Tag Archives: printed circuit boards

Did DoD, State Faceoff on TTM Deal?

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There is a rumor — and I strongly emphasize “rumor” — going around that claims the US Department of Defense sent a strongly worded letter to the State Department in opposition to the TTM’s pending acquisition of Meadville Group’s printed circuit board operations.

All of which makes yesterday’s news that the Committee on Foreign Investment in the US has no objection to the deal that much more interesting. The CFIUS is an interagency group whose members include Treasury, State, Defense, Homeland Security and other agencies.

I have contacts within the DoD acquisitions office. I’m trying to find out more on this. Stay tuned.

Tale of 2 Flex Shops

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Remember when Innovex was the high flyer among US-based flex shops? Dial back to fiscal 2005, and the company had sales of $200 million, having rebounded nicely from the 2001-02 dip. But profits were hard to come by, despite being solidly planted in the higher-margin flex side of the bare board business, and in retrospect the warning signs were in place.

In 2004, the company missed a downturn in the hard-drive market, overbuilding and suffering through six months of inventory clearout. Over three consecutive years, it closed plants in Minnesota and Arizona, while putting all its eggs in its manufacturing facilities in Thailand. And while revenues were climbing, so were net losses, which reached $25 million in fiscal 2005.

In 2006, while the electronics industry was in the midst of a strong recovery, Innovex began to crater. Sales fell to $173 million, then plunged to $71 million by the end of fiscal 2008. And there’s no end in site: Through the first three quarters of fiscal 2009, sales are just $33 million.

Then-president and CEO Bill Murnane in 2007 gave way to former Seagate executive Terry Dauenhauer, who subsequently resigned last October and was officially replaced last month by CFO Randy Acres. Was experience a problem? The 2003 edition of Innovex had one officer over the age of 45 – and he was 47. In an industry known for its ups and downs, it’s possible a lack of “local knowledge” played a role.

Now compare Innovex’s performance to that of M-Flex, another US-based flex company. M-Flex has seen sales rise to $764 million for the year ended last September, up from $508 million in 2006. Remember where Innovex was in 2003? M-Flex was smaller – $146 million. Best of all, it’s been consistently profitable.

Unlike Innovex, which placed all its bets on Thailand and HDDs, M-Flex focused on China (it has two plants there, plus one in Malaysia and one in Southern California) and handheld devices. Between the rapid growth of cellphones and now digital readers – Amazon predicts the Kindle will be its best-selling device in 2010 – M-Flex had the right strategy and appears to have more room to grow. CEO Reza Meshgin, who was named to the top spot in March 2008, has been with the company since 1989. CTO Bill Beckenbaugh has three decades of experience in PCBs, going back to his Motorola days, plus stints as CTO of Hadco and Sanmina-SCI. It’s an extraordinarily seasoned team.

Meanwhile, Acres, who spent more than a decade in Asia as an executive with IBM and later, Symbol Technologies, has been with Innovex barely a year. He would be smart to surround himself with veterans of PWB manufacturing, including at least one or two who have sold to markets other than computing. Else, it’s hard to believe Innovex will break its downward spiral.

Game Over for Ex Board Baron

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Remember Hicks, Muse?

Those were the first two names of the now infamous Wall Street Investment firm (full name: Hicks, Muse, Tate and Furst) that took the PWB industry by storm in the late 1990s and early 2000s. Starting with its Fall 1996 purchases of AT&T’s board shop in Virgina — a 700,000 sq. ft., 120-acre site considered to be among the largest in the world at the time and Circo Craft, Hicks, Muse embarked on a series of acquisitions that has no match — before or since — in our industry.

The firm bought Termbray Industries’s PWB business (aka Kalex), Forward Group, ISL, Mommers, Zinocelere, and made a strong play for Zycon before being nosed out by the shrewd maneuvering of Hadco’s Andy Lietz. (Lietz’s captivating telling over dinner of how Hadco came to buy Zycon remains my favorite memory of those years.) And that doesn’t even begin to cover the EMS and enclosures acquisitions. In 2000, they went public.

Eventually, the bubble burst. Debt topped $1 billion. Viasystems underwent a series of management changes and bankruptcy. Hicks doubled down his investment in the company, converting its debt into equity, and was promptly sued. The firm scheduled another IPO, then pulled the plug. Mass shutdowns ensued.

In 2004, Hicks left the PWB business. But before he bailed, he had bought the Texas Rangers, a major league baseball team, and the Dallas Stars of the NHL, and immediately spent hundreds of millions trying to buy championships in those sports. Those of us in the PWB industry could have seen what would come next.

Fast forward to today, and those who still simmer from the slash and burn he ultimately inflicted on the industry may take some small satisfaction in knowing he has hit such financial difficulties — his Hicks Group is said to be $525 million debt — he will be forced to give up the Rangers.

The story of Tom Hicks will make a great case study some day, but it will be for all the wrong reasons.