2/10/98 San Diego Union & Trib. C1 (SEE BOLD)
1998 WL 3991326
The San Diego Union-Tribune
Copyright 1998
Tuesday, February 10, 1998
DON BAUDER
Psssst! Wanna buy a stock selling for well under its book value?
Hey, if you're loaded, maybe you can buy the whole company.
The company is San Diego's money-losing GTI Corp., maker of
magnetics-based fcomponents for computers and telecommunications
products, among other things.
Yesterday, the stock jumped 75 cents to $4.63. That was in response
to late Friday's announcement that GTI has engaged a Wall Street firm
to help it map out future strategies, including possibly putting
itself up for sale.
Book value per share is about $6, including convertible preferred
shares, according to Peter Harker, controller. Back in heady,
halcyon 1993, this stock sold for more than $40.
GTI's products are quite labor intensive, but the company would
appear to have a juicy position in low-wage nations. It has
manufacturing plants in China and the Philippines.
Indeed, most of its employment is in Asia: 7,000 in China, 1,000 in
the Philippines and only 150 in the United States, according to
Harker.
However, it also has significant sales exposure in Asia. Its biggest
customer is Santa Clara's 3Com Corp., which recently said it had
exposure in Asia.
GTI's major competitors -- which also have manufacturing facilities
in China -- are New Jersey-based Bel Fuse, and Pennsylvania-based
Technitrol, which in 1995 paid $61.5 million for San Diego's Pulse
Engineering.
"Technitrol and Bel Fuse have pulled themselves away from the prior
industry leader, which was GTI," says David N. Allen of Torrey Pines
Securities.
"GTI has been going through an internal reorganization that has not
resulted in profitability yet," says Allen.
For its third quarter, GTI lost 17 cents a share -- an improvement on
the 58 cents a share loss for the same period a year earlier. Sales
declined to $19.1 million from $20.6 million.
For the first nine months, the loss per share dropped to 20 cents
from $1.09, but sales declined to $64.5 million from $70.2 million.
For full-year 1996, GTI lost $2.42 a share on sales of $92.5 million,
down from $114.8 million in 1995 and from $127.6 million in 1993.
The company cited a drop in selling prices. "The magnetics industry
has matured," says Harker.
However, he does not agree that GTI is now lagging its two main
competitors. "I don't think any one company has market dominance.
Pulse and Bel Fuse are roughly similar in size (to GTI)," says
Harker.
One thing that hurt GTI was a disastrous acquisition. In early 1995,
GTI completed the $19.1 million cash acquisition of 72 percent of
Promptus Communications, which had a position in the
videoconferencing market, among other things.
It was a dog. "Promptus was up against Cisco, 3Com, Ascend
Communications, particularly Ascend," says Allen. "It was a bad
strategic acquisition."
The company dumped the investment and lost $11.5 million.
Great Britain's Telemetrix PLC owns 57 percent of GTI's common and
preferred shares, and controls three of the five seats on the board.
It is pretty clear who decided that GTI had to go in a new direction.
"I definitely think there is a sense of frustration," says Bud Leedom
of San Diego Stock Report. Although the company has done well
trimming costs, "it needs a catalyst for growth; it is floundering
around. It needs capital and clearer vision. Because of the
uncertainty, nobody has gone after the stock."
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