With top-tier contract electronics manufacturers knocking at its door, Varian Inc. is steadfastly refusing to sell its lucrative CEM division.
Allen J. Lauer, president and chief executive of Varian, Palo Alto, Calif., told EBN in an interview last week that the company has turned down several offers from major CEMs interested in the scientific instrument company's manufacturing arm, Varian Electronics Manufacturing.
"I'm not interested in selling the business. There's a great deal of value and growth to it," Lauer said.
Varian's CEM division, which specializes in low-volume, high-mix products for the telecommunications industry, had fiscal 1999 sales of $96 million. At a time when midtier CEMs are struggling to find their niche markets, Varian's manufacturing division, located in Tempe, Ariz., is attractive to outsiders.
First-quarter 2000 sales for the CEM division rose 57% to $33.8 million from $21.5 million in the year ago quarter. Lauer expects the division to post sales of $140 million this year, largely through the purchase of new facilities.
Last month, Varian boosted its manufacturing capacity when it acquired a 112,000-sq.-ft. electronics facility in Poway, Calif., from Inter-Tel Inc., Phoenix, and hired 130 former Inter-Tel workers.
"We should be able to ship $80 million worth of products with the additional capacity," Lauer said.
Varian was created last year when Varian Associates Inc. broke up into three separate entities: Varian Medical Systems, Varian Semiconductor Equipment Manufacturing Co., and Varian Inc.
Instead of courting major OEMs, Varian targets small electronics companies and start-up businesses in the networking and telecom fields. Some of their customers have sales that range between $20 million and $200 million.
"There's not going to be a spin-off in the near term," Lauer said. "We're still too small in our present size. My goal is to grow it to $250 million or $300 million. That will be achieved in two to three years time."
Earlier this month, Varian's board of directors decided to repurchase up to 1 million shares of the company's common stock through Sept. 28, 2001. The company said the repurchase represents about 3% of Varian's 31 million outstanding shares.
In a related development, Varian promoted Sergio Piras and Wilson Rudd to corporate vice president posts. Piras, a former general manager with Varian Vacuum Technologies in Torino, Italy, is now responsible for the company's worldwide vacuum business. Rudd is a former general manager with Varian Electronics Manufacturing.