For JPM Co., 1999 could turn out to be a very good year.
Like most electronics outfits, the Lewisburg, Pa., cable-assembly and wire-harness maker struggled through a lackluster 1998. But when the company reported its fiscal first-quarter financial results last month, many analysts sat up and took notice.
JPM saw net sales for the quarter, ended Dec. 31, rise 30.8% from the year-ago period, to $41.2 million, a company record. The company also posted net income of $1.3 million, besting the prior-year quarter's tally of $800,000, and beating Wall Street's expectations in the process.
Executives at JPM said the growth stemmed from several years' of strategic planning and global positioning that are now beginning to pay off.
JPM, which supplies products to computer, networking, and telecommunication OEMs, realized several years ago that to compete in that market space, it needed to develop all of the competencies required to become the supplier of choice, explained JPM president and chief operating officer Jim Mathias.
"We feel we did a decent job in identifying the supplier-consolidation trend happening in our marketplace," Mathias said. "And what that meant to us was that if we could meet all of their criteria for supplier selection, then larger and significant opportunities would be available to us."
Working from that premise, JPM developed a game plan that included enhancing its ability to manufacture products at a lower cost, and spreading out globally to meet the requirements of international OEMs.
That plan, which took root with JPM's initial public offering and its subsequent purchase of Guadalajara-based Electronica Pantera, has lofted the company into what some analysts say is fast becoming a market-leading position.
"That really was a launching pad, if you will, to become attractive to some customers that previously we would not have had access to," Mathias said. "And since that time, we've been trying to increase our competence both from a technical standpoint and from a service standpoint, and continue to fill in the puzzle on a global basis to make sure that we have capabilities that are located where our customers are."
In addition to the Mexican facility, JPM has either acquired or built new manufacturing facilities in Canada, the Czech Republic, and, most recently, in Brazil. The company also has some subcontracting relationships in Asia, as well as a recently launched joint venture in Northern Ireland.
This year, Mathias said the company will be looking to strengthen its position in Asia.
"We're involved in a number of manufacturing programs for our customers utilizing contractors in Asia, and it's our intention to formalize a business structure with one or more of them," he said, noting that those relationships could turn into either direct equity investments or joint ventures.
"This year is one in which we plan to try to structure something more formal in Asia," Mathias said. "We also will be looking at sourcing more components in Asia going forward."
And it is JPM's global presence, compounded with its push toward offering value-added services such as inventory management and design engineering, that have analysts looking favorably on the company in 1999 and beyond.
"The primary driver of their business is really the supplier-consolidation trend," said David Parrish of Advest Inc., Boston. "There are a lot of major OEMs out there that are really consolidating their supplier bases, and as they do that, they're looking
at suppliers that have the full portfolio of services to be able to meet their requirements. That's really where JPM fits into the fold. They can provide the inventory management. They can provide the design engineering. And they have global manufacturing capabilities. They also have a large product portfolio. Those really are most of the requirements that the large OEMs out there are looking for."
Though competing with global powerhouses, including connector makers AMP Inc. and Molex Inc.-each of which had cable-assembly divisions that ranked among the top 10 suppliers in 1997, according to figures compiled by Fleck Research, Santa Ana, Calif.-JPM's position as an independent provider of cable-assembly solutions will likely play well for the company as it moves ahead with its expansion plans, according to Parrish.
"Typically, I think the OEMs really favor the independents over the dependents, because they don't like to get locked into a particular solution," he said. "If you go to AMP for a particular assembly, you can bet there's going to be an AMP connector on both ends of it. You're then going to be locked in. If you go to JPM, you're going to get the best solution. And that's really how they differentiate themselves from the connector manufacturers."