Neil Armstrong had just walked on the moon when Ken Pontikes, armed with a $5,000 loan from his father, founded computer leasing company Comdisco Inc. Originally known as the Computer Discount Company, Comdisco blossomed into a $2.0bn powerhouse that has thrived on the fat of the mainframe market for most of its 27 years. The company’s business model has two prongs. It sources cash from the money markets at low interest rates, buys mainframes or other big-ticket equipment and rents them at a higher rate to customers. When a customer needs to upgrade, Comdisco provides the new kit. The second revenue stream comes from re-leasing that returned equipment. The formula works well for Comdisco if used equipment holds its value and if the company can accurately gauge depreciation. But, as mainframe demand has fluctuated and prices have fallen, the company has had a trickier task. After years of success, 1994 saw losses of $21m and a $70m lawsuit by IBM Corp. Results have been mixed ever since. In 1995, profits doubled to $96m on revenues that rose 7% to $2.24bn. But this year, growth in the first nine months (to 30 June) slowed to around 3%, with profits up 10%. In 1995, Comdisco leased $1.90bn in high-tech equipment, up from $1.60bn in 1994, but still not equivalent to the $2.0bn in new leases it wrote in 1991. Comdisco’s mainframe inventory is now more than 4,000 units. It also owns 30,000 disk systems, 300,000 personal computers and workstations, as well as 125,000 terminals. The company has pushed into the leasing of servers, personal computers and workstations, and these now account for 30% of its portfolio, double the level of three years ago. It has also moved into less vulnerable areas, notably disaster recovery services. Its leasing portfolio now also covers medical equipment and semiconductor manufacturing equipment. Another solution to the squeeze on its margins has been a foray into computer services and consulting. In 1995, non-traditional business operations accounted for 41% of pretax earnings. Comdisco is still the largest independent computer leasing company – but it faces stiff competition from IBM and also less specialist leasing companies including General Electric Co Inc’s GE Capital and AT&T Co’s AT&T Capital.
