Author Archives: Mike

About Mike

Mike Buetow is president of the Printed Circuit Engineering Association (pcea.net). He previously was editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He spent 21 years as vice president and editorial director of UP Media Group, for which he oversaw all editorial and production aspects. He has more than 30 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow

LaSurprise

Posted on by

I’m one of those who didn’t see the possible acquisition of LaBarge by a non-EMS firm.

In fact, I thought either LaBarge would continue to buy other, smaller EMS firms (I’ve heard of its interest in some deals that were never consummated), or it would be gobbled up by a Sanmina-SCI or the like.

But today defense supplier Ducommun announced it would acquire the electronics manufacturing services firm for $340 million, or just one times revenue plus debt. The move is expected to almost double Ducommun’s annual revenue and boost its margins.

Don’t expect those synergies to happen overnight, if ever. EMS is a different sell than the components like panels and switches Ducommun has made a living off of for more than 150 years.

Here’s a question: Does this, coupled with API Technologies’ recent acquisition of SenDec, signal a larger trend of consolidation on the competitive but relatively margin-friendly military EMS industry?

Another question: What becomes of Craig LaBarge, who has run the eponymously named firm since 1991, taking over for his father, who founded the company in 1953. Will he sit still on the sidelines, or will he take another shot at empire building?

The ‘Sale’ of Foxconn

Posted on by

Foxconn Precision Electronics, the cellphone manufacturing arm of — guess who? — Foxconn, is for sale.

Well, actually it has been sold.

To Foxconn.

Allow me to explain. Hon Hai, which trades under the Foxconn name, has myriad subsidiaries. Some of those subsidiaries have other subsidiaries. Despite the growing handset market, FPE’s parent, Foxconn International Holdings, has been losing money — $218 million last year alone. So despite sales of $6.63 billion last year, FPE  has been sold to China Prime Rich Holdings, a wholly owned subsidiary of — wait for it — Hon Hai.

If that wasn’t awkward enough, the sale price was HK$550.4 million, which in US currency is $70.7 million.

In other words, Foxconn bought from Foxconn an entity the size of Celestica for about four days’ worth of revenue. No word yet what the company directors paid themselves for what must have been an exhausting maneuver.

Only in China.

 

Icahn’s Next Move?

Posted on by
It comes as no surprise to this blog that Mentor Graphics is rejecting Carl Icahn’s offer to buy the company. After all, Mentor has in the past turned down bids that valued the company at roughly the same amount as did Icahn’s.

But there is a distinctly disengenuous flavor to Mentor’s reasoning. In a statement, the company insists that the company is worth more than Icahn is valuing it. Specifically, it claims, “Our share price has grown by more than 70% over the last year, for a two year aggregate growth of approximately 200%.”

True, that, but what the company fails to acknowledge is that Icahn’s accumulation of Mentor stock is likely the main driver behind the upswing. One year ago, Mentor’s stock was trading at under $8 a share. It’s now almost twice that. During that time, Icahn boosted his holdings from under 5% to almost 15% of the company. The combination of his large purchases and the inevitable ride on his coattails some speculative investors are taking has no doubt strongly influenced that jump in value. Despite a $125 million jump in revenue, Mentor has lost an cumulative $14.2 million over its past three fiscal years: to suggest investors are simply thrilled by its performance is a difficult assertion to prove.

The company also speaks of — but doesn’t elaborate on — regulatory risks that come with Icahn’s proposed buyout. It’s not clear why a sale to its largest shareholder, one who is tellingly not a competitor, would run afoul of SEC or other rules. 

The relationship between Mentor and Icahn has clearly soured. That was predictable: Few companies welcome Icahn’s type of shareholder “interest.” What’s less clear is what happens next. Will Icahn fold his flag and start selling? Or will he redouble his efforts to pressure the company into a sale?

New Search

Posted on by
In a long overdue move, Google has changed its search algorithm, and those publishers that simply cut-and-paste other people’s stories (you know who you are) are going to see their rankings drop bigtime.
In Google’s words, among the four reasons for a ranking drop is this: “The content of the website has been copied from other sites.”

Since Google controls an estimate 67% of all searches performed, this is a big, big deal. Sure enough, PCD&F and other UP Media Group sites have seen a noticeable rise in traffic since Google’s move.
The Online Publishers Association, a group of content producers that includes some of the most highly trafficked sites in the world, estimates the update will shift $1 billion in annual revenue away from content aggregators back to content originators.
It’s about time.

New Search

Posted on by

In a long overdue move, Google has changed its search algorithm, and those publishers that simply cut-and-paste other people’s stories (you know who you are) are going to see their rankings drop bigtime.

In Google’s words, among the four reasons for a ranking drop is this: “The content of the website has been copied from other sites.”

Since Google controls an estimate 67% of all searches performed, this is a big, big deal. CIRCUITS ASSEMBLY and other UP Media Group sites have seen a noticeable rise in traffic since Google’s move.
The Online Publishers Association, a group of content producers that includes some of the most highly trafficked sites in the world, estimates the update will shift $1 billion in annual revenue away from content aggregators back to content originators.
It’s about time.

CyberOptics’ Coup

Posted on by

It’s always a good deal when you can simultaneously supply an end-product to end-customers and critical components from said end-product to competitors.

And that’s the situation CyberOptics now finds itself in after inking a deal last quarter to put its sensors in erstwhile AOI competitor Viscom’s solder paste inspection products. (CyberOptics acknowledged a deal in February but did not disclose the company until today.)

It’s a great move for CyberOptics, which continues to impress under Kitty Iverson’s leadership. The company, which by most accounts trails privately held Viscom in terms of annual revenue in the uber-competitive electronics assembly AOI market, has rebounded steadily from the market slide of 2008-09 and the tragic death of founder Steve Case. Sales doubled in 2010 to $57 million, and by becoming a supplier to its AOI competitors, CyberOptics triangulates its customer approach. Given that CyberOptics also supplies sensors to DEK for printers and Juki for placement machines, the modest company is positioning itself to become a true bellwether of the electronics assembly market health.

A Sad Cure for Inventory Glut?

Posted on by

If there is a silver lining from last week’s devastating earthquake in Japan, it could be that component inventories will be dwindled, thus relieving the industry of a possible oversupply problem.

Many chipmakers and others are saying the quake will hurt their ability to produce and supply parts for one to two quarters. TI, Freescale and Toshiba are among those who have closed or reduced production at their Japanese factories.

Research firm iSuppli of late has been warning of possible overinventory situation, and no one needs reminding of the pain involved to drain an oversupply glut. As of Dec. 31, semiconductor suppliers held 83.6 days worth of inventory (DOI), up 5.5 days sequentially. The last time the DOI was this high was June 30, 2008, or just before the last semiconductor downturn, iSuppli says.

It’s just possible, however, that the forced shutdowns could ease some pricing pressure and concerns for a correction as assemblers burn through existing inventories.

This much is clear: spot prices for memory and certain other parts are bound to rise in the near-term. If Japan can’t bring its factories back online soon, they may even stay there.

 

 

Market Ambivalence

Posted on by
The market, the saying goes, is always right.

And if the market is right, Carl Icahn will not be the next owner of Mentor.

Mentor’s board isn’t leaving anything to chance, announcing via an SEC filing today that it would strongly urge shareholders to support its current directors, and reject dissident shareholder Carl Icahn’s alternate slate.

“The Icahn Entities are attempting to replace your directors, who have supported Mentor’s successful strategy, with nominees who have, in our opinion, preconceived notions of what is right for you and who do not have the collective knowledge, skill and experience of your current board of directors.”

But the voice that counts most is that of the shareholders themselves, and market, for now, is not pushing the stock up. Icahn’s tender offer of $17 per share remains on the table, yet Mentor is trading at just under $15 a share. That suggests the market doesn’t believe Icahn’s proposal will be accepted, or that another bidder will come forward.

That’s probably a good read of the tea leaves: Icahn and his ally, Casablanca Capital, together control just over 20% of the outstanding shares. But no other major holder of Mentor stock has publicly called for changes at the EDA company, and for now it looks Wally Rhines and the rest of the management team will hang on. 

Hedging Turmoil

Posted on by

By now you have surely heard of the devastating earthquake that hit Japan on Friday local time. The 8.9 Richter scale quake set off a surge of tsunamis that, as of this writing, were still threatening the Pacific Rim, Hawaii and even the Western coastline of  North and South America.

In Japan, several factories were closed as result of the quake. Sony, for one, closed three plants and evacuated all employees, according to published reports.

Added with the uprisings in the Middle East and Northern Africa, it’s been a cruel month for world stability. The former took several EMS and PCB plants, including those of AsteelFlash and Fuba, offline, while the uncertainty has given way to rapidly increasing fuel costs around the world.

Over 40% of the world’s NAND flash and roughly 15% of the world’s DRAM output are manufactured in Japan, according to Jim Handy of Objective Analysis, a semiconductor research firm. Then there’s the litany of major consumer and industrial product OEMs that call the island nation home. (Objective Analysis anticipates “phenomenal price swings and large near-term shortages” as a result of this earthquake.)

Like so many disruptions — be they natural or man-made — today’s events should serve as dramatic reminder not to put all your eggs in one supplier’s — or regional — basket. Hedge your bets; spread your risk.