CNE celebrated its 20th anniversary in June 2022, a major milestone for a company with a storied past. In this third installment of our 20th anniversary blog series, Founder & Chairman Paul Knight reflects upon CNE’s 20-year history, discussing some of the breakthrough moments that helped define CNE as an IT Lifecycle solutions partner.
Also read part one and part two of our CNE 20th anniversary blog series.
Q: CNE has a reputation of being a market maker for electronic components and systems. Can you tell us about a breakthrough moment for CNE where you helped a customer expand their remarketing opportunity?
A: One of my favorite examples of being a market maker for electronic components was a time we were prospecting a large laptop repair house. The company had a broad inventory of repair part components they no longer needed and were looking to liquidate. The inventory was quite diverse, consisting of processors, memory, hard disks, optical drives, screens, motherboards, keyboards, AC adapters, etc. The company was looking to sell the inventory quickly, but given the range of items and large quantities, they were receiving offers from other firms for just a small fraction of its potential value. Our commodity team reviewed the component material lists, and cross referenced with our market intelligence reports, developing a fair market value evaluation for the customer. However, given the extensive list of materials, we felt that once we were able to fully review and repackage the material in our own warehouses the value could be much higher. It was something we would not know until a full inventory check was completed.
With some unknowns, we presented to the customer two options. The first was an outright purchase model, where CNE would buy the entire lot of component inventory for cash, based upon the limited information provided. The second was a custom model, where CNE would purchase the inventory at a set threshold price, and once the value recovered reached the set threshold, a 30/70 revenue share would be initiated, with 70% of recovered value returned to the customer.
Looking to maximize their return, the customer selected our custom option. Shortly thereafter, CNE took possession of 1100 pallets worth of laptop components that needed a new home. However, instead of flooding the market with inventory, CNE leveraged our business intelligence to manage the market, moving inventory slowly over several years to maintain a fair market price for the components. Flooding, or dumping inventory into the market, would only create an oversupply issue − quickly reducing the average resale value of the computer components and the ultimate return for our customer.
The result was CNE created and maintained a market for the customer where they ultimately recovered 10-times the original projected recovery amount, based upon a straight outright buy offer, and close to 50-times the amount from original competitive offers. The customer was very happy with the outcome and return on their investment.
Q: CNE has also been recognized in the market as a hard drive company. How did that reputation come about and how has that changed?
A: CNE was an early adopter of technology to properly erase data and test hard drives. Our engineering teams were one of the first in the market to deploy technology that could properly recondition a hard drive for reuse. If there was any data discovered on a drive, the software would completely and permanently erase any/all recognizable data so that the drive could be used again without fear of compromising any information. The software was also capable of “repairing” hard drives with bad sectors, removing them from the platter and placing them in a “safe zone” embedded into the platter by the drive manufacturer.
At the time there was only a small handful of companies that were rehabilitating used hard drives and rendering them useful for a second life. In fact, the companies undertaking most of this activity were the original hard drive manufacturers themselves. Seagate, Western Digital, Hitachi, Toshiba, and Fujitsu all had programs in place to test, wipe, and repair hard drives returned from the field. These drives were then classified as “recertified” drives. While it seemed counterintuitive for a hard drive manufacturer to be selling used product into the market, it supported the “reuse vs. recycle” movement and had an immediate positive impact upon their carbon footprint. In time, CNE became an authorized distributor for all the hard disk drive (HDD) manufacturers and sold large quantities of recertified drives to customers around the world.
Simultaneously, we began purchasing hard drive arrays equipped with software that would quickly and completely “wipe” a hard drive, through an “overwrite” process, where a random series of 0’s or 1’s is recorded on every sector of a drive. This technology would dramatically reduce testing and processing time.
We also began working with several large companies who had large quantities of used hard drives that were currently being scrapped (shredded into recyclable materials). When we introduced the new data wiping process to them, whereby their hard drives could be refurbished and resold, they were thrilled. Now these once discarded drives would be reused for years to come, allowing these companies to significantly contribute to their environmental and sustainability goals, while recovering revenue that was multiples what they could previously achieve. CNE was positioned squarely in the center of the global market for refurbished hard drives.
In October of 2011 a hard drive shortage hit, and it hit the market hard. Thailand, the world’s second largest producer of magnetic hard disk drives, was suffering from months of torrential rain and much of the country was experiencing severe flooding. Hard disk drive makers and their suppliers were forced to shut down manufacturing completely. With no end in sight for the flooding, prices for hard drives quickly skyrocketed. For example, the market price on a 160GB, 3.5”, SATA hard drive quickly went from $10 per unit to over $100.
Overnight, companies around the world that previously would not consider utilizing a refurbished drive, were now more than willing to accept them. CNE quickly invested the time, resources, and staff into accommodating the new requests, but was having difficulty keeping up with growing orders. To accommodate demand, we allocated most of our resources to meet the growing hard drive market. This is when CNE temporarily became known as “the hard drive company.”
Today, the magnetic hard disk drive remains one of the top commodities CNE repurposes into the market. However, it is joined by a wide variety of other commodities such as CPUs, GPUs, memory, SSDs, laptops, desktops, networking gear, servers, etc. The marketplace for electronics in need of a second life has matured beautifully. There is still a strong and healthy market for the “latest and greatest” technology, and there always will be. However, the environment and the owners of used technology assets have benefited tremendously from the transformation and acceptance of used equipment that has taken place.
Q: Thank you Paul for sharing these exciting stories for this 20th anniversary blog series. Do you have any final thoughts you would like to share?
A: First, I want to thank the CNE team(s) throughout the years that have made it all possible. It has been fun to reminiscence and share some of the stories that helped define CNE over the last 20-years.
As I ponder what is next for CNE, I do know that the company has grown into something I could not have possibly imagined over 20-years ago − on that fateful Sunday afternoon [when the idea for CNE was first born], watching a rookie quarterback named Tom Brady lead the New England Patriots to a win. It has been a great ride.
Looking forward, I have every intention of being involved in this business 20-years from now. Stay tuned to what happens next as the CNE team continues to introduce innovative and efficient ways to help companies manage their technology lifecycle.
Thank you for joining us for our CNE 20th-Anniversary blog series featuring CNE Founder, Paul Knight.
Read part one and part two of our CNE 20th anniversary blog series.