THE SPECULATOR : Turning Old Equipment Into New Profit Source

SANTA CRUZ â€”  Santa Clara County, home of Silicon Valley, has posted a record 14 straight months of year-over-year job losses. Employment is eroding in chip making, instruments, aerospace and computers--four categories that together account for 25% of the county’s 830,000 jobs and give the region its identity.

Brian Tischer sees all this and can’t help perking up a bit.

“Whenever you see an announcement that a facility’s shutting down or there are layoffs or a company’s moving into a new line, that tells you there’s going to be equipment available,� says Tischer in his office at Technical Engineering Services here, about 30 miles “over the hill� from Silicon Valley.

And when there’s equipment available, there are deals to be done.

Tischer is a speculator. He rolls the dice for TES, which generates annual sales of $5 million by buying, refurbishing and reselling high-tech equipment.

Tischer is busiest when the economy is either very good or very bad. In good times, companies are buying new equipment so fast that manufacturers can’t keep up with orders, so some firms settle for older, used machines from TES. And in bad times, everybody’s selling to raise cash.

Everybody but Tischer, that is. Tischer is buying. With the chip-making industry in a slump, he is busier than ever trying to find used equipment at bargain prices.

You need deep pockets and a strong stomach to do the work.

“I’m dealing with what I call the sharks of Silicon Valley,� says Tischer, 35, who also raises llamas on his hilly ranch in Pescadero. “It’s a buyer’s market now, but it’s also buyer beware.�

Tischer occasionally gets burned. In the late 1970s, he bought a $60,000 computer-aided design machine as big as a one-car garage, only to discover he couldn’t sell it and then literally couldn’t even give it away.

And sometimes he scores spectacularly. He once paid $8,000 for an old vacuum evaporator that the seller apparently had never cleaned. Inside the vacuum chamber, stuck to the walls, was 2 1/2 pounds of 99.99% pure gold worth $15,000.

“We got out the razor blades and scraped,� Tischer says.

Prospecting for such deals is mainly a matter of good sources and schmoozing by phone. When Tischer spots a promising lead, such as a factory closing, he scrolls through TES’s computer database to identify possible contacts at the company involved.

Every time Tischer or partner David Lloyd or one of the firm’s salespeople meets someone in the industry, they jot down the person’s name, position and phone number for the database.

“Maintenance people are good because they know what’s out there on the floor,� Tischer says.

After his 12 years in the business, the list is 15,000 names long and can be sorted by company, individual or type of equipment someone wants to buy or sell.

During the 20 to 30 calls he makes daily, Tischer sounds out people to discover what’s for sale--and why.

He once heard that an entire production line was for sale; the company was up against a tough deadline from its landlord.

“That was a wonderful situation for us to find,� Tischer says; the added pressure made it easier to get a low price.

As a rule, Tischer will not pay more than half the anticipated resale price. He made an exception in the case of a full production line at Advanced Micro Devices in Sunnyvale, which he bought for $1.4 million and sold piecemeal at auction 90 days later for $1.9 million. A $500,000 profit before expenses seemed acceptable.

To make sure he can act when opportunity knocks, Tischer has two San Francisco investors who back his deals sight unseen with up to $4 million in instant cash, as long as he can promise the usual huge return.