Network Hardware Resale Secures $50.5M Investment

Reprinted with permission from the Santa Barbara News-Press.

Frank Nelson, News-Press Staff Writer

December 14, 2005 12:00 AM

In the past 10 years, Goleta-based Network Hardware Resale has grown from sales of $1 million to more than $100 million and expanded from 1,500 square feet of space into 45,000-square-foot digs on Castilian Drive.

With Tuesday's announcement that Washington, D.C., business development company Allied Capital Corp. is investing $50.5 million in NHR, the leading global supplier of preowned networking equipment is poised for even more growth.

"We're at the precipice of some very serious business moves, outside North America and in new products," says company founder and retiring Chief Executive Officer Chuck Sheldon. This partnership, he says, gives NHR some "serious working capital" without any loss of control.

Mr. Sheldon and his sons, Mike and John, have been the driving force behind this family business. Even after the infusion of capital, the Sheldons will own more than 70 percent of the company.

NHR buys and sells routers, switches, access servers and other data network hardware. It has around 10,000 customers worldwide, 4,500 of them in the U.S. The company specializes in secondhand Cisco Systems equipment, a brand used to carry 90 percent of Internet traffic.

The company sells "like-new" equipment -- some still unopened in original boxes -- at a fraction the cost of new product but complete with overnight delivery, extended warranties, and ongoing technical support and services.

NHR has about 100 employees in Goleta, around 40 at its European headquarters in Holland and another half-dozen in New York. By the end of next year, Mr. Sheldon expects to open an office in Singapore.

Mr. Sheldon says another reason for the deal with Allied is that he's retiring and wants to realize some of his equity in the company. He will step down as CEO and become chairman of the board of directors.

Mike Sheldon will take over as chief executive officer while John Sheldon, currently vice president of sales, has been appointed to the board.

The company's remaining management structure is unchanged, though Chuck Sheldon says equity will be made available to senior management and employees, meaning NHR will have multiple stakeholders.

Mr. Sheldon, a believer in what he calls "measured growth," sees a bright future for NHR and predicts that revenue could double to $200 million in another five years.

He says the formula for that kind of success is simple: "You have to deliver what you promise."