Thread,
Posting another recap of Deswell customers based on current info.
We have made too much of VTech, not enough of Behringer and InterTel. Ignored Mita until they declared bankruptcy and Deswell reported 50% short term decline in sales to them. Also making a mistake of ignoring NamTai, something I hope the company does not do.
Behringer buys 100K more stock at $17.00 = $1.7M. Indicates Behringer is not only optimistic about their own future growth, but about Deswell's participation in that growth. In four years they have gone from 4th to 1st in ranking for Deswell's sales at the same time Deswell was growing by 48% per year. Sales to Behringer rose from $4M in 1996 to $16M last year, 400% in two years! And they apparently feel there's more to come.
InterTel is not showing the growth of Behringer, but they are a fast growing company. They've been using Varian and Deswell (apparently about equally with Varian producing IP devices and Deswell the phones). Varian is having problems. They've closed down at least one plant, are splitting the company up into three separate companies, are having quality control and production problems. They're involved in many disassociated areas other than electronics and it appears they aren't doing well in any of them. On the other side, Deswell has been a high quality and consistent supplier for InterTel. Strong chance that some of the future orders that would have gone to Varian will be directed to Deswell.
Mita - this is a restructuring period. Deswell has been supplying Mita HK's manufacturing facility in China that, from what I'm reading, is a highly profitable operation. The reduced order announcement was a surprise, but the content was not as I expected Mita to reduce inventory as part of restructuring the parent company. (I think Mita HK is separate, but they market thru Mita Japan.)
VTech - it was brought up that VTech was selling the 900Mhz phones for $39 and there couldn't be any profit at that price. There isn't. IMO they are liquidating inventory of 900Mhz phones. Panasonic came out with their 2400Mhz. VTech has had the 2400 ready for market, but was waiting for the 900 sales to fall off. Panasonic has forced them to switch production to 2400Mhz phones.
NamTai - hard to say. They have invested in Albatronics. I see a company that was unable to maintain revs and operating at 50% or lower capacity buying into a company that's been unable to produce profits and cash flow. While NamTai's ability to profit from investing cannot be questioned, their ability to manage is in doubt. Most of their profits have been a result of making good investments and selling at the peak of the market, not from operations. I have doubts about their ability to turn Albatronics around. However, Deswell (Jetcrown) may be able to obtain some of Albatronics business because of their relationship with NamTai.
We ignore the other smaller companies that Deswell sells to - 20% of revs, over $13M last year. They need the big company orders, but most of the small companies they deal with provide a backbone for the operation. In any business, the profits come from the big orders, but those big orders fluctuate. It's the little orders that pay the light bill and provide fill-in work that lets you keep employees busy full time. This is one of the advantages Deswell has over the larger companies that MUST have the big orders.
While Deswell does a good job of keeping customers once they get them, it would still be more desirable for them to have 10 customers providing 80% of sales versus 5 so that the failings of any one customer would have minimal impact. They appears to be something they realize and are trying to improve.
JMHO,
Ron
|
