Lackluster growth prospects in the electromechanical switch market have already prompted one megamerger and more consolidation is likely to follow, according to industry executives.
ITT Industries' Cannon division, with North American headquarters in Eden Prairie, Minn., recently jumped to first place among switch makers with the $117 million acquisition of C&K Components Inc. (Watertown, Mass.). The companies' combined revenues are approximately $350 million.
Darrell Wilk, director of marketing, worldwide, for ITT/Cannon, said the acquisition will better position ITT to provide "one-stop shopping" for switch products. As with other types of components, he said, customers want to buy as many different switches as possible from a single manufacturer.
Wilk described C&K as an excellent fit with ITT, explaining that Cannon's switch sales are strong in Europe and Asia-Pacific while C&K focuses on North America and is well-positioned with top distributors. ITT is on the lookout for additional acquisitions, he said, and talks are currently under way with a manufacturer he declined to name.
Kiyoko Toyama, president of NKK Switches (Scottsdale, Ariz.), said she was surprised by the ITT acquisition, but put the best face on it in terms of competition. "Whenever there's merger activity, it's followed by short-term instability that presents us with a tremendous opportunity to capture business," she said.
But John A. Gordon, senior analyst in the electronic components business group at Venture Development Corp. (Natick, Mass.), noted that "The larger suppliers now have to compete in a narrowing field. Smaller and niche-market suppliers have little choice but to try and compete by any means necessary, or run the risk of being swallowed up."
Added Gordon, "As the competitive environment changes, vendors have to fine-tune their target markets, and their positioning and promotion."