Circuits Assembly Online Magazine - Market News

News

JUAREX, Mexico, Dec. 20 -- Electronics manufacturing services firm Elcoteq Network Corp. will buy consumer electronics giant Thomson's Juarez operations and take over its manufacturing in a deal worth over $1 billion.

Under the deal, expected to close Dec. 31, Elcoteq will acquire Thomson's manufacturing operation here, the companies annnounced today. Elcoteq is paying $33 million for the plant, which makes set-top boxes.

Elcoteq also signed a deal to build set-top box products for Thomson in Juarez. Thomson reportedly owns a 30% share of the global set-top box market.

Elcoteq expects the deal to boost the company's sales by approximately $300 million during 2005 and by $800 million to $1 billion during 2005 to 2007.

The acquisition of the Juarez plant will double Elcoteq's manufacturing capacity in Mexico. The Juarez personnel will be retained. Currently, the plant employs 2,000 workers.

In a statement Finland-based Elcoteq said the acquisition is part of a larger plan to balance its global footprint. The company earlier announced announced an expansion into Brazil.

"The Americas is the fastest growing geographical region within Elcoteq, and the addition of Thomson as a significant new customer both accelerates this growth and diversifies and expands the product and service portfolio within Elcoteq Americas," said Doug Brenner, president of Elcoteq's U.S. subsidiary.

ST. PETERSBURG, FL, Dec. 21 -- Global electronics service provider Jabil Circuit will add new plants in India and China, the company confirmed today.

The company announced plans for a 175,000 sq. ft. facility in Ranjangaon, India, its second in that nation. The plant is expected to be fully operational by mid-2005, and will perform assembly, enclosure integration, distribution and repair services and design.

"Planning this second facility in India underscores our commitment to this growing marketplace and the manufacturing needs of both global and indigenous electronic companies in India," said Bill Muir, regional president of Asia. "We see a growing need for full turnkey solutions to serve the India marketplace and our Ranjangaon facility will allow us to offer the full complement of services in close proximity to our end-customers."

Jabil also plans a groundbreaking for a fourth plant in Wuxi, China, next Monday. The 515,000 sq. ft. plant is planned to be fully operational in next fall.

Jabil currently operates 40 facilities worldwide.

MILPITAS, CA, Dec. 21 -- Solectron Corp. today reported sales of $2.7 billion for its fiscal first quarter, flat with 2004 and down from $3 billion sequentially. GAAP income from continuing operations were $47 million for the quarter ended Nov. 30, versus a GAAP loss of $52 million last year. The Q1 2005 results don't include a $2 million restructuring charge.

The drop in revenues was due to weakness in consumer demand for set-top boxes and 3-G wireless handsets, and lagging semiconductor equipment orders, Solectron said. Sales of networking gear also fell.

Earnings met the company's previous guidance.

The firm guided for sales of $2.65 billion to $2.8 billion for the February quarter. "Looking forward, we expect revenue growth in the second half of the year, driven by the expected ramp of recent wins and improved demand," said Mike Cannon, president and chief executive.

Gross margins improved 40 basis points sequentially and operating expenses were cut to $96 million. Cash flow from operations was $190 million. Inventory was reduced $52 million. Inventory turns were 7.1.

GLEN COVE, NY, Dec. 17 - Printed circuit board maker Photocircuits Corp. will cut its manufacturing operations outside Atlanta and lay off 500 staff, the company said today.

The site, located in Peachtree City, GA, will be cut to a single building, from 300,000 sq. ft. and four buildings over the next nine months. The staff will be reduced to 100 workers from the current headcount of 600.

"This change to the physical presence of Photocircuits in North America results from the changing competitive landscape for printed circuits," the company said in an unattributed statement. "More and more customers demand the economic advantages of sourcing in Asia."

Photocircuits will maintain print-and-etch operations in Peachtree City, plus sales and technical services, logistics and inventory management.

Backlogs will be sent to Photocircuits' facility in Glen Cove, New York, and factories in China, where the PCB maker partners with Japan-based CMK.

The company estimates that realignment of the site will last about nine months.

2004 has been unkind to Photocircuits, one of the oldest PCB firms in the world. The company, once the largest board shop in the U.S., is in the hands of outside management and two of its longtime owners -- John Endee and Steve Wohlgemuth -- have been let go. The company had sales of $234 million in 2003, according to PCD&M contributing editor Hayao Nakahara, making it the 32d largest PCB company in the world.

ST. PETERSBURG, FL, Dec. 20 -- Electronics manufacturing services provider Jabil Circuit Inc. today reported record first-quarter net revenue rose 21% to $1.83 billion year-over-year.

For the quarter ended Nov. 30, GAAP net income increased to $55.9 million, from $42.5 million last year.

In a press statement, president and chief executive Tim Main said, "While the end-markets and the economy are just beginning to show signs of improvement, Jabil clearly has the strong trend for electronics companies to outsource in its favor."

Jabil guided for second quarter net revenue of $1.65 million to $1.75 billion and core earnings per share of 26 to 28 cents per diluted share. Estimated GAAP earnings per share are 22 to 24 cents per diluted share. The February quarter is typically hurt by lower consumer spending.

First quarter core earnings -- core earnings as GAAP net income before one-time charges and amortization of intangibles -- increased 26% to $65 million.

Gross profit for the first quarter of fiscal 2005 increased 16% to $154.9 million or 8.4% of net revenue.

On a GAAP basis, operating income rose 32% to $70.3 million.

The company expects to end the February quarter with significantly less inventory, officials said on a conference call with analysts.

Cash flow from operations was lower, at $35 million. Inventory turns were nine. Capital expenditures were $55 million, up nearly 100% over the second quarter. The company said it would stabilize R&D spending at that levels.

Return on invested capital rose to 17% during the quarter. Officials said they aim for ROIC of 15 to 20% longterm.

Three customers made up more than 10% each of Jabil's Q1 sales. Main said the firm plans to reduce its dependence on its top 10 customers.

The company is not ruling out future acquisitions. "We could do deals; we've got the bandwidth and the money to do it," Main said. "There are opportunities in the pipeline."

Jabil maintained previous fiscal 2005 guidance of net revenue of $7.2 billion to $7.4 billion and core earnings per share to be in a range of $1.20 to $1.24 per diluted share. "We're looking for end-markets to grow in the 4 to 5% range," the firm said. It said it expects gains from vertically integrated industrial OEMs who are considering outsourcing manufacturing.

MINNEAPOLIS, Dec. 17 -- EMS provider Nortech Systems today provided improved guidance for its fourth-quarter and fiscal 2004 revenue, saying that it expects sales of $19 million to $20 million. However, the company lowered its year-end earnings outlook, citing diminished margins and expenses for labor and raw materials.

Last year, Nortech reported fourth-quarter revenue of $15.6 million.

The firm guided for earnings of $0.05 to $0.07 per diluted share for the quarter ending Dec. 31, compared to a loss of $0.06 per diluted share last year.

Year-end revenue is expected to increase by 21 to 24% over 2003, to $70 million to $72 million, slightly above previous guidance. Nortech guided for fiscal year earnings to be in the range of $0.20 to $0.22. It previously guided for $0.26 to $0.29 expected earlier. Last year Nortech Systems earned $0.25 per diluted share.

"While we're pleased with our sustained revenue growth, we continue to face margin pressures impacting our profitability," says Mike Degen, President and CEO. "The fourth quarter earnings are being negatively impacted by a mix of lower-margin product, material cost increases and higher than anticipated labor costs and expenses related to some of our domestic and international operations."