Article

Everything old is new again

Old ATMs never die -- they end up in a refurb shop like Bear Financial Equipment of LaGrange, Ky. There, technicians transform them into machines that are almost as good as new. by Ann All, editor

February 21, 2002

When Ed Hovan was a regional zone manager for NCR, he sometimes had trouble selling pricey ATMs to budget-minded clients. "Not everybody wanted to spend the big bucks," he recalled.

Instead of getting discouraged, Hovan got inspired. Figuring quality used machines would be an attractive option for those who couldn't afford new ATMs, he started an ATM reconditioning business.

His hunch was right.

Modest beginnings to millions

Hovan retired from NCR after 21 years with the company, a stint that included the beta test for NCR's first ATM. Like other entrepreneurs before him, he first set up shop in his own home in 1988. Three years later, his wife let him know it was time to relocate.

"She kicked me out when she came home one day and literally couldn't get in because of the boxes waiting for UPS," he said. "I had taken over our garage, our basement, two of our bedrooms and two of my friends' garages."

Hovan purchased some property in nearby LaGrange, Ky., in an area slated to become an industrial park. He started out sharing quarters with another tenant, then moved into a 14,500-square-foot facility of his own in 1998. Bear has already outgrown its new quarters; Hovan plans to add another 2,500 square feet this year.

Revenue at his Bear Financial Equipment has grown an average of 64 percent for the past five years. Hovan's goal is $25 million a year by 2003. That seems doable, as the company did $10 million last year.

Though Bear has grown to include new equipment sales, parts and service, turnkey ATM programs and even bank branch design, Hovan said reconditioned equipment is still his biggest moneymaker. Refurbs of item processing equipment like check sorters are slightly more profitable than ATM refurbs.

Business is so good that he's finding it tough to stick to his original plan of expanding into about a dozen adjacent states and building service offices within a few hour's drive of each other. In July, Bear will begin servicing machines in California and Hawaii. Bear also has offices in Ohio, Illinois, Kansas and Missouri.

What's in a name?

A large, easygoing man, Hovan is known to his family and friends as "Bear." Using his nickname for the business began as "sort of a joke," but Hovan said the name recognition has been a big plus. His business cards are printed with a little black bear. Stuffed bears wearing t-shirts emblazoned with the company name are popular with clients -- especially those with kids.

Hovan's business philosophy hinges on having fun, not a surprising sentiment from a guy called Bear. "The day I get up and don't want to come to work is the day I close down," he said. He also credits his 40 employees, noting, "I have some of the best people in the world working for me."

A New Jersey native, Hovan lived in Michigan before coming to Louisville, Ky., to work for NCR. Like the company name, the location has been good for Bear's business. Louisville is home to a UPS hub, and several major interstates pass through the city.

Little banks, big business

Bear's primary customer is the small- to mid-sized financial institution, many of whom want a full-featured machine but can't afford a new one. "We can supply even the latest generation machine in recondition, and typically save the customer at least 25 percent," said Jim Zimmerman, vice president of retail sales and marketing.

Though big banks hog the headlines with their acquisitions and mergers, Hovan said local banks are experiencing "phenomenal growth. "

"This area was really neglected by the manufacturers. They're just thankful for somebody to be able to call," he said. ""We're always going to have the community banker. From what we've seen, every time one of the majors takes over, two more local banks pop up."

Bear's service division and turnkey ATM program were both created because of customer demand. They're "another way to help the customer and give him one phone number for everything," Hovan explained.

Smaller banks are increasingly calling on Bear to help with off-site deployment. Some of the company's smallest customers lack even the ability to drive dial-up machines.

"You take the small banker and throw him into the cash dispenser market, and he's lost," Hovan said. "They want to protect their customer base and stop the Bank Ones and PNCs from taking over, but they don't have the expertise to deploy and manage."

Bank mergers have been a boon for Bear's business. Reducing inventory is one of the first things a bank does after a buyout, and Bear happily takes on unwanted machines. "We've seen ATMs in the crate that have never been deployed," Zimmerman said.

Stripped, blown and scrubbed

Machines in a crate aren't the norm. Most of the pre-refurb ATMs are in much rougher condition. Hovan and Zimmerman have seen it all, including a family of mice nesting inside a machine and rusted units that have been exposed to salt air.

When a machine comes into Bear's workroom, it's stripped, vacuumed, blown out and scrubbed. A technician checks out every working part, from CRT to card reader to printer. The unit is painted, reassembled and subjected to a battery of tests. In some cases, arrangements are made with a manufacturer's technician to inspect and re-certify a machine for maintenance. The unit is encased in shrink-wrap before it's returned to the warehouse. Normally, a refurbished machine is covered by a 30-day warranty.

ATMs undergo some pretty radical transformations at the hands of Bear technicians. One of Bear's hottest-selling refurbs is an NCR 5085 that's converted from a walk-up machine to a drive-up by reconfiguring the envelope dispenser and keypad. It also receives a new stainless-steel face. The redo was convincing enough to fool some NCR representatives at a trade show. "They wanted to know what model it was," Zimmerman said.

One technician works on a machine from start to finish. Using a sophisticated computer tracking system, Hovan is able to keep tabs on who refurbs a machine, as well as what parts and how many hours of labor were involved. It generally costs from $2,000 to $4,500 to recondition a machine. The usual turnaround is 20-75 days.

The technology myth

The Y2K problem has been surprisingly good for Hovan's business. Most of his customers are replacing old equipment with rebuilt old equipment to take them to the millennium. He thinks most won't upgrade to new equipment until 2000 or 2001.

"Most banks have already done testing and certification. Now that they're compliant, they're not going to change. They'd much rather buy another one of what they already have to get them through this year," he said.

Hovan doesn't think the ATM has advanced as much as manufacturers would like their customers to believe. "The latest generation of ATMs does not really do much more than they did two generations ago. They're fancier and more expensive, they run on PCs -- but they really aren't doing any more."

He likened the ATM market to the PC market, noting that any dramatic changes require at least a year or two of development and testing. For instance, despite all of the industry buzz about running on Windows NT, almost all ATMs still run on OS/2. "When a brand new ATM is released, it's already outdated," he said.