October 18, 2004
Engineering Manufacturing Service (EMS)
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The future direction of the company is spelled out in an executive letter to shareholders signed by Jure Sola, Chairman and CEO, and Randy Furr, President and COO. This letter says in part:
On June 28, 2004, Sanmina-SCI announced it had entered into an agreement to acquire Pentex-Schweizer Circuits Limited, a printed circuit board fabrication provider with operations in Wuxi, China and Singapore. The total purchase price is expected to be approximately $78.8 million.
In July 2004, the firm announced a phase three restructuring plan, which they expect will result in restructuring charges of up to approximately $100 million over the next four to five quarters. At the conclusion of phase three restructuring activities, they expect to achieve reductions in non-cash and cash costs totaling approximately $22 to $24 million per quarter.
Hon Hai Precision Industry Co. Ltd
Company founder is Terry Gou who started Hon Hai in 1974 in a garage with 10 employees making plastic parts for black-and-white TVs. The company's early success was with sockets that allowed add-on memory modules to be snapped into PCs. The firm opened its first production facilities in China in 1993 and now has five industrial parks. Hon Hai is the largest Taiwanese manufacturing company ahead of TSMC. It is also the country's largest exporter. The company's brand name is Foxconn. Recent financial information for the company is available only through reports made to the Taiwan Stock Exchange (M.O.P.S. Market Observation Post System of the Taiwan Stock Exchange)
In November 2003 Hon Hai announced an agreement to acquire Ambit Microsystems Corporation, Taiwan's leading ODM and supplier of broadband communications products in a stock transaction valued at US$1.08 billion. Ambit's revenue of NT$30 billion consists of 40% wireline broadband, 24% wireless broadband, 14% analog modems, 14% power products, 6% RF packaging and 2% other. Ambit's WLAN and broadband access strengths, together with Hon Hai's PC dominance, create a strong 3C platform for diversification into integrated mobile computing devices.
In January 1994 Celestica was incorporated as a wholly owned subsidiary of IBM. In 1997 Celestica was acquired by Onex Corporation and Celestica management from IBM. In July 1998 the company completed largest IPO in EMS history and largest technology IPO in Canada, raising gross proceeds of US$414 million. Celestica embarked on a aggressive acquisition campaign, 8 in 1998. In 2000 Celestica acquired the Rochester, Minnesota, and Vimercate and Santa Palomba, Italy operations of IBM. The same year Celestica announces a strategic EMS alliance with Motorola with an estimated value of more than US$1 billion over a three-year period. In 2001 the firm announces a five-year strategic
manufacturing agreement with Lucent worth up to USD $10 Billion. In 2002 the company formed a strategic five-year USD $2.5 billion outsourcing relationship with NEC Corporation.
For the last 4 reported quarters Celestica had revenues of $7.88 billion and a net loss of $264 million.
By the end of 2003, the Company had transitioned most of its high volume products to low cost geographies, with approximately 70% of its production facilities in lower cost geographies, up from 50% a year earlier.
In FY2003 Celestics's top five customers accounted for 51% of revenue down from 66% in FY2002. The top ten customers accounted for 73% down from 85%. SUN, IBM and Lucent technologies each accounted for more than 10% of revenues for 2001, 2002, and 2003. Cisco did in 2003.
During the electronics industry downturn Celestica has been expanding the company's exposure in non-communications, non-computing segments. These segments include industrial, aerospace and defense, medical, automotive and consumer. Over one-third of the company's 80 new customers are in these segments. In March 2004, Celestica completed the acquisition of Manufacturers' Services Limited (MSL), a diversified EMS provider with broad exposure to some of these markets. The transaction was valued at $320 million. In 2004, revenue from these diversified segments should approximately double as a result of the MSL acquisition.
On Sept 30th 2004 Celestica Inc. announced it has completed the divestiture of its Power Systems business to C&D Technologies, in an all-cash transaction valued at US$52.8 million.
Jabil Circuit Inc
Jabil Circuit began 1966 in Detroit, MI. Their earliest work was the manual assembly of replacement circuit boards for Control Data. The name Jabil originated with the founders' first names, a combination of James and Bill. In 1976 the company won a large contract with General Motors to develop a customized, highly automated production process. In 1982 the company moved its headquarters to St. Petersburg, Fl. The company had its IPO in 1993. During the nineties Jabil opened operations in Europe, Latin America and Malaysia. In 2002 the firm acquired Philips Contract Manufacturing Services.
The company has been consistently profitable. However, with the exception of 2002 net income has never been above a few percentage points of total revenue. In the last four reported quarters Jabil Circuits had revenues of $6.2 billion and net income of $167 million. In FY2003 the top five customers accounted for 53% of total revenue. Cisco, Philips and HP each accounted for more than 10%.
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-- Jack Horgan, EDACafe.com Contributing Editor.
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