Article Excerpt:
TWST: We'd like to begin with a brief historical sketch of QSGI and a picture of the things you're doing at the present time.Mr. Grossman: The company established its roots in the remarketing of IT assets for corporations. That has always been the company's roots, and involved with that was servicing the client in any way possible in order to allow for an orderly and proper disposition and remarketing of their IT assets so that they can receive a significant return on their investment ' in other words, recouping value for assets that otherwise would not have received value on the back end. We've been in the trading and remarketing of IT assets and parts either with this company or previous enterprises for the last 20 years. The management team has been with other entities that they have built into a roughly $150 million organization. They actually started out founding QSGI a few years back to not only help corporations with remarketing, but also to capitalize on the current need for companies to deploy proper data security and regulatory compliance for the disposition of their assets. When they're upgrading to a new IT platform including desktops, laptops, servers, and even mainframe enterprise hardware and mainframe peripherals, there is a need not only to recoup the value, but also to ensure that there is security with respect to data on those assets. Not only does it make good business sense to ensure that there is proper data security and that the information is properly and thoroughly erased before you remarket these assets, but also, it's just good business sense. You don't want to put out any of your R&D, customer lists, marketing proposals, financials or inside records ' that should stay private. In fact, not only does it make good business sense, but also the federal and state governments are telling you that you should do it. Over the last few years, there has been a spate of regulations requiring that the data be erased to protect you (the company), your employees, and customers. There are regulations such as Gramm-Leach-Bliley and the HIPAA Act, which protect your medical and benefits records, as well as the FACT act. Even Sarbanes-Oxley touches upon proper disposition and tracking of assets from cradle to grave. So there is an upped need and requirement for corporations to dispose their assets. Now there has to be someone who steps in not only to fill those needs in an accessible and easy manner, but solves their headache in a cost effective manner so that the CIO or the IT Manager within a company can get on with other business. They don't have to worry that their IT assets are falling off a trailer or are stolen and exposed because a company like QSGI not only can take care of that either at their site or at our site, but we also indemnify them from any financial liability associated with a data breach because our process is thorough and fool proof. Now, I mentioned that it makes good business sense and that the government and federal and state regulations are requiring that you do that, but you've also seen the court of public opinion weigh in to ensure that companies do it. We've all read almost weekly in The New York Times, USA Today, and a whole host of journals the laundry list of companies that have had a data security breach. That list can include Citibank, Banc of America, Time Warner, Fidelity Investments, Ameriprise, and, most recently, the Veterans Administration. They had another one about five years ago. This is a process that, if handled properly with a firm that will deliver best practices in data security and regulatory compliance, is a very easy problem to handle and is inexpensive handled. If you don't do it properly, then not only are the fines significant, but the lost goodwill in the market is tremendous. That's where we come in ' that's one half of our business. The market for IT assets is tremendous. I think last year, there were about 130 million PCs that were being retired, according to Gartner, and people are retiring their assets roughly every three years. Actually, current leases that are being written are shrinking to every 27 months, and they're refreshing it with new assets. That's where QSGI comes in. Not only can we handle your needs with respect to data security and compliance, but we also remarket the assets and split the revenues with you such that in most cases, this is a no- cost compliance and insurance policy for you or you're actually receiving money back on the back end. That's been attractive to many companies because they need to handle the problem and the economics are significant. The other side of our business deals with the data center or mainframes, generally IBM Z-Series and P-Series, as well as tapes and peripherals in our data center maintenance and hardware division. QSGI's Data Center Maintenance division handles the maintenance of IBM's mainframe boxes in competition with IBM. We have monthly service contracts providing recurring revenue from servicing a mainframe and making sure that it doesn't go down, and making sure that it's in proper working order. We are doing this for the largest Fortune of the 1000 companies in the United States and abroad. We are the largest third party provider of maintenance services to data centers' IBM Z-Series boxes. IBM is our competition in that space. We can create a value proposition for the client while giving the same quality of work and IBM branded equipment. We actually can offer them a more attractive pricing structure. We are able to do that because of our data center hardware division, which deals in refurbished expanded data center hardware, including IBM Z-Series, IBM P-Series equipment, tapes and peripherals. As far as this inventory is concerned, our inventory breadth and depth is probably second to IBM. We have relationships with a good number of Fortune 500 companies out there, as well as leasing companies that compete with IBM, and that is an attractive third leg of our business. As you can probably surmise from that summary, we are a technology service provider for a corporation's entire spectrum of IT assets, from telephony equipment, PCs, desktop, laptop, and servers, all the way up through the IBM mainframe and the big boxes that you see in data centers. Our client list reads like a Who's Who of Fortune 500 companies, even Fortune 200 on the mainframe side of business. As you can imagine, they are very complementary businesses in terms of our knowing how to remarket desktops, laptops, servers, and the parts. We re-market about 98% of the products we bring in. It plays in well to the trading efforts on our hardware side of the business and, obviously, our clientele on the maintenance side of the business. If you're a large company and you've got a data center and the need for mainframe computing capability, chances are you've got a tremendous number of employees and they all have PCs at their desks. So there is a cross- selling mechanism that goes on. We're able to provide the entire spectrum of services to many clients across their entire range of IT assets.
Tickers included in this excerpt: QGI
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