Business Summary
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Corient is the world's first company to combine notebook branding with asset recovery and remarketing in a seamless global supply chain. Our slogans are:
technology reborn™ (corporate)
notebook computers in a new world™ (products)
every one is a friend™ (charity).
We are uniquely positioned to help organizations navigate the new economy of managed disposal of notebook computers. As an asset recovery company, our mission is to provide notebook remarketing services at a service level second to none.
Our Goal
Our goal is to become the world’s leading contractor within the area of mass customization, asset recovery, and remarketing of notebook computers and to win acceptance as a dependable industrial partner to all notebook makers.
Overview
We are responsible for the procurement of notebook computers destined for asset recovery, remarketing, and for collecting and disbursing all revenues generated in the process. We provide the expertise required to navigate the markets, secure quality sales, and to capture the highest possible prices for refurbished notebooks regardless of brand.
Corient works with the world’s largest makers of notebooks and their customers. We provide spot market disposal services and aggregate supply from millions of corporate consumers. The process allows us to remarket notebook computers to places where they are not available through traditional channels, or when those channels cannot supply them on a cost efficient basis. We provide logistics, anonymity and guaranteed process quality. Corient’s asset recovery program also provides other disposal management options, such as reducing notebook inventory, protect against price erosion, and reducing or eliminating recycling costs. We are a “green” company in all respects.
In a Nutshell
Corporate customers buy branded notebooks from a preferred supplier. They agree to an asset recovery and remarketing contract with Corient at the time of purchase
Suppliers orders branding from us and we deliver casings to them according to the customer’s color and logo specifications
Customers use and depreciate the notebooks over thirty-six months before sending them to Corient for restoration and remarketing
We then restore the notebooks to their original state and sell them.
Corient handles the process from beginning to end and guarantees the highest possible integrity throughout the branding, asset recovery, and remarketing cycle. When a corporate customer order customized, or branded, notebooks from a preferred computer maker they do so for two reasons: To expose their brand and to deter from theft. Upon receiving an order for branded notebooks, the computer maker presents our asset recovery and remarketing contract to the customer. If accepted, the computer maker supplies generic duplicate casing to our inventory. When the notebooks come back to us for restoration and remarketing after a predetermined use and depreciation period, we match the generic duplicate casings to the correct notebooks by a proprietary identification system.
If an organization disposes of used notebooks without first removing branded parts it loses the security value that it provides and also money since brand specific used notebooks are difficult to sell at full market price.
Captive Customers
After three years, original notebook casings are no longer available from a manufacturer or from any other source. Corient becomes the sole source since we put original duplicates in inventory when the notebooks were first ordered. Consequently, we are the only company that can guarantee full restoration of used, branded notebooks.
It further strengthens our position that we share a portion of our proceeds with computer makers who already view our services as a mean toward enhancing sales of standard solutions. They regard our entire program as an opportunity for additional revenue and margin that do not require an investment in manufacture or inventory.
Collaborating with notebook makers is a key to success. We build alliances with notebook makers and their customers. In fact, we are able to work with all of them.
Global Presence
Organizations are increasingly looking to outsourced remarketing services as a cost effective alternative to alleviate internal inefficiencies. We believe we can deliver meaningful benefits because we take on the responsibility for all of the asset recovery and remarketing elements.
Through Corient, sellers are exposed to outlets worldwide that are capable of buying at least 75 refurbished notebooks per month from us. As order inquiries reach us in response to notebook availability, we select the most appropriate buyers, who either retail them to end users or donate them to charities.
We monitor daily pricing and availability of notebook computers throughout the world. We have created direct global communications links with thousands of channel sellers. In immediate response to shifting trends in demand that causes price variances, we can step in to adjust prices. We can also offer short term and long term credit and extended term financing on purchases executed by qualified customers throughout the world.
Our company alone has developed fulfillment and logistics procedures that enable seamless integration with our partner’s supply chains that typically stretch from Asia to local destinations in over fifty countries.
Operations
Corient brings together the output of several trading boards for IT equipment in North America, Europe, and Asia. Electronic feeds continuously update information in our database. Associates work with traders via email, telephone, fax, or website. We can obtain notebook pricing and demand information on short notice, often within minutes. Our memberships in the global operational centers with exchange facilities provides us with 24-hour access to customers. Our supply is updated continuously in order to provide customers with the most current information.
Once a sale has been completed, the notebooks are sent from our warehouse to the customer who may be located anywhere in the world. The shipment has been refurbished, inspected, and tested prior to shipment. The orders are sent with Federal Express, DHL, UPS, USPS, or other secure ground and air cargo transport company.
Sales
Corient sells branding of notebooks primarily through computer makers. To date, these include Fujitsu-Siemens, DELL, and IBM/ Lenovo. Negotiations and test series production are in progress with Toshiba, Hewlett-Packard, and LG. We anticipate that others will follow as combined volume dictates costs (and profits) in the computer industry. The more they buy from the same source, the lower the component cost to each of them. They cannot afford to go their own way (with the possible exception of Apple). Market share rule. Moreover, market share is tied to price (cost). We are positioned to sell very large volumes based on their internal and early estimates. DELL has already integrated our services in their supply chain and issued instructional materials to associates.
We sell our services to those organizations that are the largest consumers of notebooks. We reach them during the branding process and connect with them again when it is time to dispose of depreciated notebooks, typically after three years. However, any large organization is likely to stagger purchases and disposals by a third each year, which gives us reason to work with them on an ongoing basis. Once we are refurbishing branded notebooks we are likely to win all their business, including asset recovery of notebooks that have not been purchased in a branded state.
Development of target customer segments focuses on the significant fact that end users procure our services through a computer manufacturer’s sales organization instead of directly from us. This is a logical progression as they normally have supply and service contracts for computers that may extend over a period of years. During 2008, our main efforts will continue to focus on building our status as a contractor to the industry.
Our first priority has been on Europe. The North American market will follow in 2008 as our manufacturing partners extend our relationship to their American customer base. Our business proposition has already demonstrated such strong viability that we feel confident that we shall be able to transfer our industrial blueprint to our partners based on the U.S. side of the Atlantic Ocean.
Sales Volume
We will work with over 12,000 trading partners with real-time tracking, pricing, and availability information to sell over eight million notebooks per year. We maintain a robust back office functionality to support purchase and sales transactions, including procurement, quality assessment, restoration, fulfillment, and revenue collection.
We need access to only fifty thousand used notebooks and one hundred customers to reach ten million dollars in annual sales. At the sales level of eight million notebooks, or 4 percent of the market, our annual revenues can easily exceed one- and a half billion dollars. We believe that it is possible to reach that level within five years given the exclusivity of our business model (described above).
Revenue
Corient derives revenues through a variety of arrangements, including fixed fees; cost-plus agreements; market spreads between purchase and sale prices; and price markups. We do not charge our customers for consulting services provided by our trading and commodity experts. Our gross margins are maintained in excess of 40 percent regardless of payment method and are not subject to sharp notebook cost/price declines.
Marketing
We have undergone a positive maturing process during the 2006/07 period. As we came into the 2006 marketing year, we began to turn our efforts away from end-users in favor of working toward manufacturers. It was in direct response to being recognized by them as the “first mover” in customized notebook branding that we realized that we would be infinitely more effective in our product placement activities if we did not have to develop demand for our product by ourselves. We are now in a position where we have access to millions of customers provided by tier-one partners, and we likewise have the benefit of their marketing campaigns, sales forces, service organizations, and brand assets. Consequently, we can focus our valuable marketing resources on customer service issues such as product quality, timely delivery, personal communication, and programs development.
Markets
The advent of the low cost notebook computer has created a boom in world-wide sales, somewhat at the expense of the desktop. Gartner, Inc., who measures global trends, says notebooks have gone from a product consumers, corporations, schools, and governments have thought of as a likely future purchase, to a product now viewed as a necessity, both for work and home.
Our primary markets are located in areas that match demand of notebook computers, as follows:
European Union, and the new democracies in Eastern Europe.
North America, primarily the United States and Canada
Asia and the Middle East
South America, primarily Brazil, Argentina, and Chile
Emerging markets
Business to Business – large corporations with well recognized brands
Premium Business – license trade with famous brands
Consumer Market – individual preferences and designs for consumers
Education – school districts and University programs
Government – Federal, State and Local government procurement
Armed Forces – Military use application
The global production of personal computers exceeds two hundred million per year, half of which are notebooks, and it is growing.
Management
The Corient team draws management, marketing, sales, and distribution expertise from earlier held positions at both global and startup companies. Experience also includes decades of developing extensive partnering relationships with corporate channel partners.
Veterans of the IT and Finance industries provide maturity, experience, and industry relationships. Ability to sell computers effectively requires a challenging blend of business knowledge, technical mastery and some art. Corient’s excellence is likely to become acknowledged in the marketplace and in relationships with clients. Our ability to deliver hinges on having the right people and the right knowledge assets. We offer a variety of challenging opportunities that will draw talent while enabling to grow intellectual capital in a supportive environment.
Customers
Corient mines relationships with several thousand organizations but relies primarily on partnerships with computer makers and their established corporate customer base which represents as much as 85 percent of their total notebook sales volume (ex. DELL). Our primary focus is on leading notebook manufacturers who deliver new notebooks to existing customers. Our secondary focus is on end-users and their distributors. Our strategy is to act as a “value-added” supplier to both value chains, taking care not to pose as a maker of anything but notebook branding. The strategy removes any notion of competition since we remain completely supplier neutral in delivery of both new and converted computers made by others. In the long term, we can achieve valuable status as a contractor, or sub-contractor, to the large companies who own the majority of the computer buying customers already.
Customers will come from the general business community because our services are valuable to all who make or use notebook computers.
Competition
There are tens of thousands computer resellers each holding a miniscule share in a chaotic global market. These companies are customers as well as competitors. Corient will sell notebooks to them, and they will sometimes compete with us in both procurement of notebooks and in the sale of them. The larger our share of used notebooks becomes, the more control we will have.
To build lasting value, we will enter into value added agreements with key suppliers, which will help us avoid the anonymity of the “gray market”.
When the issue of competition is raised, it becomes important to define the nature of it in these early stages of an emerging business. There are others who offer customized computers similar to ours, and there are many involved in asset recovery and remarketing. The difference between them and us is that they are small firms who sell their products in fierce competition with our partners. Those who have copied our branding concept remain small shops without the capacity, means, or sophistication to go beyond the local retail market.
Certain similarities mean that they may win business that would otherwise belong to us. However, as our volumes grow, our capacity grows in step and, as our costs shrink, we will enjoy an increasingly competitive advantage. To date, we are the only supplier of customized notebook branding services coupled with asset recovery and remarketing, and the only company operating globally. We are the first and only direct supplier of these services to tier-one manufacturers such as DELL, IBM/ Lenovo, and Fujitsu-Siemens.
Neutrality
We remain completely manufacturer neutral and defend it with the utmost fervor. In such position, we may offer our value added services to all manufacturers and their customers without creating a competitive advantage for any of them. The strategy gives us access to the largest procurement contracts as they become available. We have determined that it may be difficult, and certainly expensive, to influence a large customer to abandon existing, often long-term, agreements with others for the benefit of a new or unknown entity.
We do not know of any other company that is positioned as a contractor of both customized notebook designs and asset recovery. We are aware of a few small private label computer assemblers who offer customized notebook designs but they are selling against manufacturers and cannot act as their suppliers for competitive reasons. We also know of a few custom paint shops who offer to paint notebooks for customers in small quantities. None of them are positioned at the second income stream where remarketing belongs.
We depend on our notebook manufacturing partners’ ability to persuade their customers of the advantages and benefits of choosing customized notebooks, arrange for asset recovery and remarketing up front, and to deliver volumes large enough to keep our prices low.
Partners
Corient works primarily with well established suppliers in each market supported by notebook computer demand from end users. Since we act as a contractor, or sub-contractor, whose operations are limited to value-added activities we have limited insight to what customers are in process of procuring from their suppliers. Instead, we depend on forecasts provided by our partners. What we do know, however, is that our notebook branding concept has been received, and is being received, with meaningful enthusiasm by many corporations. Consequently, suppliers view our services as a mean toward enhancing their sales of standard solutions and an opportunity for additional revenue and margin that do not require an investment in manufacture or inventory. The combined potential for business when distributed over multiple market positions is very large and we have in these relationships the potential to capture a strong hold as a contractor to the industry for branded notebook computer services.
Development of the Company
Our development work has led to our position as a contractor to large computer makers. It is a result of three years and a direct investment of five million dollars by the management and 160 accredited investors.
Development of our company has also meant development of our industry. In the real world, all actors in this arena buy processors, memory, graphic cards, etc. from the same few contractors. In the near future, they will also offer individual designs on their notebook computers. Mass customization is coming to the design component of notebooks. And, we started it. Interest in individual designs is great. It may be hard to sell notebooks to an international concern in the future without offering their company logo on it. That proposition may not necessarily result in orders for all computers in an organization, but certainly for some, especially for those who conduct client facing activities, or for those who must use all means to prevent their notebook from being stolen. We claim "first mover" status because without our efforts it's unlikely that the opportunity for mass customization of notebooks would have come about in the present.
Our revenue comes from Branding (15%), Asset Recovery (15%), and Remarketing (70%). The branding component opens doors and to stay competitive we can run it down to a break-even basis if we have to in order to keep others from entering our market with a similar strategy.
Project Portfolio Disclosure
Further to what has been mentioned above relating to ongoing customer relationships we are reluctant to name others with whom we are currently negotiating partnerships or sales. It is not due to confidentiality agreements, under which our shareholders and prospective shareholders are automatically covered, but rather it is because, at the very core of our business proposition, is the notion that we can offer our partners a competitive edge by being “invisible” to their customers. A strict, sometimes severe, discretion is asked of us throughout the procurement process. We have already mentioned that many of our customers, and future customers, purchase parts from the same sources. A DELL computer may therefore (at times) be identical to a HP or Fujitsu- Siemens except for operationally meaningless design details. Another common factor among organizations in our project portfolio is that they have many, and often well known, brands that they want to protect at all cost. Further, they do not want others to know about the mechanics behind “marketing actions” they undertake to forward their positions against competitors. Consequently, we are frequently required to exercise discretion until a product has actually been launched in the marketplace.
Risks
Corient is subject to loss of business growth opportunity if its working capital is not adequate or alternative sources of capital are not available. Problems associated with funding purchase orders under extended-time payment terms to enterprise customers will be pervasive if not addressed. As our business grows we could face severe difficulty meeting increasing demand and may find it beyond our capacity to deliver. This in turn could lead to emergence of competitive entities who are better capitalized and who may find the cost of entry worthwhile.
Other risk factors include:
Our lengthy sales cycle can result in uncertainty and delays with regard to our expected revenues
Emerging competition in the markets in which we operate may reduce the demand for our services
Failure to have designs correctly applied onto notebook computers will result in reduced sales
Defects in our refurbished notebooks could increase our costs and delay our shipments
Lower demand for our partner’s products will result in lower demand for our services
Failure to hire additional personnel and to improve our operations will limit our growth
We could lose key personnel due to competitive market conditions and attrition
A portion of our revenues comes from distributors who may terminate their relationship with us at any time
The demand for our services depends upon our ability to support evolving computer industry standards
Because we sell our products to customers in many different countries and because our services are incorporated with products of others that are sold world wide we face foreign business, political, and economic risks.
Capital Requirements
Corient requires up to twelve million dollars in capital to execute on rapid growth and to expedite deliveries to customers. We do not anticipate a need for additional outside direct investments but may consider it in coming years to finance growth in response to M&A opportunities.
Factoring program
A factor shall be maintained in an interactive and ongoing manner with Corient, our customers, and our suppliers. The factor shall serve as the outsourcing arm of Corient for the purpose of qualifying customers and may provide other services.
Vendor and Supplier Financial Relationships
It will be the objective of Corient’s financial managers to educate customers and suppliers and to make them comfortable with our process of managing financial programs.
Transaction Procedures
Transactions involving sales of notebooks shall be handled in such a manner that upon receipt of a request for quote by a customer, the supply side of Corient shall complete the sourcing before the funding side shall begin activities to approve the customer. The funding side, whether internal or external, shall further control the sequence necessary to ensure prompt delivery and payments. Payment readiness shall require access to cash from our cash reserve as is necessary to meet payment requirements by suppliers. Preference shall be maintained toward suppliers that support our credit and terms objectives toward customers.
Execution
Upon receipt of a customer’s purchase order of notebooks not in our own inventory the supplier shall be notified and steps taken to meet or exceed the supplier’s requirement for payment. It shall always be the objective of Corient to keep payments accelerated in order to generate favorable terms and a strong credit rating.
Customer Credit approval
The factoring service, whether internal or external, shall maintain the credit approval process. Customers that do not meet standards shall either be avoided or be offered alternative terms pursuant to their needs and the needs of the factor.
Acceptance of Assignments and Outsourcing
All customers shall accept that Corient’s sales programs are contingent upon the customer’s willingness to provide support for the interactions necessary to meet the needs of all parties to a transaction. Failure to support such programs may result in our refusal to supply notebooks under terms and may instead lead to our decision to demand pre-payments.
Future Capital Needs
It is certainly a great challenge for a startup company to finance expansion over a profit and-loss statement. Facts and assumptions of this summary suggest a need for capital in order to finance an expansion, which will result in our ultimate position as a contractor- of- choice to the computer industry. The first step in our expansion is under way in Europe. The next step involves the North American market, which is as large as the European and extremely brand driven.
Budget
When considering the nascent nature of the partnerships between our company and its partners, including the three major partnerships already in place (DELL, Fujitsu-Siemens, and IBM/ Lenovo), it is very difficult to accurately forecast what these relationships will bring in terms of sales volume, gross revenue, cost of goods sold, or cost of sales. If we ask DELL, for example, they say that twenty to twenty-five percent of notebook sales should be branded by us before long. That translates to over two million units per year in Europe alone. If we ask Fujitsu- Siemens, they feel confident that five percent of their global notebook sales will be sold with branding provided by us. And so it goes. The management of Corient has determined that a company- wide goal of capturing five percent of the annual global output of notebook computers for our services is prudent, which eventually puts us in excess of eight million notebook computer units per year.
Notebook Branding
The branding business of our company is to convert notebook computers to effective advertising vehicles by means of decorating the notebook casings, or “lids” with the customer’s colors, logo, and graphic profile. The highly profiled notebook computer also becomes less desirable to steal as it will be easily recognizable as another’s property. Our branding activities opens doors to Remarketing contracts.
Branding Sales
We sell branding primarily through computer manufacturers. To date, these include Fujitsu-Siemens, Dell, and IBM/ Lenovo. Negotiations and test-series production are in progress with Toshiba, Hewlett- Packard, and LG. We anticipate that others will follow as combined volume dictates manufacturer’s costs (and profits) in the computer industry. The more they buy from the same source, the lower the component cost to each of them. They simply cannot afford to go their own way (with the possible exception of Apple). Market share rule the big manufacturers. Our company is positioning to sell large volumes at the lowest prices.
Our end-users procure our products through a computer manufacturer’s sales organization instead of directly from us. This is a logical progression as they normally have supply- and service contracts for computers that typically extend over a period of years. During 2008 our main efforts will continue to focus on building our status as a contractor to the industry. Our first priority has been on Europe and this will also continue. The North American market will follow now as our manufacturing partners extend our relationship to their American customer base.
Branding Competition
We have chosen a strategy which depends on our ability to act as a neutral supplier. We have embarked along this path for the following reasons:
We remain completely manufacturer neutral. We may offer our value added services to all manufacturers without helping to create a competitive advantage for any one partner. The strategy affords us access to the largest procurement contracts as they become available. We have determined that it may be difficult, and certainly expensive, to influence a large organization to abandon existing, often long-term, agreements with leading computer suppliers for the benefit of a new or relatively unknown entity.
We also have an exclusive Asset Recovery and Remarketing strategy which allows us to offer a restoration and disposal program for depreciated notebooks which recovers the full used value of each notebook on resale.
Insurance Policies
We carry commonly accepted corporate insurance policies that are continually evaluated for appropriate adjustments in coverage and scope. The Management of our company believes that the company has adequate insurance protections when measured against current circumstances.
Information to Shareholders
We continuously communicate company information to shareholders, particularly in regards to performance and financial matters of note. Please refer to the Important Dates of Disclosure for official dates.
Offices
Our company rents adequate and representative offices Malmö, Sweden and in Saint Louis, Missouri, U.S.A.
Agreements with Interested Parties
Corient has no undisclosed agreements in place with any person or entity that have an interest in us through contracted services and it has made no agreements with its managers or board members that are outside the scope of commonly accepted business practices. Corient and its affiliates operate under he laws of the land where it conducts business and it adheres strictly to local rules and regulations.
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