One tech company bounces back
A struggling Jabil Circuit moved jobs overseas, but then found new business to help restart its U.S. plants.
By JEFF HARRINGTON, Times Staff Writer
Published January 14, 2004
ST. PETERSBURG - A year ago, Jabil Circuit chief executive Tim Main nearly had a revolt on his hands.
Some managers were grousing that too many jobs were being cut in the United States and work moved overseas. Employees fretted privately that they had to train workers from Mexico who would be taking their jobs when work moved south of the border.
The angst faded into history Tuesday as Main stood before about 100 shareholders at Jabil's annual meeting to proclaim that the "transformation" of the second largest public company in the Tampa Bay area was complete.
The contract manufacturer, whose fortunes used to rise and fall with the demand for computer circuit boards, is today a much more diversified player. It makes everything from CD players to medical instruments to computer printers. After rebounding last year, sales are on track for a 21 percent to 26 percent rise this year to approach $6-billion. Jabil's stock ended 2003 up 58 percent. And with inroads into more intensive manufacturing for aerospace and defense, even its downsized U.S. plants are on the mend and talking about hiring again.
"The thing we really like is we're back to being a growth company," Main told the morning gathering at Vinoy Country Club in St. Petersburg.
In many ways, Jabil's downward spiral beginning in 2000 was a microcosm of the tech industry. So, too, has been its path to recovery - one paved on job cuts, diversification and inventiveness. Like other manufacturers, it sent hundreds of jobs and contracts for mass-produced goods to cheaper labor in China, Malaysia and Mexico. To fill the void on U.S. assembly lines, Main created teams at his plants and sent them on a mission to find the kind of high-touch, low-volume business that would be less likely to be shipped overseas.
In response, Jabil's manufacturing plants in Massachusetts and Florida received certification last summer to provide subcontract services to military suppliers such as Honeywell, Raytheon and General Dynamics. With six new customers, revenues have surged at the Billerica, Mass., plant.
Jabil's transformation came with controversy, particularly over the job-cutting strategy. Between 2000 and early 2003, the company's bay area work force was slashed in half, from 3,000 to less than 1,500. Elsewhere in the country, Jabil closed operations in Idaho and Texas.
Under pressure about the cuts last year, Main said he had no choice. Large customers were demanding low costs. It was a choice between paying upwards of $10 an hour to employees in the United States, a couple of bucks an hour to workers in Mexico or as little as $1 an hour to laborers in China.
The company's transformation is most telling in a look at the numbers. In 1995, it had 2,600 employees, 75 percent of them in the United States, and just two international outposts. It began 2004 with 33,000 employees, just 10 percent of them based in the U.S. Most of its workers are scattered among 30 locations in Europe, Asia, Mexico and Brazil.
More important for its long-term health, Jabil diversified its customer base. Its top three customers today are in different sectors: Royal Philips Electronics (consumer electronics), Cisco Systems (computer networking) and Hewlett-Packard Co. (computer storage and printers). Medical instrumentation, a new business for Jabil a few years ago, now accounts for 11 percent of revenues.
Jabil ended 2003 with about $700-million in cash, but Main said he is not anxious to buy a competitor weakened during the recession. Rather, he wants 70 percent of the company's growth in 2004 to be internal.
The company was off to a good start in its first fiscal quarter ended Nov. 30: Net income surged fivefold while revenues grew 41 percent. "A good trend has been established, and we plan to continue that," Main said.
Jabil's stock closed Tuesday at $30 a share, down 47 cents or 1.5 percent.
After the meeting, shareholders were generally supportive of the performance, although one shareholder questioned whether Jabil is diluting shareholder value by rewarding employees with newly approved stock options. Jabil chief financial officer Chris Lewis said Tuesday's approval of 10-million more shares for future stock options would last the company two to three years. There also were concerns that Jabil's far-flung operations would lose the personalized customer touch that helped grow the business.
Another shareholder quizzed management about why chairman Bill Morean has been systematically selling hundreds of thousands of shares over the past six months. Last week alone, Morean sold 100,000 shares for about $3-million.
Morean said he was advised by counsel to sell, partly to diversify his portfolio and partly to avoid having a major impact in the movement of Jabil's stock because of his sizeable stake. The sell-off was systematic and not timed to capitalize on Jabil's stock movement, he indicated.
Morean, who now owns about 28-million Jabil shares, said he will continue being a large shareholder. He said he fought the notion of selling Jabil stock for more than two years and his decision was not a matter of financing other endeavors.
"It's not about lifestyle," he said. "I drive a 4-year-old pickup truck." |
