Vol. 9, No. 2: February 1999


Table of Contents

Cover story

Order Fulfillment Is Coming On Fast

News

Apple To Outsource iMac?

Benchmark To Take Over Stratus Systems Work

Elcoteq To Supply Nokia in China + U.S.

More new programs

New programs on the horizon

SMTEK Picks Up Technetics After Deal Fails

Other deals done

Distributor to make EMS-related deal

New facilities

Manufacturers’ Services Hits $838 M

Raising capital

1998 Results for 16 Publicly-Held EMS Providers

Other financial news

Data General Staying in Contract Business

Management changes

Order Fulfillment Is Coming On Fast

In years past, order fulfillment was one of those perfunctory items that appeared on many service listings. If a provider was going to offer systems build, it had to be willing to perform the next step — delivering the product to the OEM’s end customer or distribution channel. While order fulfillment sounded good on paper, OEMs were often unable or unwilling to give up final control of their products. Leaving an EMS provider as the last line of defense was not an option that many OEMs were comfortable with.

But today as more OEMs outsource a complete system, they are rethinking product delivery. “They’re saying, ‘Now you’ve got the product, I don’t want to see it,'” says Ron Jellison, president of Mack Technologies. If system integration and final testing can be done at the provider, then shipping the product back to the OEM becomes a wasteful step.

Take Cisco Systems. The company has stated that by the end of 1998 half of its units would never see the inside of a Cisco factory (May ’98, p. 4). As one of the largest users of manufacturing services, Cisco by itself has the power to fuel an order fulfillment trend among its providers.

But Cisco isn’t alone in this form of outsourcing. EMS providers are already handling order fulfillment and logistics for a variety of products (see table below).

Nonetheless, statistics on order fulfillment remain elusive. A number of top-tier providers were silent on the subject when polled by MMI. Still, the order fulfillment side of box build sales grew rapidly last year for at least three providers (table). Indeed, all three of them — Mack Technologies, Manufacturers’ Services and So-lectron — treat order fulfillment and logistics as a competitive advantage.

The outsourcing of order fulfillment along with systems build is spawning new capabilities and new models in the EMS business. This opportunity has also sparked interest from Artesyn Solutions, a large repair services provider with order fulfillment systems already in place.

When performing order fulfillment, an EMS provider may see orders arriving in multiple streams. The classic solution is to install the OEM’s order administration system inside the provider’s facility. EDI is another obvious way to receive orders from the OEM. But a more elegant method perhaps is to connect the customer’s planning and execution system with the provider’s order administration system, as Manufacturers’ Services does.

But what if the provider has a build-to-order program where orders are coming from individuals over a toll-free telephone line or the Internet? Solectron, for one, is now supporting orders from both streams. And EFTC, which offers BTO services in concert with Federal Express, can take orders by “warm transfer,” where the caller is switched from the OEM’s telephone center to an EFTC fulfillment center or FedEx call center.

When a provider takes on order fulfillment programs, the number of ship-to locations obviously goes up. Mack Technologies, for example, averages about 200 systems a day shipping to ten VAR locations. “I think most contract manufacturers are shipping either to distribution, VARs or resellers. I don’t know of too many shipping complete systems to the customer’s end user,” says Jellison of Mack Technologies.

Maybe so. But shipping to end users is the most direct way to deliver products. If this practice spreads, destinations will multiply, putting greater demands on the provider’s ability to handle logistics, including international deliveries.

Already, new requirements for logistics are beginning to surface. The in-transit merger of system components from multiple origins, a standard practice among some OEMs, is emerging as a need for EMS providers. For instance, Celestica uses this procedure on the West Coast for a computer product, where monitors come from the Far East. Instead of shipping the monitors to the East Coast for integration, Celestica has them held on the West Coast and merged in transit with the rest of the system. Otherwise, the monitors would travel needlessly to and from the East Coast.

Orders can also be received through the distribution channel. Solectron in a widely reported alliance with Ingram Micro has positioned itself to process and fulfill orders from this stream (Aug.’98, p. 1). When this alliance was announced, observers wondered whether it signified the start of a new trend. The answer now appears to be yes.

NatSteel Electronics Ltd. has also placed itself in the distribution channel through its acquisition of three Asian distributors effective Jan. 1 (Nov.’98, p. 9). These distributors, which now operate under an NEL subsidiary called ECS Holdings, were recently awarded distribution rights for Apple products in Singapore, Malaysia and Thailand. NEL says this distribution network expands NEL’s role in the global supply chain. According to an article in the Singapore Business Times, NEL hopes that products manufactured by it will also be distributed by ECS and products from the ECS channel will go to NEL for manufacturing.

Celestica is making moves in the channel as well. “We have a number of alliances and discussions in place with distribution partners for partnerships in channel assembly,” says Jim DiBurro, a regional manager in marketing and business development at Celestica.

A company need not be a major IT distributor or EMS provider to participate in channel assembly. “Little distributors like us think we can do well in that business,” says Jim Estill, president and CEO of Canada’s EMJ Data Systems. EMJ, which produces “white box” PCs for the channel, is acquiring Sidus Systems, another Canadian company with businesses in both white boxes and contract manufacturing (see News on p. 5).

But the channel assembly model is not without competition. EFTC is promoting its BTO services based in FedEx’s Memphis, TN, hub as a better alternative. “By integrating technical services with the logistics [and] transportation hub base of Federal Express…we feel we offer the optimal solution,” says Allen Braswell, president of EFTC Services. He points out that operating at the hub cuts off the inbound leg of shipments that would otherwise be consolidated at the hub, while extending the window of work time. In January, EFTC shipped its 20,000th notebook computer for Fujitsu PC Corp., its first BTO customer.

Still, the channel assembly model can save money versus doing things the old way. Tom Kent, president of Artesyn Solutions, figures that channel assembly saves $130 to $150 per box by eliminating extra touches that arise from reconfiguring systems in the channel. “That number has been pretty well written and publicized,” he points out.

California-based Artesyn, which moves more than $3 billion worth of material a year in a business that is mainly repair, is looking to apply its materials and logistics know-how to the manufacture of whole units. And the company is peering into the future for new ways to do business.

“What if the master distributors became basically virtual?” asks Tom Kent. In this theoretical scheme, the distributors would no longer hold product. “Let the retailers and VARs place orders on the factory floor,” he explains. This scheme would certainly cut out inventory from the channel.

So as the business of order fulfillment is growing, it is also evolving into new forms.

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News


Apple To Outsource iMac?

According to unconfirmed reports, Apple Computer is contracting out production of its iMac PC to LG Electronics of South Korea. An Apple spokesman says the company does not comment on such reports. He points out Apple has not made any announcements of that nature.

A Reuters report cited an Irish broadcast that said Apple will cut jobs in Ireland as a result of outsourcing iMac production. According to the news service, the Korea Economic Daily also published a story quoting industry sources that LG Electronics would build iMacs for Apple.

NatSteel Electronics Ltd. (Singapore), which serves as the motherboard supplier for the iMac, says this contract has no impact on NEL.

If true, the contract will expand LG Electronics’ relationship with Apple. LG has been sole source for the casing and monitors that go into the iMac, reports Pranab Kumar Sarmah of the Daiwa Institute of Research.

He says LG does not assemble motherboards and has told him that it has no immediate plans to begin motherboard assembly. The analyst points out that few contract manufacturers can fulfill Apple’s board requirement on short notice and that NEL has performed well for Apple. He concludes that Apple’s new agreement with LG poses no immediate threat to NEL’s contract with Apple. According to the Daiwa analyst, Apple is expected to contribute almost 25% of NEL’s fiscal 1998 sales.

Reportedly, iMacs are assembled in Cork, Ireland; Singapore; and Sacramento, CA.

Benchmark To Take Over Stratus Systems Work

Benchmark Electronics (Angleton, TX) has signed agreements to purchase certain assets and transfer certain employees from Stratus Computer Ireland, a wholly-owned subsidiary of Ascend Communications. Under these agreements, systems integration work will be moved from the Ascend facility in Dublin, Ireland, to Benchmark’s Dublin facility a block away.

Over the next three years, Benchmark will provide systems integration and testing services for product lines that were part of the old Stratus Computer. Known as a supplier of fault-tolerant computer systems, Stratus was headquartered in Massachusetts, but performed systems build in Ireland. When Ascend acquired Stratus last year, Ascend said it would divest itself of Stratus’ nontelecom businesses. As result, the Stratus Enterprise Computer Division with its product line is becoming an independent company, while Ascend is retain-ing Stratus’ telecom product line. Benchmark will build both product lines, but will handle them differently. The EMS company will ship Ascend’s products to its Dublin facility for final processing, while products for the computer division being divested will go directly to end customers. When independent, that division will operate under the Stratus name.

Benchmark expects to acquire “roughly more than 200 people” from Stratus, some test equipment and maybe some inventory.

For Benchmark, this deal represents a natural progression in the level of outsourcing from Stratus to Benchmark. The provider has served Stratus for a number of years starting with board assembly. “Over the last two or three years, we have been taking on additional portions of the manufacturing cycle until now we’re at the completed end,” observes Donald Nigbor, president of Benchmark.

The Irish deal obviously gives Benchmark more systems build work, an area that the company has targeted for expansion. According to Nigbor, systems build has been roughly about 10% of Benchmark’s business. “It hasn’t been historically a large percentage, but it’s a rapidly growing percentage,” he notes.

While Benchmark acquired a contract manufacturer from Lockheed Martin last year, this is Benchmark’s first acquisition of an OEM manufacturing operation. The provider has joined the hunt for OEM divestitures, which have been increasing in number (Jan., p. 3). “We have been looking at some,” says Nigbor. “This one fit ideally our strategy of growing in Europe.”

Financial details were not released. The parties plan on closing the deal as soon as possible following government approvals. It could go through in 30 to 60 days.

When Ascend announced completion of its Stratus acquisition in October 1998, Ascend also mentioned that a group of manufacturing employees would be moving to a contract manufacturing facility.

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Elcoteq To Supply Nokia in China + U.S.

Elcoteq Network (Lohja, Finland) is taking part in a new joint venture that will manufacture cell phone accessories and subassemblies in China for Nokia. Likewise, Elcoteq has landed a contract to supply Nokia’s Ft. Worth, TX, plant with cell phone accessories and subassemblies manufactured by Elcoteq’s new plant in Monterrey, Mexico.

In China, the Elcoteq joint venture has agreed to acquire the manufacturing of cell phone accessories and subassemblies from Dongguan Nokia Mobile Phones, a joint venture between Dongguan Nanxin Industrial Development Corp. and Nokia Mobile Phones. Elcoteq owns 70% of this new venture, called Dongguan Elcoteq Electronics Company, and the remaining 30% is held by Elcoteq’s Chinese partner, Nanxin Industrial Development Corp.

Giving Elcoteq a presence in Asia, the new venture is being set up as a full-service EMS operation in the city of Dongguan. Elcoteq estimates that the venture will bring in sales of FIM 300-400 million in its first year.

The Elcoteq venture is slated to take over parts manufacturing, including personnel, machinery, equipment and stocks, from the Nokia joint venture after the Chinese new year on Feb. 16. The purchase price will be based “on the closing of the books on the transfer date.”

“This acquisition is a further step in our program of rapid internationalization, which in the past year has included acquiring and building modern manufacturing capacity in all important geographic markets. We now have outstanding manufacturing capacity in four European countries, and our newest plant in Mexico will be completed in the first quarter of 1999,” states Elcoteq chairman and CEO Antti Piippo. “The plant in China will give us a strong foothold to serve the enormous markets in Asia, and especially in China. This acquisition also demonstrates that our strategy of co-evolution with key customers works in practice.”

“This agreement will enable us to focus our own local resources and competencies to satisfy the growing demand for mobile phones in China, while at the same time ensuring the efficient and high-quality supply of accessories from a partner operating locally in China,” states Pertti Korhonen, senior VP of global operations and logistics for Nokia Mobile Phones.

Back in North America, Elcoteq’s Mexican plant will deliver cell phone accessories and subassemblies for several Nokia models on a turnkey basis. Manufacturing of these products will involve some 200 people in Monterrey during the first year. The plant was due to start up at the end of last month.

“The worldwide cooperation between our two companies will save time and resources among the different regions at Nokia Mobile Phones as we introduce new products. Elcoteq’s expertise in electronics manufacturing and their commitment to meeting the customer demands characteristic of our fast-growth industry were key factors in our decision,” states Anssi Raty, Nokia Mobile Phones’ VP of operations for the Americas.

Aside from Mexico, Elcoteq operates seven plants spread among Finland, Estonia, Russia and Hungary.

More new programs…Under a new manufacturing agreement, SCI Systems (Huntsville, AL) will provide Symbol Technologies with contract manufacturing initially from SCI’s Northeast and Mexico divisions. SCI’s Augusta, ME, facility has begun production for Symbol, and plans are to transfer “specified product” to SCI’s Mexico operations in the near term. In the future, the Augusta plant will serve as a gateway to other SCI plants as required by Symbol, which makes bar-code data transaction systems. This agreement involves a high-mix model….Flash Electronics (Fremont, CA) has been named global manufacturing partner for Diamond Lane Communications (Petaluma, CA). Diamond Lane had previously been a customer of AVEX Electronics’ San Jose, CA, facility, which has been closed (Dec.’98, p. 1). Flash will build Diamond Lane’s DSL (digital subscriber line) Speedlink System for high-speed Internet and remote network access over ordinary telephone lines. The system requires more than 45 unique assemblies, cards and system components. In less than four years, Flash has tripled capacity and now occupies a new 52,000-ft2 facility with six Fuji SMT lines. Customers include Truevision, Network Appliance, Pinnacle Systems, Digidesign, Web TV, Diamond Multimedia, Premisys Communications and NEC. Flash reports a revenue growth rate of 80% per year since its inception. Based on unofficial information, Flash closed its fiscal 1998 as of June with sales of about $30 million and expects fiscal 1999 sales to be in the $50-million+ range….Hewlett-Packard has contracted Kimball Electronics (Jasper, IN) for North American manufacturing of SnapLED assemblies used in automotive lighting. Kimball will also be responsible for supplying HP’s automotive lighting printed circuit assemblies. Kimball and HP will be exploring other ways to work together in serving the automotive market….New customers at IEC Electronics (Newark, NY) include General Electrics’ Industrial Systems unit and Rascom, a server company in New England.

New programs on the horizon…Trimble (Sunnyvale, CA), which develops products based on GPS technology, plans to use contract manufacturing to improve efficiencies and expects to start implementing this change within the next few months….World Access (Atlanta, GA), which provides long-distance services and network equipment for telecom, is undertaking a reorganization that the company believes should result in a decision to outsource manufacturing.

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SMTEK Picks Up Technetics After Deal Fails

SMTEK International, a public EMS company based in Thousand Oaks, CA, has stepped in to acquire Technetics, an EMS provider in El Cajon, CA, after an earlier deal to sell the company fell through. The purchase was made for cash and notes payable.

Operating an 18,000-ft2 facility, Technetics provides turnkey box build and SMT services to high-end commercial and military customers. For seven months ending July 1998, it generated sales of about $5 million. SMTEK has hired Michael Perry, an industry veteran, to run the newly-acquired company as president.

“The acquisition of Technetics represents an important strategic move because it will enable SMTEK to better serve the San Diego area, which is a hotbed of high-complexity, high-mix work,” states Gregory Horton, chairman and CEO of SMTEK. “Technetics will become an SMTEK Express Services center providing quick-turn and production manufacturing services to OEMs in San Diego County and Orange County.”

He says this acquisition fits SMTEK’s goal of creating a global network of EMS providers. SMTEK is now up to four EMS operations counting the two in California plus plants in Fort Lauderdale, FL, and Northern Ireland. The company also maintains a raw board shop in Northern Ireland.

Originally, I-PAC Manufacturing (Carlsbad, CA), an EMS subsidiary of Photomatrix, had intended to purchase Technetics, but the two parties broke off their talks after failing to reach an agreement (Nov.’98, p. 11 and Jan.’99, p. 11).

Other deals done…Solectron (Milpitas, CA) has completed its acquisition of IBM’s Electronic Card Assembly and Test operation in Austin, TX (see Jan., p. 10). Financial details were not disclosed. Solectron says this transaction is the second largest in its history….Smartflex Systems (Tustin, CA), a public EMS company specializing in flex circuits and precision manufacturing, has purchased certain assets of Tanon Manufacturing out of bankruptcy (Dec.’98, p. 4). Tanon had operated as an EMS subsidiary of EA Industries. The price was about $15 million in cash, of which $2.5 million will be paid in April 2000. Assets purchased include certain equipment and selected inventory acquired at a discount. According to Smartflex, Tanon’s facilities in West Long Branch, NJ, and Fremont, CA, are too large for the amount of business they carry. Smartflex plans to move the two Tanon operations into facilities with about half the square footage. These new facilities will be located within a short drive from the current sites in West Long Branch and Fremont, which have been renamed Smartflex New Jersey and Smartflex Fremont respectively….I-PAC Manufacturing of Carlsbad, CA, has acquired the business and certain assets of Amcraft, a precision metal machining company also in Carlsbad, CA. I-PAC purchased Amcraft’s business assets for $18,000 from a proceeding to assign them for the benefit of creditors. “We believe that this and related metal fabrication acquisitions will allow the company to offer an expanded range of products and services to new and existing customers, thus increasing the revenue-to-sales expense ratio and differentiating the company in the marketplace,” states Patrick Moore, CEO of Photomatrix. The company also intends to use this metal capability for its own products. What’s more, I-PAC has entered into an agreement to acquire the business and certain assets of Greene International West of Oceanside, CA, a metal stamping company that recently escaped a Chapter 11 proceeding through an infusion of capital. Now incorporated as National Metal Technologies, this operation will become a wholly-owned subsidiary of I-PAC. A price of $500,000 will be paid for this purchase, and equipment will be leased. I-PAC plans to move the Amcraft operation into NMT’s 80,000-ft2 leased facility as well as enter the electronic enclosures market….Chase Corp. (Bridgewater, MA), a diversified company whose business includes Humiseal conformal coatings, has acquired the remaining interest of DC Scientific, a full-service EMS provider in West Bridgewater, MA. After acquiring a minority position in DC Scientific in 1996, Chase bought controlling interest in 1997. Peter Chase, president and CEO of Chase Corp., says prospects for regional operations like DC Scientific are strong, given that EMS industry growth of more than 20% a year is expected to continue, particularly in the Northeast.

Distributor to make EMS-related deal…EMJ Data Systems Ltd., a Canadian distributor of computer products and peripherals, has entered into an agreement to acquire Sidus Systems, a systems integrator and contract manufacturer also based in Canada. Sidus of Richmond Hill, Ontario province, has filed for protection from creditors. “EMJ has been very small in contract manufacturing in the past. This clearly would step us up a rung,” says Jim Estill, president and CEO of EMJ (Guelph, Ontario). Sidus creditors will receive the net asset value of the company plus $1.6 million from EMJ, which will acquire Sidus’ stock in an exchange of shares. Both companies also have “white-box” businesses in channel assembly (see article on p. 1).

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New facilities…Primetech Electronics, an EMS provider in Montreal, Canada, has purchased a 123,000-ft2 facility in the Greater Montreal community of Kirkland. Starting in April, the company intends to consolidate its three facilities, totalling 71,000 ft2, into the new building. “Sales at Primetech have more than doubled over the past two years, as a result of additional programs from existing customers, an increased proportion of final OEM product assemblies and new business demands. We expect both a continuation of our internal growth and a ramp-up of activity from new customers,” states John McAllister, president and CEO of Primetech….In Eden Prairie, MN, Micro Dynamics Corp. is starting production in a new 12,000-ft2 facility, its second EMS plant in Minnesota. The new facility performs test services, large complex board assembly, system integration and prototyping. What’s more, the Eden Prairie facility specializes in large complex PCBs such as very high end computer boards with 20 to 40 layers and several thousand parts including at least 50 large BGAs. “This expansion allows us to go after national markets with our test services, large complex board assembly and system integration capabilities,” says Win Wood, Micro Dynamics’ VP of sales and marketing. One of the facility’s first orders is a multimillion-dollar systems program from an East Coast OEM. The new facility gained some 150 man-years of experience, particularly in testing, as a result of an OEM divestiture. “We brought over their test engineering group — some of the best in the country, if not the best in doing these very complex things,” Wood remarks. Micro Dynamics ended 1998 with more than $15 million in sales. Corporate offices are located in the Eden Prairie building, while a second facility with 38,000 ft2 handles smaller boards in Montevideo, MN. Note that the company is employee-owned through an ESOP. Wood says he doesn’t know of any other contract manufacturers that are owned in this manner….CBA, Inc., an EMS provider in Youngsville, NC, plans to lease 57,000 ft2 of additional space there and expects the building to be ready in the May-June time frame. The provider currently maintains two buildings with a total of about 25,000-ft2 and three SMT lines. In 1998, sales exceeded $10 million. CBA’s niche centers on mixed technology, medium volume and difficult boards, and design services are offered as well as assembly. The company targets nonconsumer products for medical, RF/wireless, industrial and military applications. Customers include Ericsson, C-Phone (Wilmington, NC) and Volumetrics Medical Imaging (Durham, NC). A sister company provides compliance testing. CBA was ranked among the Deloitte & Touche 1998 Technology Fast 500 Companies. The company recently changed its name from Circuit Board Assemblers….Having decided to increase system-build capabilities, Agility (Ayer, MA) has moved its second facility to a new location, which will be primarily dedicated to that activity. Floor space there totals 10,500 ft2, an increase of nearly 7000 ft2 from the old location.

Manufacturers’ Services Hits $838 M

New president named

Manufacturers’ Services Ltd. (Concord, MA) just reported that revenue for 1998, its fourth full year of operation, reached $838 million, up 49% over 1997. Year-over-year increases in sales also held true for each quarter of 1998, with Q4 revenue amounting to $244 million.

In addition, the provider has promoted CFO Robert Donahue to president. He assumes this role from Kevin Melia, a cofounder, who will continue as chairman and CEO. As president, Donahue will head up global manufacturing operations and strategy and customer program management, while retaining his CFO position for the near term. Donahue, who has served as CFO since 1997, joined the company from Stratus Computer, where he also held that title.

“We entered 1998 with four goals: grow our customer base, expand our service offerings, build a management team to take us into the next century and fund growth from internal operations,” states Kevin Melia. “We achieved these objectives and actually reduced our total debt burden by more the 45%.”

Manufacturers’ Services now serves more than 50 customers worldwide, including ADC Telecommunications, Ericsson, Hewlett-Packard, IBM, Iomega, Rockwell and Unisys. More than 50% of the provider’s business comes from final systems build and distribution.

The company views technology initiatives as a competitive differentiator. In 1998, the company rolled out Baan’s enterprise software in all of its sites in North America and began implementing solutions from GenRad and Aspect for real-time process control and global procurement management.

In 1999, Manufacturers’ Services plans to establish centers in multiple regions throughout the U.S. to focus on core competencies in computer-aided engineering, board layout, electromechanical design, test systems development and RF test engineering.

Raising capital…In a private offering, Solectron sold convertible senior notes that will result in gross proceeds of about $700 million, excluding overallotments. This figure is higher than originally reported (Jan., p. 10)….Jabil Circuit (St. Petersburg, FL) has filed for a public offering of 10.5 million shares with an anticipated value of about $375 million. The company will offer six million shares, while the remaining shares will come from two officers. Chairman and CEO William Morean will offer four million shares, and Thomas Sansone, former president and now vice chairman, will sell 500,000 shares. Morean will reduce his stake in Jabil to 26.2% of shares outstanding. Jabil expects its proceeds to be used for debt repayment, capital expenditures and general purposes including possible acquisitions. The company has also announced a two-for-one stock split.

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Other financial news…This month, SCI Systems said its current outlook indicates that sales and earnings for the March and June quarters will not meet earlier expectations but should meet or exceed year-earlier results. The company cited customer market share shifts as well as several product areas where market conditions and pricing appear to be deteriorating somewhat. SCI also revealed that a multiplant headcount reduction program is in progress to enhance efficiency. Separately, the company announced plans to consolidate operations of its Watsonville, CA, plant with those of its Rapid City, SD, and San Jose, CA, facilities during April. The Watsonville operation, one of SCI’s smaller plants, was acquired several years ago from the former Tandem Computers….For the fiscal Q1 ended Dec. 3, 1998, MCMS (Nampa, ID) reported sales of $91.2 million, up 28% from the year-earlier period, and a net loss of $2.0 million, which included interest expense of $4.7 million. The EMS provider says it is increasing U.S. capacity while more than doubling its Penang, Malaysia, facility. According to Reuters, Standard & Poors has lowered its ratings on MCMS and revised its outlook on the company to stable from negative….Meanwhile, the wire service reports S&P has raised two ratings on Flextronics International (San Jose, CA)…Reptron (Tampa, FL), which acquired EMS provider Hibbing Electronics last year, saw Q4 1998 sales of its K-Byte Manufacturing unit increase by 43% over a year earlier to $42.1 million, while K-Byte’s gross profit declined from $4.0 million to $1.9 million. …Like some other public EMS companies, EFTC (Denver, CO) has adopted a plan to protect against hostile takeovers. The provider expects Q1 1999 sales to be 10% to 15% lower than Q4 1998 levels pri-marily because of the shut down of its Greeley, CO, facility (Dec.’98, p. 1).

Data General Staying in Contract Business

Unfazed by the rising tide of outsourcing and OEM divestitures, Data General continues to stay put as both an inhouse manufacturer and an EMS provider. The computer company says its effort in contract manufacturing, under the VALiiANT Division, is driven by the need to keep manufacturing a core competency. This is not unheard of (Oct. ’98, p. 2).

“Data General Corp. standard products are highly configurable and complex with market demands that require short cycle times. The skills established to meet these demands required significant investment. It is believed that this investment can also offer a return. Standard contract manufacturers have similar thinking. Contract manufacturing will also provide the climate for continuous improvement and manufacturing excellence,” explains Michael Ferguson, director of business development for VALiiANT.

Ferguson recently joined the divi-sion after working as an outsourcing consultant. His experience includes serving as director of program management in Johnson City, TN, for the former Custom Manufacturing Services unit of Texas Instruments.

The VALiiANT Division is based in Apex, NC, where Data General’s 400,000-ft2 facility can act as a manufacturing partner for system-level products of low-medium volume, high complexity and high reliability. The facility has installed its second SMT line, which is dedicated to VALiiANT. In addition, a plant in Manilla, Philippines, can supply higher volumes of lower complexity to the Asian market. Data General also operates a Mexican facility primarily for repair and a depot facility in Europe. As a result, VALiiANT is positioned to meet global requirements for logistics, says Ferguson.

At present, VALiiANT has one customer, for which the division is supplying a turnkey box-build product in the Internet space.

Management changes…Jabil Circuit has expanded its management team through a series of promotions and new assignments. As alluded to earlier in this section, Thomas Sansone has been promoted from president to vice chairman. He will focus on strategic positioning, communication with the financial world, and advising officers with operating responsibilities. Timothy Main, who had been senior VP of business development, has succeeded Sansone as president. Mark Mondello has moved up from VP of business development to replace Main as senior VP of business development. Wesley “Butch” Edwards, senior VP of operations, has been given responsibility for overseeing all operations worldwide, while William Peters was promoted to VP of operations with day-to-day responsibility for all manufacturing operations. Ronald Rapp will move from executive VP of operations to senior VP of operational development focusing on systems, technology and human development. He will also set up a dedicated organization to handle acquisitions and greenfield opportunities. Separately, Jabil promoted Beth Walters to VP of communications late last year….Walt Wilson, formerly president of Solectron Americas, has assumed the new role of senior VP for supply chain integration and information technology at Solectron. Wilson oversees common process initiatives worldwide, materials, information systems and information technology. Plants in Mexico and Brazil also report to him. This change occurred in part because of the retirement of Steve Ng, Solectron’s chief materials officer.

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Copyright 1999 JBT Communications

MMI January 1999

MMI March 1999

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