Some of the world's biggest electronics manufacturing services companies gathered in San Francisco earlier this week at the BancBoston Robertson Stephens Electronic Manufacturing Products & Services Conference. Here are reports on some of the companies' presentations:
Artesyn: Bullish about '99Artesyn Technologies Inc. president Joseph O'Donnell said the company is on track to meet revenue and profit expectations. The power-supply company is expected to finish the year with $600 million in sales and earnings per share of between $1.08 and $1.12. "We think those estimates are realistic," O'Donnell said.
O'Donnell expects that the Boca Raton, Fla.-based company will continue to participate in the industry's consolidation activity, which has already boosted Artesyn's position over the last several years. Artesyn acquired Zytec Corp. in December 1997, a move that more than doubled Artesyn's revenue base and bolstered its market share. Artesyn now ranks fifth among power-supply companies worldwide, according to estimates from BancBoston Robertson Stephens.
Celestica: $10B by 2001
Aiming to achieve $4.6 billion in sales this year and $10 billion in 2001, Celestica Inc.'s top-line growth will continue to be supported by an aggressive acquisition program.
The company is seeking "more strategic OEM divestiture opportunities in datacom and telecom," said Tom Tropea, senior vice president of marketing and business development. A potential merger candidate "must be a good product, geographic, and cultural fit," he said.
Celestica has acquired more than two dozen companies since early 1997 and another acquisition is pending, Tropea said.
In April, Toronto-based Celestica completed the purchase of a facility in Rajecko, Czech Republic, from The Rochling Group's Gossen-Metrawatt subsidiary. In the same month, Celestica said it would acquire a portion of Hewlett-Packard Co.'s medical operations, which could produce annual sales of $100 million, according to BancBoston Robertson Stephens estimates.
Among the other tactics outlined by Celestica to bolster its sales and earnings growth are expanding its geographic footprint; leveraging its supply-chain and engineering prowess; developing new technology; expanding service offerings; and diversifying its customer base.
In 1998, Celestica's top customer accounted for 24% of sales, and the top five for 69%. By 2001, Celestica hopes its top customer will represent 15% to 20% of sales, and the top five 50% to 60%. North America and Europe account for 77% and 23% of Celestica sales, respectively. The company's goal is to bring Asia into the fold over the next few years, with the region projected to account for 15% of sales, Europe 25%, and North America 60%.
Whatever the mix, Celestica is aiming to achieve annual sales growth of 45%, and long-term EPS that consistently exceeds yearly comparisons by more than 30%. In Celestica's second quarter, the company achieved that and more. Sales grew 62%, to $1.25 billion, up 62% from $773.6 million in the same period of 1998, and up 16% from the first quarter this year.
Hadco: Acquisition in works
Printed wiring board manufacturer (PWB) Hadco Corp. is in talks to acquire a small European PWB company, in a move to boost the level of revenue generated outside the United States, according to Gordon Bitter, chief financial officer at Salem, N.H.-based Hadco. Bitter said that the transaction, if completed, would be worth between $10 million and $15 million.
"We're not looking for a major manufacturing presence in Europe, and that's why the amount involved is so small," Bitter said. "But we still want to raise revenue from outside the U.S. and we have already identified some candidates and started due diligence with one company."
Hadco, one of the top four PWB manufacturers worldwide, has said it wants to triple the revenue generated from outside the United States from the current level of about 15%.
Hadco is not alone. Many component suppliers and contract electronics manufacturers at this week's conference emphasized the increasing importance of European and other foreign sales to their continued profitability.
"We have identified six EMS companies that have established facilities in Eastern Europe over the past year," said analyst J. Keith Dunne of BancBoston. "We expect strong growth over the next few years in every major geographic region of the world and, based on recent trends, we could be too conservative in our estimates for emerging countries and Western Europe."
Jabil: Will top $2B this year
Jabil Circuit Inc. will cap off fiscal 1999 with more than $2 billion in revenue and $140.9 million in operating income, said president Tim Main. Still, Jabil's annual revenue and operating income growth of 57% and 33%, respectively, will belie the company's weak fourth quarter ending in August.
Earnings per share are still expected to come in roughly 10% below analysts' original fourth-quarter estimates of 34 cents per share. The company announced in its third-quarter conference call in June that last-minute design delays on new products from two customers would cut into fiscal fourth-quarter revenue and net-income growth. "We're not looking for a surprise upside in the fourth quarter," Main said.
In the third fiscal quarter ended May 31, the company posted earnings of $24.4 million, or 29 cents per diluted share, on revenue of $522.5 million.
The St. Petersburg, Fla.-based CEM, which has been traditionally known to avoid acquisitions as a vehicle for growth, has changed its stance recently. After two acquisitions in the past 15 months, Jabil plans to make additional investments to expand its global blueprint, as well as to augment its repair and services business, Main said.
In May 1998, Jabil acquired the printed-circuit assembly assets in Boise, Idaho, and Bergamo, Italy, of Hewlett-Packard Co.'s LaserJet Solutions Group Formatter Manufacturing Organization (FMO). And last month, EFTC Corp. announced it was selling its repair and warranty operation to Jabil for $30 million. That deal is expected to close this month.
SCI: On the acquisition trail
SCI Systems Inc., the world's second-largest CEM, hopes to make several acquisitions in the next few months.
Amid a climate of continuing consolidation among smaller CEMs, SCI said it expects to add capacity by buying plants from OEMs and by acquiring other CEMs in areas where it either has a limited presence or needs to expand further.
The strategy marks something of a shift for the Huntsville, Ala., company, which in the past few years has concentrated on internally driven expansion programs.
"You will see us participate in some significant acquisitions in the next 12 months," said Gene Sapp, chief executive of SCI, Huntsville, Ala.
Solectron: Ready to buy
CEM market leader Solectron Corp., which has filed to sell as many as 15 million new shares, said that a large percentage of the $950 million it expects to raise from the offering will be used for additional strategic acquisitions and for capital expenditures.
The Milpitas, Calif.-based company is completing the acquisition of two OEM plants, which it said should add about $300 million to its annual revenue.