It’s official. The printed circuit board business is slumping again.
Earlier this month, Orange County’s three publicly traded circuit board makers,Santa Ana-based TTM Technologies Inc., Anaheim’s DDi Corp. and Multi-Fineline Electronix Inc., also of Anaheim,reported flat sales and warned of falling prices.
The news led some to conclude that the boom that drove up stocks of circuit board makers last year is over.
Shares of Multi-Fineline plunged 30% on the news. They’ve gained back some ground but still are off by about 15% in the past few weeks. Shares of TTM and DDi are off by about 13% this month.
Circuit boards are a staple of OC’s technology sector. The county’s biggest contract electronics makers, many of which make circuit boards, employ more than 3,360 workers, according to a Business Journal survey last fall.
The boards house chips and make up the innards of computers, mobile phones and other electronics. They’re low-profit components made either in large batches or on short notice.
Board makers took a big hit in the tech downturn of 2000 but enjoyed a turnaround last year as electronics makers dramatically upped orders.
As demand for computers, networking gear and other products returned, companies turned to quick-turnaround board makers rather than signing long-term supply deals.
The spike in demand was enough to revive DDi, which filed for bankruptcy protection in 2003. TTM saw its shares surge by 50% in early 2004.
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TTM HQ: moved to OC in 2003 |
The strong market for circuit board stocks prompted Multi-Fineline to go public in late 2004. The company’s shares more than doubled in the ensuing months.
These days, demand for circuit boards is steady. But it’s not growing at the pace of a year ago. That’s left circuit board makers with too many factories,and falling prices for their products.
“There is some aggressive pricing,” said Scott Robertson, an analyst with Stanford Financial Group Co., a Houston-based investment bank.
Circuit board makers aren’t selling at a loss, according to Robertson. They’re selling at cost to gain customers in quick-turn work, or orders turned around in 24 hours or so.
The goal is to land quick-turn work and turn it into long-term business, he said.
“It’s a balance of how much margin are you willing to give away and how much you will keep,” Robertson said.
TTM and DDi make boards on short notice, usually for a computer or other electronics maker trying to fill an unanticipated spike in orders.
DDi plans to keep its focus on quick-turn work but is trying to leave room for what Chief Executive Bruce McMaster calls “longer lead time work.”
The company gets a majority of its sales from quick-turn work. DDi reported first-quarter sales of $45 million, which were off 7% from a year earlier. The company’s operating loss narrowed to $371,000 from $4.4 million a year ago.
DDi is cutting costs amid the sales slowdown. It plans to close an Arizona plant and a corporate support center in Colorado. Some human resources jobs are set to move from Colorado to Anaheim. Most of the Arizona work is going to a Virginia plant.
TTM saw a slight rise in first-quarter sales, which rose 2% from a year earlier to $59 million. But that was at the low end of the company’s earlier projection.
Falling prices also cut into profits: TTM’s first-quarter net income fell 30% to $4.5 million.
“Pricing pressure was slightly greater than expected, especially in quick-turn,” TTM Chief Executive Kent Alder said in a statement.
TTM moved its headquarters to OC in 2003 from Redmond, Wash., after it bought Advanced Circuits Inc., a Honeywell unit, which had a plant in Santa Ana.
Multi-Fineline, which makes flexible circuit boards for use in mobile phones, bar code scanners and network gear, is projecting slimmer profits for the current quarter. It said it expects to post net income of $7 million to $9 million on sales of $78 million to $85 million,the low-end of Wall Street’s earlier expectations.
Multi-Fineline’s results for the March quarter were upbeat,sales rose 37% from a year earlier to $77.4 million, while net income grew 36% to $7.9 million. But analysts and investors looked past that to the company’s forecast, driving shares down 26% after the quarterly report.
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Apani Networks Raises $16M
Brea-based Apani Networks closed $16 million in a second round of funding, the company said last week.
The funding came almost entirely from Unicharm Corp., a Tokyo-based maker of disposable personal care products.
Apani makes software for virtual private networking, a way of networking computers using the Internet instead of a corporate intranet.
“We are delighted with the support by Unicharm and their endorsement of both our technology and our business model,” said Shuichi Ishiguro, president and CEO of Apani Networks. “The new funding will be used as working capital to fuel our continued expansion.”
,Andrew Simons
