EMS providers SMTC Corp., and Plexus Corp. have joined the growing list of technology companies that have projected lower revenue in upcoming quarters.
Order push outs and cancellations from customers has caused SMTC to anticipate an adjusted net loss between 8 and 10 cents on revenue of $200 million for the Markham, Ontario company's first quarter of 2001, ending March 31. Paul Walker, SMTC's president told analysts today that he is not providing specific guidance, but expects the company to have a slower first half of 2001.
The sluggish demand that SMTC is experiencing has been noticeable among many EMS participants who have initiated layoffs, plant consolidations and other restructuring efforts to get through this difficult period.
SMTC reduced its temporary and permanent workforce by 1,110 employees in December and will close its Denver, Colorado manufacturing facility within the next 30 to 90 days, said Bruce Mann, SMTC's vice president of investor relations. The Denver plant was used for new production introduction and printed circuit board assembly work for major OEMs such as IBM Corp. The move marks the first time the EMS provider has shut a manufacturing operation.
"It was the least strategically located plant relative to our customers," Mann said. "The unit of IBM that we do work for in Denver is based in Raleigh, N.C. and we have other customer that is in San Jose. So the NPI work will go to San Jose, and the IBM stuff will go to our Charlotte, N.C. facility and the volume production will go to Chihuahua, Mexico."
SMTC is looking forward to a better second half of 2001 as six new programs and customers from networking, industrial and telecom OEMs are expected to ramp during that period.
"We're optimistic," Mann said. "We're one of the best positioned of the mid tier providers because we're vertically-integrated and we have a global footprint."
Meanwhile, executives at Plexus Corp., Neenah, Wis., reduced the company's earnings outlook for the second and third quarter of 2001 citing the slower economy and inventory situation in the networking/data communications sector.
Plexus' revised outlook for its second quarter is between $278 million and $282 million.
"We believe Plexus could reduce headcount by 5% or less and implement other cost cutting initiatives that would result in a small, one-time restructuring charge in the third quarter that we estimate at between $2 million to $3 million," said Jerry Labowitz, an analyst at Merrill Lynch & Co. in New York in a report.
Said Louis Miscioscia, an analyst at Lehman Brothers Inc., New York, in a report, "We would expect most of the March quarter EMS providers to either pre-release or reduce expectations for the June and September quarters when they report in April."