Fall was the season of mergers and acquisitions: Viasystems and Merix; TTM and Meadville; DDi and Coretec. Likewise, you hold in your hands a merged product – PCD&F and Circuits Assembly. Like many of the industry deals, this was borne both of necessity and opportunity. The good news is, with our stable of editors, including Pete Waddell (20 years of design work), Kathy Nargi-Toth (a similar amount on the fabrication side), and my own 18-plus years covering design, fabrication and assembly, we have the technical chops and experience necessary to make sense of the fast-moving electronics manufacturing world. Going forward, our two brands will retain their identities, including their own websites. Meanwhile, the printed magazine – the last remaining monthly publication in North America covering electronics manufacturing – gets a boost in size and circulation. Win-win.
I have mixed feelings about DDi’s pickup of Coretec. On one hand, Coretec was finding it extremely difficult making it as a small yet publicly held company. Its sales had slipped from C$92 million in 2006 to C$81.4 million in 2008 – an 11.5% drop – and were on a run rate of $72.7 million this year. Worse, it was still seeing sequential declines through the September quarter, while competitor DDi has begun the upward revenue climb. Its last quarterly net profit was the fourth quarter 2006. And with no cash on hand, its hands were severely tied. All of which might explain why Coretec’s CFO position has been something of a revolving door for years.
DDI, on the other hand, has turned the corner after years of questionable acquisitions, two bankruptcies, and a notorious internal culture. It’s turned a profit all three quarters this year. That said, DDi has just $25 million in cash itself, and PWB fabrication is a cash-intensive business, with lots of ugly cycles. While I suspect DDi saw an opportunity to beat some competitors to the punch by bidding on Coretec now, I can’t help but think that had they waited, they might have picked up the company more cheaply. And I’d hate to see several years of work undone by a deal gone bad.
Meanwhile, TTM’s purchase of Hong Kong-based Meadville’s board business opens a huge can of worms, as it would put the father of Hong Kong Chief Secretary for Administration Henry Tang in position to own 33% of TTM. But knowing a little about how government works, even when a Chinese government official is the offspring of the biggest shareholder of the leading bare board supplier to the US Department of Defense, it says here the real stunner would be if US anti-trust regulators saw a potential conflict and nixed the pending deal.
Warming in Munich. November’s biennial behemoth known as Productronica was, all in all, a better-than-expected show, modest by historical standards, but strong compared to everything else this year. Perhaps more important, after a year of malaise, there was a noticeable improvement in the general outlook for 2010. Almost across the board, the more than 80 companies we spoke with during the show see 2010 already emerging as a brighter year. The strong consensus is that the worst is past, and while there remain certain structural problems – including major banks’ inability or refusal to reopen credit lines – business is picking up in most sectors, led – perhaps surprisingly – by automotive.
Much like the two major China shows and Apex, Productronica this year was dominated – capital D – by regional visitors. And I am coming to believe the ongoing regionalization has less to do with the economy and more to do with the fact that for the very most part, existing production technology can build even the latest and greatest products. No matter that new generations of end-products come out every six months (or less), processes are driven by component packaging, and while leading-edge package types have shrunk from 0402 to 0201 to 01005 during the past five years, most conventional equipment is so darn good that it can print, place, solder, inspect and test the latest package styles. Assemblers simply no longer need to chase the latest and greatest equipment around the globe to win or build the latest designs. And that, in turn, obviates the need to run from show to show in search of the “next big thing.”
Year ends. KeyTronicEMS is one assembler that never has been the “next big thing,” but based on a six-year track record of net profits, it clearly should be in the conversation. Be sure to check our profile of the Circuits Assembly EMS Company of the Year this month.
2010 will bring our third annual Virtual PCB trade show and conference. This year promises to be the best yet. Click on www.virtual-pcb.com to learn more.
Our sincere hope that all our readers have a healthy, happy 2010!
