A textbook definition of irony could be summed up with Telmar Network Technology Inc.’s new location,right next to Broadcom Corp. in the Irvine Spectrum.
Broadcom’s new neighbor may have a hand in the ongoing technology slowdown that has claimed some of the chip maker’s fabled growth.
During the recent tech boom, key Broadcom customer Cisco Systems Inc. churned out networking gear expecting dot-coms and established customers to keep buying as they had. As Internet companies began to close and larger companies slowed their buying, the demand for routers, switches and other devices has dwindled.
Cisco now has a surplus of products, and as a result the company has stopped ordering chips and other products from suppliers,including Broadcom and Newport-based Conexant Systems Inc. Meantime, as dot-coms have folded they’ve turned to the secondary market to unload near-new Cisco gear.
“You can go on eBay and find a router for 30 cents on the dollar,” said Conexant Chief Executive Dwight Decker.
Enter companies such as Telmar, which fixes up and resells networking equipment and is authorized by Cisco to handle its second-hand gear. When a dot-com fails or a large company is looking to sell equipment, Telmar sweeps in, refurbishes it, marks it up and sells it at anywhere from 40% to 70% of the price of new gear.
“It really goes by supply and demand,” said Craig Brechner, director of new markets for Telmar, which moved from another building in Irvine to the Spectrum in January. “Sometimes we’ll pay pennies on the dollar, but it really depends on the market.”
The market for used networking gear isn’t small potatoes, and neither is the effect that companies such as Telmar can have on Cisco, Broadcom and others in the tech downturn. Sales of aftermarket refurbished and resold equipment could reach $1 billion this year, according to Brechner.
“With the slowdown in the economy, a provider of refurbished equipment such as Telmar can help customers save money,” he said. “Sometimes we can even offer new products that were in surplus.”
Sure enough, Telmar plays in a lucrative field. Sales of networking gear to telecommunications service providers is pegged to grow,albeit at a slower clip than 2000,going from $14.2 billion last year to $24.4 billion this year, according to San Jose-based research firm Infonetics Research.
Telmar’s customer list,which includes computer equipment makers, the regional Bells and their rivals,isn’t anything to sneeze at.
As for the company’s new location next to Broadcom, “There’s no correlation,” Brechner said. “There’s no conspiracy theory going on here.” n
