MMI December 2006

Vol. 16, No. 12: December 2006


Firms Nearly Agree on EMS Industry CAGR

High growth rates a thing of the past

Four forecasts differ by little more than 2% regarding a five-year CAGR (compound annual growth rate) for worldwide EMS revenue. Those who think that the EMS industry still has potential for high growth will be disappointed by this near consensus. CAGRs projected by four market research firms vary from 10.0% to 12.2% for the period 2005 to 2010. Not only that, three out of four firms have estimated CAGRs that are less than 1% apart in a range from 10.0% to 10.8% (see table).

The four firms supplying forecasts are Electronic Trend Publications, IDC, iSuppli, and Technology Forecasters Inc.

Their estimates for EMS revenue in 2006 average $149 million, which represents a 13.5% increase over the 2005 mean. This increase is slightly above but in line with MMI’s projected growth of 11.6% for the nine large US-traded providers in 2006 (Nov., p. 2). Projections for 2007 average $167 million, which corresponds to an 11.8% increase over the comparable figure for 2006 (table).

Looking at the average revenue forecasted each year from 2005 to 2010, one finds a pattern of gradually decreasing growth year to year. On the average, EMS revenue growth is projected to decline to single digits by 2009, and in 2010 it will exit the forecast period at a predicted average of 8.7%.

When ODM revenue forecasts are averaged, the resulting CAGR is 13.6% versus 10.7% on the EMS side (table). A difference of less than 3% between the two rates implies that the growth disparity between two sectors will narrow. Indeed, for 2006 the average ODM growth rate is 18%, or 4% to 5% above the EMS average. By 2010, the gap shrinks to 1.3%. On the average, year-to-year growth is also forecasted to decline for the ODM business.

In 2010, ODM sales will reach a projected average of $134 billion, compared with $219 billion for the EMS industry. At that point, the ODM sector will represent 37.9% of total outsourcing revenue versus 62.1% for the EMS side. Based on forecast averages, the ODM sector will pick up 2.7 percentage points in market share from 2005 to 2010.

On an average basis, estimated outsourcing revenue (EMS + ODM) will increase from $203 billion in 2005 to $353 billion in 2010 for a CAGR of 11.7%.


News


Sanmina-SCI Reveals Extent of Problems with Grant Dates

Sanmina-SCI’s investigation of its stock option and restricted stock grants has concluded that equity awards were misdated for all seven officer grants issued from fiscal 1997 through fiscal 2002 and for 19 of 21 non-officer grants from January 1997 through June 2006 (Sept., p. 7-8). In nearly all cases, the record date for accounting purposes preceded the appropriate grant date, and the stock price on the record date was lower than the price on the appropriate date. As a result of correcting the grant dates, the company has recognized a pre-tax compensation expense of $115.2 million for the fiscal years 1997 through 2005.

The San Jose, CA-based provider also found other problems with its administration of equity awards. Sanmina-SCI used the incorrect date for new options granted under an option exchange program offered in 2003. Correcting the date increased stock-based compensation expense by $26.0 million from fiscal 2003 through 2005. Sanmina-SCI also had to record a $58.6-million compensation expense in fiscal 2003 for cancelled options that were submitted for exchange. In addition, modifications had to be made to certain option grant awards in connection with employee termination agreements between 1999 and 2006. This pre-tax charge amounted to $24.4 million for the fiscal years 1997 through 2005. Altogether, errors related to equity awards amounted to an additional $224.2 million in pre-tax stock compensation expense for the fiscal years 1997 through 2005.

As to the impact on cash, additional payroll taxes to be paid in connection with the option grants totaled about $3.6 million for this period. There was no impact on revenue.

Also, Sanmina-SCI undervalued unvested awards that were exchanged in its December 2001 acquisition of SCI Systems. As a result, Sanmina-SCI overstated goodwill for the acquisition by $28.8 million, which led to overstating a goodwill impairment charge by that amount in fiscal 2002.

In assessing how the errors in stock option accounting occurred, the investigation identified concerns with respect to the actions of two former unnamed executives of the company. The investigation also found deficiencies in internal controls, including record keeping.

Findings of the company’s investigation of equity awards appeared in its Form 10-Q for the quarter ended July 1, 2006. The 10-Q, whose completion was delayed because of the investigation, was filed this month. Sanmina-SCI reported a loss of $54.8 million for the quarter, compared with a restated loss of $4.1 million for the year-earlier period. This restated loss included negative adjustments of $16.7 million for additional stock compensation expense and a positive net change of $12.7 million for an interest rate swap. These adjustments equated to a loss of $0.01 per basic and diluted share for the quarter ended July 2, 2005.

Sanmina-SCI has been named as a nominal defendant in multiple shareholder derivative lawsuits, some of which have been consolidated. Twenty-seven different current and former directors and officers have been listed as defendants in one or more of the actions. In a shareholder derivative lawsuit, a shareholder brings legal action against one or more individuals on behalf of a company in which the shareholder owns stock.

The company intends to file its Form 10-K within the 15-day extension afforded by the SEC.

Jabil Misses 10-K Due Date

Jabil Circuit’s investigation of its past stock option practices continues to prevent the company from filing full financial results. The St. Petersburg, FL-based provider was unable to file its annual report on Form 10-K for its fiscal year ended Aug. 31 by the extended deadline of Nov. 29. This month, Jabil did supply some limited financial information for the November quarter.

The company stated that it would not be in a position to fix a filing date for the 10-K until it has completed evaluation of its historical financial statements and its accounting firm is able to finish auditing statements for the 10-K. Last month, Jabil announced that it would need to restate its 2005 financial statements and possibly other statements as a result of its stock options review (Nov., p. 5). Historical stock options grants that could result in an adjustment to Jabil’s past financial statements date back to 1996. The provider has not finished this review.

For the quarter ended Nov. 30, Jabil reported sales of $3.22 billion, up 34% year over year. Revenue was at the midpoint of guidance. The company’s guidance for the February 2007 quarter calls for sales in a range of $2.75 billion to $2.85 billion, which corresponds to a sequential decrease of 11.6% to 14.7%. This revenue expectation is based upon seasonally lower sales in Jabil’s consumer sector along with a more muted view of overall end market growth. The company expects that its consumer business, the largest contributor to sales, will drop by about 33% in the February 2007 quarter versus the prior quarter, reflecting normal seasonal patterns and higher than desired inventory levels for certain products. For fiscal 2007, Jabil reaffirmed prior guidance of about 20% sales growth (Sept., p. 8).

The company took a charge of about $12 million in the November quarter for discontinuing an unspecified consumer product that Jabil had developed. After price points declined dramatically, the company decided to exit this business.

Responds to shareholder suits

Jabil is the subject of several shareholder derivative and purported securities class action lawsuits in connection with certain past stock option grants. A Special Review Committee of Jabil’s board has largely completed its investigation of the allegations in the shareholder suits and has authorized Jabil to state: “The Special Review Committee has concluded that there is no merit to the allegations in the State Court derivative complaints that Jabil’s officers issued themselves backdated stock options or attempted to cause others to issue them.”

Because Jabil missed the extended 10-K deadline, the New York Stock Exchange has notified Jabil that the NYSE will begin monitoring the company and the filing status of its 10-K. If Jabil does not file its 10-K within six months of the extended due date, the NYSE will determine whether Jabil should be given up to six months more to file. If no more time is granted, suspension and delisting procedures could be started.

To avoid the prospect of Jabil violating a credit facility covenant, credit facility lenders have agreed to waive, until Feb. 2, 2007, the requirement that Jabil deliver its quarterly and annual financial statements. The lenders did not charge a fee for the waiver. Jabil also faces a similar requirement for its $300 million of 5% notes. If Jabil does not deliver the 10-K to the bond trustee by Dec. 14, holders of 25% of the outstanding amount of the 5% notes could require Jabil to deliver the 10-K within 60 days. If Jabil does not comply, they can demand immediate payment for the notes. The company is considering its options regarding the 5% notes.

The company also disclosed that it is reviewing unrelated matters covered by the historical periods at issue. Jabil did not specify the nature of these matters nor the reason for examining them.

Kimball Electronics to Acquire Reptron

In a diversification play, Top 50 EMS provider Kimball Electronics Group (Jasper, IN), a division of publicly held Kimball International, and Reptron Electronics (Tampa, FL) have signed a definitive agreement by which Kimball will acquire Reptron for $0.68 per share and other consideration. The deal is worth a total of about $46 million.

Under the agreement, each common share of Reptron will convert into the right to receive cash in the amount of $0.68, which represents a 28% premium over Reptron’s three-month weighted average stock price. Kimball expects to pay about $3.4 million for Reptron’s shares.

The transaction also includes Kimball funding the retirement of Reptron’s senior secured notes due 2009 and Kimball’s assumption of short-term debt of Reptron. As a condition of the deal, a cash tender offer for Reptron’s outstanding senior notes must be completed at a 12.5% discount to par value. The cash tender offer, to be funded by Kimball, will amount to $26.3 million at the discount. Minimum acceptance of the offer is 97% unless waived by Kimball. Holders of more than 80% of the notes are committed to participate in the offer. In addition, Kimball will take on about $16 million in short-term debt.

Subject to various conditions, including the approval of Reptron stockholders, the transaction is expected to close in Q1 2007.

“This acquisition supports Kimball’s ongoing strategy to diversify from our automotive base into end markets that also require high quality and high reliability. I am confident that Reptron’s experience and proven track record of servicing medical and high-end industrial customers, combined with Kimball’s core competency of durable electronics, will strengthen our ability to serve our combined base of customers,” stated Don Charron, president of Kimball Electronics.

In addition, executives of both companies have identified a number of synergies that will result from the combination and expect to reap the economic benefits from those synergies over several quarters, after closing the deal.

For the first three quarters of 2007, Reptron reported sales of $108.7 million, up 6.7% year over year. The provider posted an operating loss of $0.9 million and a net loss of $3.7 million for the period. Medical work contributed 39% of sales in the period, while the industrial/instrumentation segment accounted for 33%. Semiconductor equipment represented 11%, which could be counted as industrial business. On a trailing four-quarter basis, Reptron recorded a slight operating loss of less than $50,000 on revenue of $145 million.

As of March 1, the company employed 952 people. Reptron operates in four US locations according to its website; they are Gaylord, MI; Hibbing, MN; Tampa, FL; and Fremont, CA. Obviously, Reptron lacks facilities in low-cost geographies.

“Kimball’s strong balance sheet and global footprint make the deal attractive for Reptron’s customers, employees, and shareholders,” said Paul Plante, Reptron’s CEO.

The Electronic Contract Assemblies segment of Kimball International posted September quarter sales of $158.5 million compared with $108.0 million in the year-earlier period. Two acquisitions completed this year contributed $63.8 million to revenue for the September quarter (Kimball’s fiscal Q1). Without these acquisitions, Kimball’s EMS sales in the quarter would have declined year over year.

The EMS segment incurred a $0.5-million loss from continuing operations in the September quarter versus income of $0.8 million from continuing operations in the same period a year ago. A shift in the sales mix and operating inefficiencies at certain locations hindered September quarter results. Also, losses from Kimball’s recently completed China facility amounted to about $0.02 per Class B share. And the company incurred severance costs equating to about $0.01 per Class B share from realigning some of its shared services as part of cost reduction efforts in this segment.

Deals done… Flextronics (Singapore) has completed its acquisition of International Display Works (Roseville, CA) in a stock-for-stock transaction with an enterprise value of about $243 million (Sept., p. 5). IDW specializes in small-form-factor LCD work. Tom Lacey, chairman and CEO of IDW, will head Flextronics’ components group….The acquisition of digital camera maker Premier Image Technology (Taipei, Taiwan) by Hon Hai Precision Industry (Tu-Cheng, Taiwan) was due to take effect on Dec. 1 (June, p. 3)….A management buy-out of EMS provider Axiom Electronics (Beaverton, OR) has taken place. As a result, Axiom gained its independence from former parent company Ambitech International (Chatsworth, CA)….Moventis Capital (White Rock, BC, Canada) has closed on its acquisition of EMS provider PTL Electronics (Delta, BC, Canada). (See May, p. 6)….Recently, EMS provider Sibex (Safety Harbor, FL) acquired the assets of another provider, Futronix (Homosassa, FL), which reportedly filed for bankruptcy protection in 2005. With the deal, Sibex gained a 30,000-ft2 facility, which employs 38 people, according to the company’s website. Also, Sibex plans to open a customer-dedicated facility of 5,000 ft2 in the Largo, FL, area. The website lists January 2007 as the operational date for this facility. Privately owned Sibex reports its annual sales as $5 million.

India’s Solectron Centum to Spawn EMS Company

Solectron Centum Electronics Limited (Bangalore, India), a publicly traded company in India and part of Solectron (Milpitas, CA), will spin off the Indian company’s EMS division into an independent company under a demerger scheme approved by Solectron Centum’s board. The EMS division will become a new company to be called Solectron EMS India Limited. In this scheme, the share capital of Solectron Centum will be equally divided between the new EMS company and the demerged Solectron Centum.

Solectron Centum currently operates two divisions: EMS and components. “The EMS and components divisions have different business models, and Solectron believes the demerger is critical to enable a more effective focusing of management and other resources on the unique requirements of each business,” stated Perry Hayes, Solectron Centum’s chairman and senior VP and treasurer of Solectron.

According to a statement from Solectron Centum, Solectron will assume management responsibility for the demerged EMS operation, while Apparao Mallavarapu, managing director of Solectron Centum, will continue to oversee the business retained by it.

For Q3, Solectron Centum’s services business generated sales of 324.4 million rupees ($7.3 million at current rates), an increase of 264% from the year-earlier quarter, and earned operating income of 25.8 million rupees ($577,000).

Presented as an Indo-US joint venture company, Solectron Centum is a supplier of frequency control products and hybrid microcircuits as well as EMS. The company also offers software engineering. Reuters reported that Solectron owns a 50.68% interest in Solectron Centum.

The proposed demerger is subject to statutory and regulatory approvals.

More new EMS providers…Re-portedly, two new EMS providers have emerged from divested operations in Sweden. According to European website evertiq.com, Proxy Electronics will take over a power modules operation in Kalmar, Sweden, from Ericsson, and Speed Production has occupied a former NOTE facility in Borås, Sweden.

New business…Hon Hai Precision Industry, also known by its trade name Foxconn, will begin delivering notebooks next year to Apple, reported DigiTimes.com, which sourced a Chinese-language newspaper that in turn cited the Taiwan-based Topology Research Institute. Total volume expected was reported as 1.5 million units. In addition, Hon Hai will manufacture in volume a robotic toy dinosaur, called Pleo, for Ugobe (Emeryville, CA), according to DigiTimes.com. Hon Hai will reportedly invest in Ugobe and set up a toy division….Flextronics’ facility in Plano, TX, is handling the manufacture of new automotive kiosks invented by Smart Automotive Management (Tucson, AZ). The kiosks, which will be introduced this month, offer a drive-up diagnostic tool for cars and light trucks. Also, Flextronics will provide manufacturing for a hearing system developed by Nacre (Trondheim, Norway), evertiq.com reported, and manufacturing will take place in a Flextronics facility in Norway. Nacre recently received a $30-million order for hearing systems from the US Marine Corps….Trend Micro (Tokyo, Japan) has chosen Sanmina-SCI to provide customer and channel support for Trend Micro security appliances. This relationship covers global logistics and support services provided to channel partners and customers worldwide who purchase the security appliances. Trend Micro offers software, hardware and services for network and Internet content security. Also, Nujira (Cambridge, UK), a supplier of power amplifier technology, has selected Sanmina-SCI as worldwide manufacturing partner to support Nujira’s sales to major OEMs in the wireless infrastructure business. Sanmina-SCI will manufacture a modulator that is the key component of Nujira’s technology for improving power efficiency of RF power amplifiers in various wireless systems….According to a report posted on www.portfolio.hu, a Jabil Circuit operation in Szombathely, Hungary, will take on repair work for Cisco Systems. The Hungarian unit will add 50 people as a result….Zastron Electronic (Shenzhen), a wholly owned subsidiary of Nam Tai Electronics (Tortola, British Virgin Islands) has secured a contract from QUALCOMM MEMS Technologies, a new Nam Tai customer and a wholly owned subsidiary of QUALCOMM. Under the agreement, Zastron will provide module assembly services for QUALCOMM’s iMoD displays. …Aegis Semiconductor (Woburn, MA) is using Top 50 EMS provider Fabrinet (Cayman Islands) to boost output of Aegis optical channel monitors.…Kitron (Lysaker, Norway), another Top 50 provider, and Kongsberg Defence & Aerospace have entered into a profit-sharing agreement for development, industrialization and production of a military radio link. For Kitron, the agreement will generate initial revenue of about NOK 70 million ($11.5 million) from 2007 to 2009. Also, Kitron and Radio Components AB, which sells equipment for cellular radio base networks, have renewed their industrialization and production agreement of 2004. The renewal will generate estimated revenue of about NOK 60 million ($9.8 million) for Kitron in 2007, with further growth expected. Kitron Microelectronics, a Swedish subsidiary of Kitron, has received orders from Transmode (Stockholm, Sweden), a developer of optical networking systems, for delivery in 2006. These orders are worth about SEK 50 million ($7.3 million), and Kitron expects to increase production for Transmode in 2007….Baldor UK, a supplier of motion control products and a division of Baldor Electric (Fort Smith, AR), has selected NOTE (Danderyd, Sweden), also a Top 50 provider, as EMS partner for the manufacture of a new generation of servo drives. The initial annual value of the program is about SEK 40 million ($5.9 million). Also, the NOTE Norrtelje unit (Norrtälje, Sweden) and SWE-DISH Satellite Systems, a maker of mobile satellite communication equipment, have extended and expanded their relationship with the signing of a three-year agreement. The two companies will expand their collaboration on the production of three SWE-DISH product lines.…Lockheed Martin has awarded LaBarge (St. Louis, MO) a contract to continue producing circuit card assemblies for the signal processor of the Aegis Weapon System, designed to operate with a family of US Navy missiles. In addition, LaBarge has secured a contract valued at about $5 million from Kaman Aerospace. Under the contract, LaBarge will provide cockpit wiring harnesses for various models of the Black Hawk helicopter. LaBarge also does other work for the Black Hawk program.…Automotive Lighting, a Magneti Marelli company, has selected the Manufacturing Services division of Global Display Solutions (GDS) as Automotive Lighting’s supplier of electronics manufacturing services. Headquartered in Italy and with operations in Romania and China, the division will provide complete support on a global scale. Among division customers are GE Medical, Ducati and Marconi. GDS is a manufacturer of industrial displays.

Technology alliances…Celestica (Toronto, Canada) has joined an existing collaboration between Freescale Semiconductor and Wavesat to offer a production-ready WiMAX reference design. Aimed at customer premises equipment (CPE) manufacturers, the platform features Wavesat’s WiMAX Mini-PCI module and MAC software, Freescale’s MPC8323E PowerQUICC II Pro processor, and Celestica’s WiMAX Gateway Solution Accelerator. “As part of our Solution Accelerator strategy, the CPE enables us to offer a pre-invested, modifiable CPE solution that lowers our telecommunications customers’ costs and speeds their time-to-market,” stated Paul Barsley, Celestica’s VP of global design services….TES Electronic Solutions (Langon-sur-Vilaine, France), a design and manufacturing services company, and Wisair (Campbell, CA), a provider of WiMedia Ultra Wideband (UWB) chipsets, are teaming up to offer UWB solutions in Europe. Under the partnership, TES will provide system and module design services and customer support for UWB solutions based on Wisair’s UWB chipset.

Hon Hai Said to be Planning 3 More Sites in China

According to various media reports, the Hon Hai group is laying plans for three more sites in China. Investment in the three locations will reportedly total some $3.2 billion.

Most recently, Hon Hai is said to be planning an industrial park in the central China city of Wuhan, located in Hubei province. IDG News Service and a Chinese website reported that Foxconn Technology Group, a Hon Hai entity, will invest $1 billion in the park. Among the products earmarked for the site are displays, projectors, digital cameras and automobile components, according to a Wuhan Morning Post report posted on another Chinese website. This report noted that Hon Hai intends to make the Wuhan park the world’s largest production base for digital cameras.

Another planned facility in China has been attributed to Foxconn International Holdings (FIH), Hon Hai’s mobile phone subsidiary. Several news sources have reported that FIH intends to spend $1.2 billion or about that amount on a new plant at Langfang in Hebei province. In a statement posted this month on the Taiwan Stock Exchange, Hon Hai said it has made an indirect investment of $33 million in Foxconn Precision Electronics (Lang Fang), which is engaged in manufacturing and marketing of handsets and components.

In the third case, Hon Hai reportedly will sink $1 billion or possibly more – news sources describe the amount somewhat differently – into a complex located in Huai’an, a city in Jiangsu province.

New space…Solectron will build a repair center in Plzen, the Czech Republic. The facility is scheduled to open in the spring of 2007….SMTC (Toronto, Canada) recently expanded its footprint in San Jose, CA, as part of its growth strategy focused on opportunities in the Western region of the US….VTech (Hong Kong) will add a new factory building at its existing Liaobu plant in Dongguan, China, to cope with growing demand for the contract manufacturing services of its CMS business. Scheduled to open in April 2007, the new building will increase the size of the CMS manufacturing facilities by 50%. VTech also operates OEM businesses in corded and cordless telephones and electronic learning products….TXP, a provider of pre-manufacturing services, has added 16,488 ft2 to its facility in Richardson, TX, to accommodate the R&D team of its photonics division. The team expanded from the recent hiring of Siemens’ former Optical Network Terminal (ONT) staff. As a result, the Richardson facility now includes about 47,000 ft2. TXP and Siemens have finalized a license agreement under which TXP will manufacture and market the ONT technology (Oct., p. 6)….NOTE (Danderyd, Sweden) has signed a real estate contract regarding the construction of a new facility for the NOTE Norrtelje operation in Norrtälje, Sweden. The facility is scheduled for completion in the summer of 2007.

Celestica Lowers Q4 Guidance

Celestica has lowered Q4 guidance for revenue and EPS. The company now expects Q4 revenue in the range of $2.20 billion to $2.25 billion, compared with previous guidance of $2.25 billion to $2.45 billion. Guidance for Q4 adjusted EPS was reduced to a range of $0.00 to $0.06 from the earlier expectation of $0.15 to $0.23.

“The change in revenue is based on the overall reductions in demand from several of our largest customers,” Craig Muhlhauser, Celestica’s new president and CEO, told analysts. He also said the revised outlook reflects “largely end market demand reductions across many of our large customers in both the communications and IT segments.” Muhlhauser added that the reductions are not necessarily confined to Celestica’s largest customers.

He attributed the lowered EPS guidance to the decline in volumes and to inventory provisions related to Celestica’s Monterrey, Mexico, facility. The provider ordered more inventory for the site than was needed by customers. Included in the revised guidance is an expected charge of $0.08 to $0.12 resulting predominantly from an increase in inventory provisions at the Monterrey plant.

Muhlhauser said, “Our quarter was not materially affected by any disengagements or lost business.”

Elcoteq also reduces forecast

Elcoteq (Espoo, Finland) has revised its sales and profit guidance downward for Q4. The company now expects that its Q4 sales will be slightly lower than in Q3, and that its operating income will be roughly one-half of the Q3 level. Earlier, Elcoteq had forecasted that Q4 sales and operating income would be at the same level as in Q3.

According to the company, the main reasons for revising the forecast are lower than expected production volumes and intensified competition especially in Europe in both terminal products and communications networks.

More financial news…Solectron reported that its sales in the November quarter increased 22% year over year to $3.00 billion. Profit after tax (GAAP) from continuing operations was $6.6 million in the quarter versus $20.2 million in the year-earlier period. Non-GAAP profit after tax for the November 2006 quarter equaled $47.6 million, or $0.05 per share, compared with $28.1 million, or $0.03 per share, in the year-ago quarter. Non-GAAP gross margin for the November quarter declined sequentially by 30 basis points to 5.1%, which did not meet the company’s expectations. Guidance for the February 2007 quarter is for sales of $2.80 billion to $3.00 billion, and for non-GAAP EPS from continuing operations in a range of $0.04 to $0.06….For the fiscal quarter ended Oct. 31, US-traded SigmaTron International (Elk Grove Village, IL) recorded sales of $44.9 million, up 28.6% year over year. Net income amounted to $708,011, down from $1.2 million in the year-earlier quarter, while diluted EPS came in at $0.18 versus $0.29 in the year-ago period. The company said unforecasted demand from several markets led to operating inefficiencies during the October quarter. SigmaTron is transferring a significant portion of its Hayward, CA, business to its Tijuana, Mexico, operation, whose output is expected to triple over two quarters. But ramping in Tijuana has gone slower than the company wanted. Increased business from existing Hayward customers should offset some of the business moving to Tijuana….For the first nine months of 2006, sales of Top 50 provider PartnerTech (Malmö, Sweden) grew 56% year over year to SEK 2.26 billion ($331 million at current rates), while operating profit increased by 112% to SEK 138 million ($20 million).…Neways Electronics International (Son, The Netherlands), another Top 50 provider, expects 2006 revenue of around 230 million euros, corresponding to an increase of about 11%. The company is also forecasting that net profit will improve by at least 80%….For the six months ended Sept. 30, the CMS business of VTech (Hong Kong) saw its revenue increase 85.7% year over year to $131.3 million. Revenue growth occurred across the board, but was primarily driven by strong demand from existing customers in the areas of switching mode power supplies and professional audio equipment. Europe represented 51.1% of CMS revenue, followed by North America at 33.8% and Asia Pacific at 15.0%….IEC Electronics (Newark, NY) recorded September quarter sales of $8.1 million, up 95.5% from the year-earlier period. This was the highest level of quarterly sales in over three years. Operating income for the September quarter (IEC’s fiscal Q4) stood at 5.5% of sales, compared with 1.4% a year earlier. Net income rose to $352,000 from $52,000 in the year-prior quarter.

Some company news…Top 50 provider Suntron (Phoenix, AZ) and Applied Materials have reached a settlement that ends litigation filed by each company. In December 2004, Suntron sued Applied Materials for damages over $20 million in connection with unused and obsolete inventory that allegedly amounted to more than $18 million (Mar. 2005, p. 6-7). Applied Materials has agreed to pay Suntron a confidential sum and will acquire certain Suntron inventory.

People on the move…Nam Tai Electronics has appointed Warren Lee as CEO. He has been a director of a Nam Tai subsidiary, Nam Tai Electronic & Electrical Products, which is listed on the Hong Kong Stock Exchange. With a history in investment banking, Lee has advised in over 200 corporate transactions of listed companies in Hong Kong since 1992. He succeeds Patinda Lei, who served as both CEO and CFO since January. Lei, who is now chairman of Nam Tai subsidiary Zastron Electronic (Shenzhen), will continue to act as CFO until a replacement can be found. In addition, Seitaro Furukawa has joined Nam Tai’s board as a non-executive director, replacing Stephen Seung who resigned from the board for personal reasons. Furukawa retired as chairman of J.I.C. Technology, Nam Tai’s other Hong Kong-listed subsidiary.…Benchmark Electronics (Angleton, TX) has promoted CFO Gayla Delly to president. Replacing her as CFO will be Don Adam, who most recently served as VP and corporate controller.….Plexus (Neenah, WI) has also announced two promotions within its senior management team. Paul Ehlers has advanced to executive VP and COO, a position that extends his responsibilities to include the company’s engineering business unit and worldwide business development. The COO position has been vacant since August 2003. Ehlers will continue in his role as president of Plexus Electronic Assembly, the company’s manufacturing business unit. Also promoted is Michael Verstegen, who becomes senior vice president, global market development. In this newly created position, he will oversee Plexus’ market-sector based business development. Over the next several months, Verstegen will relinquish his current role as president of the engineering business unit, Plexus Technology Group….Flextronics has hired Peter Ho as its new CPO, overseeing the company’s entire purchasing operation from Shenzhen, China. Before a brief stint at Sanmina-SCI, Ho was chief procurement officer at Thomson, where he spent about 20 years. In addition, Yusuke Kojima has joined Flextronics as president of its Japan operations. He previously served Kodak in various senior executive roles, the most recent of which was president of Kodak Japan and senior adviser for digital imaging systems….Elcoteq (Espoo, Finland) has named Phil Brown president of Elcoteq’s geographical area Americas. He joined Elcoteq in February 2005 as director of human resources for Elcoteq Americas. Before Elcoteq, Brown spent more than 25 years at Goodyear Tire and Rubber in both HR and operations. Also, Richard Appleby has joined Elcoteq as director of Americas operations. Formerly VP of North American manufacturing for Foxconn, Appleby has over 25 years of experience in electronics manufactur-ing….Carl Munio has joined SMTC (Toronto, Canada) as VP and GM of SMTC San Jose (CA). With over 35 years of experience in the computer and networking sectors, Munio previously held senior-level positions at SBE, Sun and HP….IEC Electronics (Newark, NY) has promoted Jeffrey Schlarbaum to executive VP. An EMS veteran, Schlarbaum joined the company in 2004 as VP of sales and marketing. Before that, he served as regional VP of sales for Plexus, Eastern Region VP of sales for now-defunct MCMS, and business unit director for MACK Technologies. In addition, Carl Sassano, chairman and CEO of Transcat, has joined IEC’s board. Publicly held Transcat is a distributor of instruments and a provider of calibration and repair services….Adeptron Technologies (Markham, Ontario, Canada), an EMS provider traded in Canada, has appointed Paul Walker as a member of its board of directors and as a consultant. Walker co-founded and was CEO of SMTC. Most recently, he served as a senior VP, North American business development, for Flextronics….NOTE (Danderyd, Sweden) has hired Gert Larsson as president of NOTE Lund (Sweden), effective Feb. 1, 2007. Larsson joins NOTE from Sweden’s Nolato, a polymer products manufacturer, where most recently he held an executive VP position in the Hungarian business….Norway’s Kitron has brought in Erling Svela as its new CFO. His experience covers both Norwegian and international companies.…VOGT electronic (Obernzell, Germany), which operates businesses in components and EMS, has appointed Dr. Hans-Joachim Dittloff chairman of its management board. He joins VOGT from Agere Systems, where he assumed the roles of managing director and VP engineering. The appointment follows the resignations of Larissa Vogel, a management board member who headed the EMS unit and some other activities, and three supervisory board members, who were subsequently replaced.

Plant closures…According to local media, Solectron plans to close a plant in Kanata, Ontario, Canada, near Ottawa and one in Dunfermline, Scotland.


Copyright 2006 JBT Communications. Unauthorized distribution is prohibited.

MMI November 2006

MMI January 2007

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