Charles Newman gets deliveries at his Dexter, Mich. recycling factory, up to 10 tons each weekday. He's counted a fish tank, a rotisserie grill, a rum cake, a gilded bra and a Forrest Gump videotape among his "gifts." But the real goodies are cell phones, and he gets 10,000 to 15,000 of these daily. His company, ReCellular, buys used phones for a few bucks each from wireless carriers, banks, retailers and fundraisers. It resells them--after sprucing up some of them--to dealers, distributors and carriers, and recycles the hopeless cases.

Last year this 56,000-square-foot operation processed 3 million phones, netting $1 million before taxes on revenue of $40 million, a doubling of sales since 2002. With an estimated 100 million cell phones retired annually in the U.S. and five times that many collecting dust, ReCellular's biggest challenge is keeping up. "Most of what we do is stumble into things," says Newman, 64. "I'm amused when people commend us for our foresight."

Newman's first propitious stumble was out of the business of renting minicomputers, a business doomed by the invention of the PC. In 1991 Newman segued into renting cell phones, back when the devices cost $3,000 and up. Soon enough prices plummeted, and he was left with a stack of 8,000 aging phones. So he refurbished and sold out his stock and bought more to flip the same way. After launching a Web site in 1997, Newman started connecting with buyers around the globe wherever U.S.-standard phones were compatible--mostly South and Central America, Israel and the Far East.

Co-owned by Chuck Newman, his brother, Allan, and a few employees, ReCellular is the biggest company of its kind but still relies on elementary collecting techniques. It provides Sprint, Verizon, T-Mobile, various retailers and other organizations with postage-paid boxes. The collectors receive a minimum of $3 per phone or a cut of the eventual resale price.

Once in Dexter the phones are sorted, resorted and sorted again. One of the 200 employees separates batteries, eyeballing those that need to be tested. In another area a worker sorts phones by model, with the help of a $3 million electronic cataloging system: It allows ReCellular to know how much to pay, say, the Body Shop, which might have sent in ten different models, and to integrate that data with accounting software affecting new purchase and sale decisions. In another area two dozen workers erase personal information; another four reverse engineer incoming models, figuring out how to take off welcome screens, remove pictures and videos and unlock phones so that they can be used on other carriers' networks. ReCellular sends phone chargers to Goodwill Industries to sort, test and clean.

Eight percent of incoming phones need more work. They're sent to Texas or to a contract plant in China for reprogramming, cleaning, a new keypad or a new plastic case. The fourth of phones that are obsolete or have fatal defects like fading display screens go to a Midwest recycler that extracts precious metals like gold. The revenue from reclamation is small enough that ReCellular has to pay the recycler to take the bad phones off its hands. That's worth the money since Newman can tell the companies and charities sending him phones that all waste will be disposed of in an environmentally responsible way. Hard to fathom, but he claims he kept 2,000 tons of phones, batteries, accessories, pagers, cases, chargers and cords--containing arsenic, lead and cadmium--out of landfills last year. Not enough for the Basel Action Network, a Seattle group monitoring the toxic waste trade, which alleges that companies like ReCellular are shifting toxic waste to nations that aren't equipped to deal with its eventual disposal. Newman says he already collects used phones in developing countries and is growing that part of the business.

Surviving phones get sold for $5 to $120 each, the majority in the lower range. ReCellular uses half what it recoups to pay collection partners and shipping costs; another 40% goes to salaries, operations and overhead costs. The company aims to keep 10% at the end but fell far short last year, thanks mainly to problems with its new software:It took six months to work out the kinks, while 550,000 phones piled up in the factory.

The proliferation of new models--Newman reckons there are 850 active ones on the market--means more business for ReCellular. And more headaches. Cell phone manufacturers don't always design phones that are easy to clean up and debug. ReCellular engineers have to learn the tricks on their own, while the clock is ticking. The longer it takes them to figure out how to process, for example, a discarded Treo 600--a 32-megabyte gadget with phone, e-mail, Web access, an organizer and a camera--the less ReCellular will be able to resell it for.

Wireless carriers, which provide half of ReCellular's input, can be prickly, too. Sprint branded products have to be totally unbranded to be resold in North America. Nextel, which has proprietary technology running on its network, prefers doing most recovery and recycling itself.

Then there is competition. RMS Communications Group in Ocala, Fla. reaches out to consumers via a Web site and a mall kiosk. Elham Ebizadeh, who runs a cell phone refurbishing and ring-tone business in Los Angeles, added a collection and recycling company last year, handing out 500 drop boxes in grocery stores and other locations.

But ReCellular's advantage is scale. With his partners, Newman has 50,000 collection boxes and expects to have twice that many by year-end. He also has his eye on related businesses--as in collecting MP3 players, cameras and GPS units.