Without healthy competition from used equipment vendors, IBM will be free to decide if it will remarket equipment, to whom, under what circumstances, and at what price, according to the white paper prepared by Rosemount, Illinois-based Comdisco Inc to persuade customers and everyone else with an interest just how important it is that Comdisco should win the suit brought against it by IBM Corp and IBM Credit Corp (CI No 1,742). Comdisco also points out that IBM would be more likely to price new equipment without discounts if it wins the lawsuit. IBM and IBM Credit Corp maintain in their pending lawsuit that their assets are unprotected when competitors such as Comdisco substitute like-for-like IBM parts to satisfy the specific needs of users in the secondary market. IBM characterises the disassembling of systems and the subleasing of IBM Credit assets as misappropriation of computers and parts owned by IBM Credit, while leaders of the computer leasing industry say such actions are standard practice. Comdisco chairman Kenneth Pontikes says his company has equal concerns about asset protection but there needs to be a reasonable way to ensure that all lessors’ assets are protected without restricting computer users’ rights to sublease or reconfigure equipment. Critics charge the IBM-IBM Credit lawsuit is nothing more than an effort to restrict the flow of used equipment as a means to stifle competition. According to Comdisco, Thomas Donovan, director of Technology Investment Strategies Corp in Framingham, Massachusetts, has surveyed about 150 leasing and data processing managers, and found that about 80% of the respondents perceived IBM as more interested in protecting itself from competition that in protecting IBM assets. Pontikes points out that this legal battle is not merely a squabble between two competing corporations. IBM’s clamp on interchanging computer parts has far-reaching implications. Restricting the flow of used equipment, threatens computer users’ access to economical alternatives, he says. Pontikes notes that IBM already controls upwards of 70% of the new computer systems on lease. If it wins the suit, it also could control the secondary market, affecting everyone’s pricing and flexibility. The white paper, The IBM vs Comdisco Lawsuit: What it Means to Computer Users, maintains that free movement of equipment is crucial to meeting the frequently changing needs of computer customers. It argues that when used equipment is available in sufficient quantity from a number of vendors, as it is now, it competes against new equipment. New-equipment vendors must keep their prices low if they hope to win a customer’s business, it says, whether the customer needs to replace an entire system or simply upgrade current equipment. Without healthy competition from used equipment vendors, IBM will be free to decide if it will remarket equipment, to whom, under what circumstances, and at what price, says Comdisco, adding that it IBM and IBM Credit win the lawsuit, it could also give them economic freedom to price new equipment without discounts. On the issue of asset protection and IBM’s objection to substituting like-for-like parts, Comdisco insists that IBM’s assets are not harmed. If a third-party company such as Comdisco does upgrade or modify the equipment during the IBM Credit lease, the equipment is immediately tested and recertified for maintenance by IBM. When Comdisco returns equipment to IBM Credit, it restores the equipment to its original configuration; the equipment is again recertified by IBM technicians before it is returned to IBM Credit. IBM Credit’s assets have never been compromised. Comdisco shares IBM and IBM Credit’s concerns about asset protection but suggests that vendors agree on a reasonable way to ensure the lessors’ assets are protected without restricting computer users’ rights to sublease or reconfigure equipment. Comdisco contends that the return of original serial-numbered parts is not only unreasonable but a practical impossibility, given the numerous components of today’s larg
e computer systems and the ways in which users upgrade them. The return of like parts with a warranty of clear title at lease-end – parts that are identical in every way with the exception of serial numbers – is reasonable assurance of asset protection, Comdisco insists. On the allegations of improper subleasing, IBM Credit objects to subleasing beyond a period exceeding the remaining initial lease term, saying it presents difficulties in planning its inventory and can result in lost opportunities. Yet IBM Credit’s term lease master agreement gives lessees the right at lease-end, with proper notice, to renew their leases, extend initial terms or purchase the equipment outright, regardless of whether they choose to sublease the equipment, the leasing firm asserts.
Suddenly objecting to long practice
Subleasing by a third party beyond the initial lease term doesn’t create any more uncertainty for IBM Credit than does the company’s own agreement. IBM Credit now is suddenly objecting to what has long been a practice in the leasing industry: the return of IBM Credit-leased machines at lease-end with some identical IBM parts, such as memory and channels, substituted for the parts that originally were on the machine, Comdisco insists. This industry practice has been based on the recognition that parts are interchangeable with other parts from the same manufacturer, as long as they bear the same part number. Indeed IBM Credit occasionally subleases Comdisco equipment and removes and remarkets Comdisco-owned parts during reconfigurations; however, Comdisco is not suing IBM Credit because subleasing is vital to a robust secondary market and provides a valuable service to lessees who outgrow equipment, the company says. Resorting to conspiracy theory, Comdisco notes that it and other leasing leaders have pointed out that IBM could have sought a business resolution rather than a lawsuit to address the issue of asset protection. The fact that it chose to bring suit against independent lessors rather than deal directly with the industry trade group, the Computer Dealers & Lessors Association, suggests the hidden agenda of wanting to stifle competition. Comdisco says it has suggested that a solution designed to protect IBM’s assets without jeopardising the thriving secondary computer market would be more appropriate than lawsuits.
