‘Flex’ing Its Muscle

Flextronics announced the purchase of rival Solectron today. If the deal goes through, it will return Flex to the top of the EMS leaderboard, outpacing fast-growing Foxconn. Still, is this the right buy and at the right time?

Perhaps more than any of its competitors, Flex has shown it can absorb and integrate other companies with minimal amount of operational — and financial — disruption. However, Solectron would be, in revenue terms, the largest deal Flex has done, and probably the most complicated. Reason: Solectron has had, at best, a spotty financial record. Time was, the company was the star of the industry. But Winston Chen isn’t walking through the executive door again, and the latest CEO, Mike Cannon, jumped ship for Dell in February. Sales are off 10% since 2004, even while the EMS industry at large has returned double-digit growth. And the company’s stock has remained submerged, despite the improving balance sheet.

Perhaps Flex was encouraged by Solectron’s improving profitability over the past two years. Or maybe it felt that its rival’s last two quarters, which put the company on a run rate of about $11.75 billion, are evidence Solectron has turned the corner.

Either way, I’m wary that this may be too much, too soon, even for Flex. Foxconn has been growing at 25% a year clip, and perhaps Flex felt it needed a big move to close the gap. This would do it, and then some. But biggest doesn’t always mean best. Hope I’m wrong.

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About Mike

Mike Buetow is editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He is also vice president and editorial director of UP Media Group, for which he oversees all editorial and production aspects. He has more than 20 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow

2 thoughts on “‘Flex’ing Its Muscle

  1. It’s no secret that Solectron has been a little too successful with business sought & lost by Flextronics. So if it’s true that Flex lost lucrative programs to Solectron from, say, Kodak, they just got’em all back.

    At least indirectly.

    Maybe the moral is an old one:
    If you can’t beat’em — buy’em.

    Rusty

  2. Putting Solectron and successful in the same sentence is a stretch. Flex has bought a company they will have to cut at least 25% of the overpaid and overworked IL. Flex has been kicking Solectrons butt. This is purely a market share move.

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