Global Jabil Bounces Back Big
By MICHAEL SASSO msasso@tampatrib.com
Published: Oct 23, 2003
ST. PETERSBURG - Getting a few moments of face time with the Jabil Circuit Inc. brass is no small feat.
Chief Operating Officer Mark Mondello estimates he's in the air at least 40 weeks a year, visiting any of Jabil's 35 facilities on four continents. Chief Executive Timothy Main's schedule is about the same.
Coming out of a prolonged high- tech slump, Jabil is increasingly global in scope. The St. Petersburg electronics manufacturer is chasing contracts with Asian conglomerates and moving production to China and Malaysia, in particular. Industry analysts applaud the company's moves, but its global strategy has cut into its domestic work force and could impact it further.
``I do think there is a legitimate concern about the level of manufacturing that's moving abroad, especially to China,'' Mondello said of the U.S. manufacturing scene. ``But as for Jabil specifically, we feel really good about where our global footprint is today. Most of our work is behind us.''
Things seem to be looking up for Jabil, which makes printed circuit boards and other electronic components for Philips Electronics, Cisco Systems, Hewlett-Packard and others. Jabil earned $43 million, or 21 cents a share, on revenues of $4.7 billion in the fiscal year ended Aug. 31. That is up 23 percent from fiscal 2002.
More important, the company is predicting earnings per share of at least 73 cents this year. That would be a return to its fiscal 2000 form, the year before the tech slump hit, when it earned 78 cents a share.
Jabil stock shares generally have held their value better than other contract manufacturers'. Jabil stock, which closed at $27.78 a share Wednesday, has lost about 57 percent of its value since it peaked about $65 in late 2000. For this year, Jabil stock is up 55 percent.
``Jabil never went to $3 like some of its competitors,'' said Joseph Covino, a research analyst for Citizens Funds of Portsmouth, N.H., which holds at least 81,000 shares of Jabil stock. But ``you had to stick with it a bit when times were tough in the industry,'' he said.
With the inevitable downturns in manufacturing, Jabil has worked hard the past few years to diversify its business, Mondello said. Among the changes:
* Plant acquisitions - In recent years, Jabil has paid about $210 million for Philips Electronics plants in Europe, South America and Asia. It also bought a Lucent Technologies plant in Shanghai, China, for about $75 million and an NEC facility in Japan.
Mondello did not know the dollar value of Jabil's recent purchases, but a September Forbes magazine article said Jabil has paid $614 million in nine deals since November 2001. Its debt has risen as well. In 2000, Jabil had about $25 million in long-term debt, but by August its debt had grown to about $314 million, according to its most recent balance sheet.
Nonetheless, Mondello said the company did not go out and snatch up companies en masse. Rather, it bought factories from companies with which it did business. For example, the Philips deal is expected to provide Jabil with $4 billion in business over four years.
* New customers - In the late 1990s, about 60 percent of Jabil's business was with telecommunications and computer-networking companies. But in the past three years, the company has tried to break into other markets, including consumer electronics, automotive and aerospace. Whereas consumer electronics was just 4 percent of Jabil's business in 2000, it had risen to 20 percent by 2003, according to annual reports.
One of Jabil's biggest targets: Japan. Estimates put the Japanese electronics market at $50 billion to $80 billion, and most Japanese companies are not using contract manufacturers, Mondello said. Jabil has a sales office in Japan, as do its competitors, he said.
``It would require a very small portion of that market for us to have fairly significant growth,'' Mondello said.
* Global work force - Jabil has nearly 30,000 employees worldwide, and perhaps only 15 percent of them are in the United States, Mondello said. Jabil does not break out employment information for specific countries or regions, company spokeswoman Lisa Allison said. The company confirmed at the end of February that it had cut about 500 headquarters and manufacturing jobs in the Tampa Bay area, leaving it with about 1,500 local employees, the latest available figure.
A big growth area is China, where Jabil has four facilities and is looking to expand further, Mondello said.
Generally, Jabil has shifted production of large-volume, commodity-type products to developing nations, such as components for cell phones. Production of more complex and bulky items have remained in the United States. As the company goes after more aerospace and defense contracts, it is likely those jobs would remain in the United States, Mondello said.
Shifting work overseas has been tough, but necessary to meet price demands, he said.
Looking ahead, most industry observers are bullish on Jabil's prospects. About 25 Wall Street analysts follow Jabil, and only Chris Whitmore of Deutsche Bank has a ``sell'' recommendation.
Deutsche Bank or its affiliates own 1 percent or more of Jabil Circuit stock.
In general, Whitmore said, demand for contract manufacturers' services is still weak, and their manufacturing plants are not running at full steam. And while Jabil is seeking out more consumer electronics business, low-cost manufacturers from Taiwan are chasing the same business.
``You have a competitive environment that is getting increasingly more intense,'' Whitmore said.
However, Shawn Severson, a senior vice president with Raymond James Financial in St. Petersburg, gave Jabil Circuit a positive rating recently. Among other things, Jabil waited until the high-tech slump kicked in to buy factories, Severson said. So it got them at good prices. Other contract manufacturers bought factories during boom times, then watched them sit idle during the slump, he said.
``The timing proved to be very good for them,'' Severson said. |
