Tracking Market Conditions

The Component Market Is Still Weak & Mid-Term Outlook Could Worsen Before Getting Better

In our initial read of the ITAD sector’s performance in the second quarter of 2024, we first assumed Iron Mountain’s positive quarterly results may have reflected what was happening in the market, in particular in the component sector. Well, that’s not really the case. Instead, other major players in the component space depicted a rather […] Continue reading below.
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In our initial read of the ITAD sector’s performance in the second quarter of 2024, we first assumed Iron Mountain’s positive quarterly results may have reflected what was happening in the market, in particular in the component sector. Well, that’s not really the case. Instead, other major players in the component space depicted a rather challenging environment, likely more reflective of the broad market conditions both for new and used components. In the current environment, the component market will have to undergo adjustments and corrections with the potential for significant challenges in the ITAD sector’s own component business. With major players in the sector reporting year-over-year revenue declines, and weak sequential performances, there is plenty of evidence of a broader industry downturn, that may not necessarily insulate the ITAD’s component business. What concerns me the most, perhaps, is these companies’ strategic focus on inventory management. By that I mean inventory reduction, that would impact pricing and margins. Beyond the mid-term, of course, I am still optimistic that demand will return to normal in the long run.

So for now and for ITAD executives, the implications are clear: As component availability fluctuates due to inventory adjustments pursued by leading companies and sellers of brand-new components, ITAD businesses must figure out ways to respond to this situation and stay agile. For example, and as I have always advocated, ITAD companies must have vertical and segment approaches in their go-to-market strategy, so as to focus more on growth segments and avoid putting too many sales and marketing resources in low-to-no-growth segments. While the overall market remains tough, opportunities exist in leveraging these specific areas of demand to sustain and potentially grow revenue streams. This environment underscores the need for ITAD companies to closely monitor market trends and adapt strategies accordingly. With the right approach, there’s potential to navigate these challenges and emerge stronger.

In the electronics and IT components markets, so critical to the ITAD sector, the second quarter of 2024 experienced difficult conditions. Components are part of a portfolio of products and services that ITAD companies rely on to generate revenues. Parts and components originating from PCs, servers, data centers and other devices and systems are remarketed to feed into a variety of secondary markets, including the warranty sector.  Although the ITAD industry does not rely solely on components, as they also sell complete systems, supplying output into the commodity market and offering premium services such as data erasure, the component business generates a substantial percentage of overall sales for many leading ITADs.. Any negative performance on that market would inevitably affect many ITAD company’s revenue position. So then then question is how is the component market performing?

There have been some early indications of improved performance in the secondary market, largely through the reading of Iron Mountain quarterly earnings results. But this could be a misleading way to analyze the market. Iron Mountain’s results are not likely to be the norm as they could be the consequence of two phenomena. First, the positive results reported by the company are a function of acquiring Regency Technologies and it may be therefore benefiting from a “honeymoon” period. The second is related to the company’s unique go-to-market strategy, where it managed to integrate its ITAD sales with its broad sales efforts, leverage its existing client relationships in its core business of document management, to up-sale ITAD services.  Therefore, the company already has attentive clients who may be willing to give it business due to the trust it has built over the decade. Taking these two factors into account, we should expect Iron Mountain to do well, at least over four consecutive quarters. A better review period for Iron Mountain would start in the fifth quarter after it acquired Regency to account for a full year of operations.

However, a broader analysis of the component market suggests both continued difficulties and a potentially compromised outlook for the secondary market.

Reading the Tea Leaves:

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Analyst/Author: David Daoud | Analyst

David Daoud has researched the mainstream IT hardware market since 1996 and expanded into hardware disposition research in 2003. He has spearheaded the creation of IDC’s GRADE certification. Since then, David has been providing consulting and expert advice to companies looking to establish best practice in their IT equipment decommissioning and helped leading ITAD service providers assess demand, understand competition, and forecast what’s to come. David is currently the Principal Analyst at Compliance Standards, which focuses entirely on the end-of-life of IT equipment. He can be reached at 508-981-6937 or at ddaoud@compliance-standards.com

Analysis: Sage Expands Beyond ITAD, Breaks into the Break-Fix Market

On October 22, 2024, Sage Sustainable Electronics (Sage) issued a press release via Businesswire to announce its acquisition of an electronics repair firm called Relectro. This acquisition is somewhat unique in Sage’s context because Relectro does not operate in Sage’s traditional ITAD space. It offers board-level and post-warranty repair for devices like laptops, tablets, and mobile handsets, which means that it operates in a stage that precedes Sage’s typical involvement. As such, we perceive this acquisition as a pathway for Sage to expand upstream in the ITAM sector.

Ingram Micro’s ITAD Business at a Crossroads: 2025 Could Be a Make-or-Break Year

I was excited to learn that Ingram Micro (IM) filed for an IPO on the last day of September. Becoming a public company would give us better visibility on how the company is performing, even if its ITAD unit is small in comparison to its core business. The IPO filing by Platinum Equity would pave the way for the return of Ingram Micro to the public market after it left it in 2016. In 2021, Platinum Equity acquired it from previous owner, HNA Group, for $7.4 billion.

M&A: Iron Mountain’s ITAD Acquisitions: A Strategic Move or Risky Business?

M&A: Iron Mountain’s ITAD Acquisitions: A Strategic Move or Risky Business?

The recent news stories of Iron Mountain acquiring the Irish firm Wisetek have created a head-scratching moment. As I spoke to a number of executives in the ITAD space, the general reaction has been: Are we seeing another Arrow in the making? However, it would be naïve to believe that the purchase of three ITAD-related entities could in itself spell doom. Iron Mountain certainly has its work cut out in terms of integration, optimization and messaging, but there are plenty of opportunities ahead to properly leverage its three ITAD units.

Lenovo’s Positive AI PC Momentum: Key Considerations for ITADs

Lenovo’s Positive AI PC Momentum: Key Considerations for ITADs

I am impressed with Lenovo’s latest earnings results as it seems to be leading the charge in the AI PC sector, showcasing strong performance. Dell and HP are expected to release their earnings results at the end of the month and we should see whether the Lenovo story is a broad-based market trend or unique to the Chinese company. Lenovo’s latest earnings report highlights strong growth, characterized by a 20% increase in sales, with net income up even more.

Intel & AMD: The Perils of Being Number One and How they will Impact ITAD and Electronic Recycling

Intel & AMD: The Perils of Being Number One and How they will Impact ITAD and Electronic Recycling

In this analysis, we look at two companies that have a major impact on the ITAD sector and its future. The technology that Intel and AMD creates will affect the ITAD sector in numerous ways, including what kind of products will be available for the secondary market and how quickly a refresh cycle takes place. Although Intel has traditionally been the giant in the semiconductor sector, AMD has outperformed it this quarter.

Navigating New Climate Regulations: Impact on ITAD and Strategic Recommendations

With the rapidly deteriorating environment and climate, pressure is mounting on global corporations and even small businesses to address their own environmental posture.  Several regulations, passed or are under consideration, aim at forcing companies to be both transparent and make changes in the way they manage their business to lower climate risk.

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