ReCellular Chief Sees Future for Yesterday’s Electronics

1/14/11

Steve Manning saw some of the latest consumer electronics at the 2011 International CES confab in Las Vegas this month, and the CEO of Dexter, MI-based ReCellular was reminded how it takes before Americans who buy such nifty gadgets will want to trade in for new stuff. About 15 months.

“It was amazing, great neat technology displays,” Manning says, “but if you step back from that event, in 15 months, those products that they are announcing will become obsolete because newer technology and features are going to be introduced.”

The effects of Moore’s law have been kind to Manning and his company, however. ReCellular, which collects used mobile phones and refurbishes them for the resale market or recycles them, grew its revenue by about 45 percent in 2010 and rapidly added workers because of increasing domestic and foreign demand for its refurbished devices, says Manning, who joined the firm in May 2009. (The company is private and does not release specific sales and profit figures publicly.)

ReCellular is an important company to know about because of its rapid growth and prospects to boost the Michigan economy. In October, the Farmington Hills, MI-based venture firm Beringea endorsed ReCellular with an undisclosed investment in the company through its Invest Michigan Growth Capital Program. Since the deal was announced, the firm has grown its work force by more than 10 percent, according to Manning.

Founded in 1991 by brothers Charles and Allan Newman, ReCellular has had a knack for capitalizing on major changes in the multibillion-dollar wireless industry. In its early days, when new mobile phones cost several thousand bucks, the firm refurbished phones and leased them to customers. Now phones are much cheaper, making it easy to own them outright, and the time cycles for replacing them are much shorter. For instance, Americans’ rush to buy newer smartphones such as the iPhone has provided a surplus of older-model handhelds for ReCellular to refurbish and sell, Manning says.

ReCellular is now the largest cell phone refurbishing and recycling firm in the country. It processes between 400,000 and 500,000 phones per month. About three quarters of the phones are refurbished for the resale market, while the devices that are beyond repair are pulled apart. The plastic parts are recycled and the valuable materials, like gold from circuit boards and copper from battery chargers, are sold.

The firm makes profits on its resale business but, even after cashing in the gold and other precious metals, the recycling operates at a loss, Manning says. Yet that is part of the game. A reason for people to send their phones to the company is to keep the devices out of landfills, where plastic pieces can leach gas and other toxic materials from the phones can pollute the environment.

Despite the company’s rapid growth, Manning says that it is just scratching the surface of the global supply of used cell phones. He estimates that Americans alone have roughly 700 million to 1 billion old phones stashed in drawers and closets. A part of the company’s strategy is to give people good reasons to recycle those used phones. ReCellular receives many of its phones from charities that get people to donate their cell phones to support specific causes.

The company is now searching for ways to increase its ability to collect phones in overseas markets, in part because about 60 percent of the phones it sells today go to customers in foreign countries. In Europe, Manning says, most of phones are made with the same technology that is required for the devices to operate in other foreign markets. Many phones sold in the U.S., however, are not built with that same technology, the CEO says.

ReCellular might expand its operations in places such as Europe through acquisition, Manning says. (The firm already has a facility just outside Hong Kong to help manage its global supply chain.) There’s also an opportunity for consolidation in the U.S. market, given that there are lots of small players in the industry here. The CEO didn’t discuss any specific plans for acquisitions, yet it’s something to watch at the firm.

The company has added some 30 employees since it announced its deal with Beringea in October, bringing its work force to about 310 people, according to Manning. Another piece of good news is that the CEO expects to match or improve the level of revenue growth the firm had last year. Manning says that the company is also interested in increasing its business through markets for gaming devices, tablet computers, and netbooks. Which means a whole bunch more 15-month-old devices could someday show up on ReCellular’s doorstep.

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