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. (TTM, for the record, has not seen sequential growth in 2009 either.) 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, numerous lawsuits, and an internal culture considered by many to be wanton and reckless. Its turned a profit all three quarters this year — which is impressive. 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.
On a side note, Coretec CEO Paul Langston is a serious-minded, second-generation PCB guy and I know the difficulties of running the company over the past several years have weighed on him. We wish him the best.