid of their old assets, and we could refurbish to sell those in other marketplaces,” Long said on the call. “And how it used to work is, there was a profit share program with those customers. What it’s evolved to is customers having a warehouse full of products and wanting one cash check for them.
“Over a 10-year period that we had this business, those retail sort of prices that you would charge for it became readily available on the Internet, so it became harder and harder to make a profit from the buy to sell,” Long added. “It became very clear that this value proposition for the customers was less interesting to them than when it started, and we didn’t see the benefits going forward in our strategy.”
Background: Scrapping the ITAD business, which reports as part of Arrow’s global components arm, will result in a $115 million charge in the second quarter, officials said last month.
Since 2010, Arrow has steadily acquired regional ITAD providers on the way to becoming a top five ITAD provider globally. Arrow’s list of ITAD acquisitions includes Intechra, Redemtech, TechTurn, and Asset Recovery Corp. The acquisition strategy made Arrow a global leader in ITAD service capacity alongside OEMs like HP, IBM, and Dell, as well as specialty ITAD providers like Sims Recycling, Iron Mountain, and ITRenew.