Will this earnings go-round be the end of the good times for Orange County’s contract electronics makers?
Maybe, if you read the warning that came out of Anaheim’s DDi Corp. earlier this month.
The company, which makes circuit boards on short notice, recently lowered its outlook for the third quarter. DDi now expects sales for the quarter of about $72 million, down from an earlier projection of $75 million to $78 million. And the company expects a loss, versus its earlier profit projection.
DDi, which is set to release results on Wednesday, blamed the shift on “softness” in the North American circuit board market.
The good news: “Order volume has shown a modest improvement through the first part of October,” Chief Executive Bruce McMaster said in a statement.
DDi, as well as Santa Ana-based TTM Technologies Inc., benefited from the pickup in the economy last year and in the early part of this year. As demand for computers, networking gear and other products returned, companies turned to DDi and other rapid-fire electronics makers, rather than sign long-term deals for circuit boards.
After emerging from bankruptcy reorganization in December, DDi has rebounded in the past year. The company’s sales have grown sequentially every quarter for the past four quarters. The company also has posted steadily increasing gross profits and declining net losses in the past three quarters. Still, its shares are trading at 4.3, down from a 52-week high of 19.5.
TTM Technologies also has benefited from the sector’s rebound, seeing sequential gains in revenue in the past two quarters.
But recent talk of unsold products in various segments,from chips to computers to disk drives,doesn’t bode well for contract electronics makers.
DDi has cut costs, McMaster said.
“We believe that the operational improvements we have taken will significantly improve our cost structure and financial performance,” he said. “By taking a measured, yet timely response to the market changes, we feel that we are retaining the capacity and capabilities that will be needed to take advantage of opportunities resulting from a return of growth in the market. We view the weakness in demand in the latter part of the third quarter as a temporary correction in the larger recovery cycle.”
Another circuit board maker, Anaheim’s Multi-Fineline Electronix Inc., recently said it is sticking with its projection for the quarter ended Sept. 30, the company’s fiscal fourth quarter. Multi-Fineline said it expects sales of $66 million to $71 million and net income of $7.5 million to $9.1 million for the quarter.
Multi-Fineline, also known as M-Flex, makes a special kind of circuit board that is flexible. The company’s boards sit inside flip-open wireless phones and digital assistants.
About 75% of Multi-Fineline’s business comes from Motorola Inc.
Gateway Gains
Some good news for Wayne Inouye: Irvine-based Gateway Inc. has taken market share from Hewlett-Packard Co.
That’s according to a recent Morgan Stanley report that downgraded HP’s shares amid increased competition. HP has lost “several points” of PC market share, most to Gateway, the report said.
Inouye, Gateway’s chief executive, is attempting to turn around the computer maker. He became Gateway’s boss after the company bought Irvine-based eMachines Inc. in March. Inouye managed to right eMachines by boosting quality and running a lean operation. He moved Gateway from Poway to Irvine in September.
From Ingram to UCI
Thomas Madden, chief financial officer of Santa Ana technology products distributor Ingram Micro Inc., plans to leave the company in April to teach at the University of California, Irvine’s Graduate School of Management.
Madden joined Ingram Micro in 2001.
“Tom has been an exemplary CFO and I’m sure he will make outstanding contributions to the UC Irvine Graduate School of Management and its students,” said Kent Foster, Ingram Micro’s chief executive.
William Humes, Ingram Micro’s corporate vice president and controller, is set to replace Madden as chief financial officer.
Madden’s pending departure is the latest in what’s been a series of high-level exits at Ingram Micro. In June, Pat Collins, group vice president of marketing and sales, left after he was passed over to run the North American sales operation. Collins left to “pursue other interests,” according to the company, which praised his work at Ingram Micro.
Upward mobility,or lack thereof,was an issue for Mike Grainger, Ingram Micro’s longtime chief operating officer and president who abruptly resigned in March. Grainger, widely seen as the heir apparent to Foster, shocked industry and Wall Street observers alike when he left after being told that he wouldn’t take Foster’s place when he retired.
Universal Buys SimpleDevices
Cypress-based Universal Electronics Inc., a maker of remote controls, bought SimpleDevices Inc. of San Mateo for $12.5 million in cash, plus a possible performance payment of Universal stock.
SimpleDevices makes software that lets TVs, set-top boxes, stereos and other consumer electronics wirelessly connect with home networks.
