Q&A: Nobody beats the used-Cisco wiz

Mike Sheldon is president and CEO of Network Hardware Resale, one of the largest dealers of used Cisco network gear. His outfit sold more than $138 million in products last year in a market that Cisco estimates to be around $200 million to $300 million -- but Sheldon says could be more like a $2 billion-plus market.

Sheldon spoke with Network World Senior Editor Phil Hochmuth about the state of the used-Cisco market, where customers should and shouldn't buy used gear, and why he's Cisco's biggest fan -- even if the feeling isn't mutual. The following is an edited transcript.

Can you describe what you do and the size and state of the Cisco used-equipment market?

We're the largest player in the Cisco secondary market. We did about $138 million in sales last year. We'll grow again about 20% this year. The market is probably in the billions — two-plus billion. There are virtually no public companies in the space, so it's very hard to get a true read on the size. The market also is quite developed in Europe and Asia. It's a very sophisticated and professional market. The products we sell are sourced primarily from Cisco's own customers as well as through a broad network of secondary-market VARs . . . who have connected to buy and sell equipment. We deliver, almost in every case, within 48 hours. Our effective inventory is vastly larger than Cisco's [suppliers, such as Ingram Micro or Tech Data] . . . Our prices are very good. Obviously, that's the headline. In general, our prices are about half what Cisco would charge, sometimes higher, or sometimes lower.

How does Cisco view what you do?

[Cisco] does a decent job painting the authenticity and quality of the product as low. I would say that's simply not the case for companies like Network Hardware that have very large operations. Our facility in Santa Barbara is 80,000 square feet and employs over 100 people who do nothing but receive and inspect and test the equipment. Every piece of gear we touch is physically inspected, which is not true of new equipment. We have rigorous testing methodologies in place to not only ensure it's authentic — that's a given — but also that it functions, and basically looks, as new. So the market is healthy and growing. Cisco's installed base of equipment is probably in the billions of units. But most of that is eventually going to find its way through our market at greatly reduced prices. Unless Cisco were to take it all back, which has its own logistic and economic challenges and which I don't think they would want to undertake. There's no stopping the market.

What about the potential pitfalls of buying used network equipment? Are there risks of ending up with a faulty or even counterfeit product?

There's a lot to be afraid of in any secondary market. We don’t counsel our customers to look at eBay. But NHR and the vast majority of the secondary market has organized itself to not be that . . . to not have that characterization. We provide a great warranty and good equipment that's been tested and they have nothing to worry about.