Reprinted with permission from the Santa Barbara News-Press.

High-tech recyclers

Chuck Sheldon's Sure and Steady Approach Turns Network Hardware Resale Into $50 Million Business

business unlimited
By Frank Nelson

Chuck Sheldon, founder, president and chief executive officer of Network Hardware Resale (NHR), believes in doing business the old-fashioned way.

For example, he doesn't agree with hot-shot upstart companies that spend lots of money on flashy houses, cars and "cherry wood conference tables" before they've even made a dollar.

"I have a very conservative philosophy," admits Mr. Sheldon, whose Goleta-based company has carved out a lucrative niche as one of the world's largest buyers and sellers of used Internet network hardware.

"I'm exasperated by all the dot-com bombs and their corporate mismanagement," he said, casting a critical eye over businesses that go from big spending, through IOs and on to bankruptcy without ever earning a buck.

In contrast, Mr. Sheldon believes in profitable consolidation every step of the way. Which explains how he has guided NHR from $325,000 in sales 10 years ago to a forecast close to $50 million this year.

The sure-footed formula also accounts for a steadily increasing staff, which now totals 68 -- all but eight of them in Goleta, the rest occupying an office Mr. Sheldon opened in Amsterdam just five months ago.

NHR specializes in secondhand Cisco Systems equipment, "a good horse to ride," Mr. Sheldon says, because 90 percent of Internet traffic worldwide travels across Cisco hardware.

The company buys and sells routers, switches, access servers and other data network hardware with around 3,000 customers worldwide, many in the U.S. with household names like IBM, General Motors and State Farm.

Though the equipment is "used," about half of it is still unopened in the original boxes. It comes with a regular 90-day warranty, which buyers can extend to one, two, three or five years.

NHR boasts overnight delivery, quality which is as good as new and prices on average half the cost of the equivalent brand-new product.

NHR's success has earned national exposure through Inc. Magazine which for the last three years has ranked the business on its list of America's 500 fastest-growing private companies -- at Nos. 93, 158 and 409.

The latest honor reflects gross sales increasing 582 percent in the five years analyzed for the rankings, from 1997 to 2001. Last year's revenues were $27.6 million so if Mr. Sheldon's forecast holds true, sales will nearly have doubled in 2002.

The business has come a long way since 1986, when Mr. Sheldon launched Strand Computer Resale to sell IBM products out of his house in Hermosa Beach.

He had put in 20 years with Big Blue before opting for a career in local politics, winning a place on the Hermosa Beach City Council in 1987 and going on to serve as mayor from 1991 through 1992.

After that he began cranking up the fledgling venture, switching to used Cisco equipment, hiring part-time technicians, taking his son John into the business and, in 1995, moving to Santa Barbara and changing the name.

Today, the family-owned company, which now includes John as vice president of sales and son Mike as vice president of operations, is continuing to expand -- here and overseas.

Recently the business spilled into another 10,000 square feet of second-floor space in its Castilian Drive headquarters, a move Mr. Sheldon reckons should provide enough room for the next two to three years.

Overseas, Mr. Sheldon weighed the choice between London and Amsterdam as a European base, finally picking the Dutch city. The office opened in July and is already profitable. But despite that sort of stellar performance, he's not rushing to open more offices around the world.

Network Hardware Resale has some excellent clients in Asia, China and Australia -- worth $5 million -- but does all its business via e-mail. "We've never even met those customers," Mr. Sheldon said.

However, he thinks an Asian office could be justified in two to three years, one in Australia perhaps a little sooner.

With the help of three fluent Spanishspeaking staffers, the company also is making inroads into Mexico, Central America and South America.

"We're going to keep growing and we're going to keep making money," Mr. Sheldon said.