October 2009

Satellite Communications Equipment

A Second Life for Satellite Communications Equipment

By: Kelly Fitzpatrick

John Lynch likes to stay in the game – even when the economy is playing against him.

That’s why in the last year Lynch, owner of Asset Recovery Center in Milford, Connecticut, decided to trust the words of a good friend and coworker and started investing in the secondary market for satellite communications equipment. And it paid off.

Normally, Asset Recovery Center deals with the buying and resale of computer and regular telecommunications equipment. A recent slump in the economy and the shelf life of most IT equipment has created a perfect storm for this type of business as of late. But that didn’t stop Lynch.

“Well, what happened was you know how the computer industry has slowed down in the secondary market for everybody?” says Lynch. “Well a friend of mine who is very familiar with satellite communications equipment says ‘John, you know you should start selling satellite communications equipment.’

That friend was Sean Fitzgerald, a business associate of Lynch’s for over 20 years. After both left the telephony industry years ago, Fitzgerald branched out into satellite communications equipment and broadcasting on his own. Recently seeing value in remarketing satellite communications equipment he brought the business back full circle and hooked up with Lynch again to set up a satellite communications equipment division at Asset Recovery Center and is now Director of Satellite Gear Purchasing and Distribution.

“He had the opportunity to start getting some satellite communications equipment but wasn’t able to put up the finances for it,” says Lynch. “So I said okay, let’s take a shot and we did it together and it’s worked out wonderful for us.”

They started off their satellite communications equipment venture with buying a teleport last summer.

“A teleport is a facility that houses satellite dishes to send and receive internet, voice data, news channels,” says Lynch. “You know like ESPN, if you were to go to their facility there is a farm of satellite dishes so they can broadcast worldwide.”

Since buying the teleport, Lynch says they’ve doubled their money so far and still have another double to go before they’re done selling off everything. He’s also purchased additional satellite communications equipment from major telephone companies as well.

A main part of why this is becoming such a booming business is because satellite communications equipment has a longer shelf life. According to Lynch, PCs and laptops usually have a shelf life of two to three years, servers have three to five years and Nortel, Sony Ericsson or Alcatel-Lucent might be good for seven to nine years, where satellite communications equipment has a 15 – 20 year shelf life.

But it’s not the U.S. that’s buying most of the satellite communications equipment from Lynch and Fitzgerald.

“There is a huge secondary market in the second and third world countries for satellite communications equipment where it’s more or less the top of the food chain with wireless communications,” says Fitzgerald. “They’re getting away from putting in fiber into these second or third world countries and they’re putting in satellite communications equipment and wireless communications.”

A good way to look at why is an example Lynch brings into the conversation.

“Say you’re in the middle of Indonesia and half the people don’t have telephone lines, they can’t get communications and so they put up a nine-meter dish. They hitch up 50,000 people overnight versus waiting for cell towers and everything else to go up.” They have a need for satellite communications equipment.

Fitzgerald expands on the same point.

“The advantage to satellite communications equipment is if you’re dong a fiber project, to lay fiber is going to take six months to a year,” says Fitzgerald. “You can set up satellite communication links within a couple of days. Once the equipment has arrived you can expand it very quickly. You don’t have to dig up the ground, the infrastructure and have all of those problems. It’s here to stay, so I see the market growing very rapidly.”

Lynch says a lot of these countries don’t have lines directly into their facilities so with satellite communications equipment and microwave equipment they can shoot the last mile so they don’t have to worry about lines but can still install switches and telecom gear into wherever they need to.

Although profitable, with a double satellite communications equipment sale to Indonesia for $100,000 and other similar sales to Australia and Israel among other countries, Lynch says patience and capital are critical if you want to throw your hat into this ring.

“I would say the hardest part about the satellite communications equipment market is that you have to be able to lay out a lot of money and be patient because it takes a long time to sell because people do not buy unless they specifically need it,” says Lynch. “I look at it like this, let’s say I was going to put $200,000 into the bank and I’m going to get two percent, so I’m going to get $4,000 for the year. Well I would rather put $200,000 into a package of satellite communications equipment to purchase because the chances are in a year I’ll probably double my money.”

A lot of the money is used to put the satellite communications equipment into inventory; Lynch says if you’re looking to broker or flip you may as well not play. “And the advantage we have over everybody else is that we stock all of our equipment,” says Fitzgerald. “Whenever I speak to anyone else as far as our customers or potential customers all over the world or people interested in selling their equipment, I tell them there is no middle man, we’re not brokering anything. Anything you buy from Asset Recovery we stock. John has a very large facility up in Connecticut where we test it and then we ship it out.”

Along with the stocking, testing and shipping, a good amount of the cost goes to refurbishing the satellite communications equipment. Take the two antennas Asset Recovery sold to Indonesia. The refurbishment process included cutting the bolts off, putting a whole new bolt kit together to reassemble, power washing the petals, spraying it with the original manufacture’s paint and regalvanizing the post that it sits on. They also hooked up the amplifiers in their lab to test them for a day before shipping.

According to Lynch, when everything was said and done, the refurb alone cost about $25,000. “You always need to lay the money out first prior to getting paid.”

But even though there is a lot going out, Lynch is making more on the return. Where business hasn’t been very good to most in the last year or so, this new facet of Lynch’s business has been very good to him. He’s still very involved with his regular inventory, selling over 300 pieces of equipment last month. And that inventory covers everything from telecom switching to computer gear and whatever is in between. Lynch says he’s looking for the biggest return on his investment, and right now, satellite communications equipment seems to be critical in that strategy.

“We expect to be the biggest used satellite communications equipment dealer by the end of this year, middle of next year in the country,” says Lynch. “Because we’re willing to stock it, take it in and hold it. So we hope to be the biggest used satellite communications equipment dealer in the country — that’s our goal.”

Share