<In case you missed it, INVX lead wire business "dying" faster than expected. Good news for Hutch? Also, INVX moving a plant from Mexico to Thailand. As we know, Seagate is Thailand's largest private employer. Not a coincidence, I would guess.>
I think this was an interesting press release. The end of an era for Innovex? They had been so sure that their wire business would fade slowly. I'm sure they've done their best to transition their low-end wire business to a flex circuit, but this has probably been harder even on the low end than they expected.
As far as moving from Mexico to Thailand, I'm surprised to see they even had a facility in Mexico. Perhaps this is an operation from AdFlex, the company they've just purchased? Anyway, they've always had a major manufacturing presence in Thailand and they have a facility in China that is about 2 years in the making.
The AdFlex merger will probably cause them to regroup several operations to find the best synergies. AdFlex was moving their business out of the UK and into Thailand if I remember correctly.
Is all this good news to Hutchinson? I don't know. Certainly Hutchinson has taken the market and closing wires biz signals the end of low end low cost wire interconnects.
It use to be that TFI heads took 2 wires and then MR started needing 4 or 5 wires. Innovex put a tab at the end of the wire strand to make it easier to handle these loose wires, which was very popular when MR first started. Then, TSA became the best solution as heads became smaller and more advanced. Seagate is still Innovex's best customer and the one taking their advanced flex circuit solution.
Clearly for Innovex, it's a sad thing to see them go from their previous glory to a company grasping for a purpose. But, one might question whether they ever posed a long-term threat to TSA. Last year at Diskcon, they announced their pre-bonding of a Flex-on-Suspension FOS which was suppose to make them competitive with TSA, but market response shows it was no accepted.
So, Hutchinson has to deal with other competition from similar sources which are Japanese based on products from NHK/Nitto Denko and Fujitsu if they ever release their CAPS product. Doesn't look like either of these companies is making much trouble for Hutch.
So, I'd say Hutch's problems are market demand, and dealing with their own internal efficiencies. Probably this announcement is worth a rise in the share price for those who follow the business enough to realize the connection. It's certainly not bad news. This coupled with recent advances into the 30's, and traditional strength going into the end of the year should help keep HTCH as a strong investment, probably likely to gain the mid-30's or better.
Regards,
Mark
PS, I'll miss Diskon this year. Hope you'll all feed me with lots of juicy rumors. |
