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One Man's Used Chip Is Another...

Inside Wall Street


Don't think that all used or unwanted computer chips end up in the junkyard. Far from it. These castoffs have, in fact, created a new industry that has Aurora Electronics thriving. And Aurora's stock, listed on the American Stock Exchange, has gone from about 5 a share in August to 14 on Feb. 16. One big investor believes the upswing has some distance to go.

Formerly known as BSN, a sporting-goods maker, Aurora's new business is mainly recycling integrated circuits, or semiconductor chips. Aurora's recycling sales have grown from zip to more than $40 million in the past five years. Sales are expected to hit $50 million this year and top $68 million in 1994. And profits are also growing. Analyst Ian Gilson of L. H. Friend, Weinress & Frankson in Irvine, Calif., expects 60 a share in 1993 and 90 in 1994, vs. a loss in 1992.

"Aurora is in the business of sorting and selling," explains analyst Bill Gibson of Cruttenden & Co. "The company pulls off the parts they want from a computer and then tests, straightens, redips, and polishes the chips." Aurora pays suppliers a percentage of the selling price--about 60%--after the parts are sold, says Aurora Chairman and CEO Jim Cowart. The average price that the chips in a computer bring ranges from $100 to $300.

Aurora gets supplies from IBM as well as other computer makers. Parts are then sold to U. S. companies and to major brokers acting for customers in Asia. "The potential market for these chips is huge, since less than 1% of the potential supply is reconditioned and resold," says President David Lahar. GENE G. MARCIAL

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