Declining Dollar Stands to Bolster Local Exporters
By CHRIS CZIBORR
The U.S. dollar’s marked decline in the past few months stands to have a mostly positive impact for Orange County exporters and companies that have operations in overseas markets, company officials say.
Analysts say the dollar’s decline,the first of any magnitude in seven years,will continue for at least the next year.
For Fullerton medical device maker Beckman Coulter Inc., the weakened dollar should yield sales gains, especially for its European business, which accounts for 25% of Beckman’s total sales.
“We’re much happier with the weaker dollar picking up stronger revenue for us,” said Amin Khalifa, Beckman’s chief financial officer and vice president of finance. “It won’t impact us demonstrably until the third quarter, but if this current exchange rate trend continues it certainly will help our bottom line, and it helps our competitiveness overseas.”
Beckman makes most of its products in the U.S., so it chiefly is an exporter and benefits from a lower valued U.S. dollar because its medical products become cheaper overseas,something that will benefit OC exporters across-the-board.
When the dollar goes down in value against other currencies, products made in the U.S. and sold overseas effectively become cheaper to produce domestically as companies can pass on the cost savings to overseas customers.
Khalifa said the strong dollar vs. the weak euro in the past couple of years had placed a tight squeeze on Beckman’s European profits.
The euro currently buys close to 95 cents, up from 85 cents a year ago.
“So we have been swimming upstream for at least the last two-and-a-half years, with a strong dollar making it hard to be competitive overseas,we couldn’t raise prices in Europe during that time,” Khalifa said. “What makes it especially difficult for us is that some of our biggest competitors are European,they actually benefited when the dollar was strong at the same time as we were hurt.”
Tech Companies See Benefits
And, at the same time, the weak euro translated into fewer dollars for Beckman’s European operations, which dealt the company a double blow, since the then-stronger dollar also hurt Beckman’s ability to compete on price.
Khalifa thinks the dollar’s “fair” value is par with the euro.
“Having a dollar approaching equilibrium with the euro is the best thing for our country overseas,” Khalifa said. “For a long time our government has deemed to think it was patriotic to have a strong U.S. dollar. I think they’ve come around to taking a more balanced view on that.”
Forecasters expect the euro to reach parity with the dollar within a year.
Irvine computer security products maker Rainbow Technologies Inc. expects to see some of the same benefits as Beckman. Rainbow’s business also is based in dollars or euros, though,unlike Beckman,its European business makes up only about 5% of total revenue.
“The euro’s significant appreciation since last year-end has helped our export profits,” said Patrick Fevery, Rainbow’s chief financial officer. “The weaker dollar has a positive effect because it allows us to be more competitive in our foreign markets and in our euro-denominated business,the lower dollar means more revenue from euros translated into dollars from our Europe business.”
Officials at local chipmakers said the weaker dollar won’t have a huge impact since the semiconductor business worldwide is a dollar-denominated industry.
“We just deal flat out with U.S. dollars, so we won’t see any major impact,” said Jim Peterson, chief executive and president of Irvine chipmaker Microsemi Corp. “But we will be more competitive against the Asians.”
Buying in Local Currencies
Bala Iyer, senior vice president and chief financial officer at Newport Beach chipmaker Conexant Systems Inc., echoed Peterson.
“Everything we spend is in dollars and all our revenue is in dollars, so I wouldn’t expect to see any big changes,” Iyer said. “However, the falling dollar makes it less expensive in markets outside the U.S. for people to buy our goods.”
Irvine networking products maker The Linksys Group is considering whether to let overseas distributors buy goods in their own currencies, according to Robert Auci, director of Linksys’ international business.
“The U.S. dollar right now is forcing us to look at other ways to allow our distributors to pay their bills,” Auci said.
Esmael Adibi, director and professor of economics at Chapman University in Orange, said that a less-valuable U.S. dollar would be a net gain for OC’s high tech sector.
“Most of our high tech companies are exporters, so the lower dollar is definitely a plus for the tech sector overall,” Adibi said. “The lower value of the dollar is going to spark inflationary pressures here in the U.S., which could hurt some companies, but that won’t happen for another several months.”
Adibi attributed the weaker dollar to stronger economies in Europe, South Korea, Taiwan and elsewhere.
“Some investors are seeing that other equity markets are more attractive than the U.S. right now,” he said.
