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Technology Stocks : CMCI -- Ignore unavailable to you. Want to Upgrade?

To: ccryder who wrote (255)	1/2/1998 3:22:00 PM
From: paul kneitz	Respond to of 329

Good article from DJ News Service: (UPDATE) CMC Industries Shares Plunge On Loss Of Micron Electronics Business Dow Jones Online News, Wednesday, December 31, 1997 at 14:45 NEW YORK -(Dow Jones)- Shares of CMC Industries Inc. plunged Wednesday after the company's largest customer, Micron Electronics Inc., late Tuesday said it was ending its manufacturing relationship with the Santa Clara, Calif.-based company. In afternoon trading, shares of CMC (CMCI) were down $4.75, or 44%, at $6.063 on Nasdaq volume of about 637,000 shares. Average daily volume is about 182,000. The company's 52-week low of $5.50 was set in April. CMC said the end of its dealings with Micron may hurt its business and profits in the current and future quarters. The company said it will try to offset those effects by continuing its efforts to secure new customers and enhance existing customer relationships. CMC provides contract manufacturing services to original equipment mankers in the telecommunications, computer and electronics industries. Analysts said Micron Electronics accounted for about 40% of CMC's fiscal first-quarter revenue. In explaining its decision, Micron (MUEI) cited changes in the personal computer marketplace and in the business approach the company feels it must take. CMC Chief Financial Officer Andrew Moley said the company has no reason to believe Micron Electronics' decision had anything to do with CMC's performance. In fact, Micron (MUEI) had named CMC a supplier of the year in the past, he said. "This is very atypical," Moley said. "Usually you build your relationships if you're performing, keep your business and sometimes grow your business, and that's what has been happening for us" with other customers. A spokeswoman at Micron said its decision resulted from increased in-house capacity at its own plants. "CMC did a great job, their quality was excellent and they were a great partner," she said, adding that if Micron ever did need additional outsourced capacity, CMC would be a leading candidate for that work. While conceding that making up the lost revenue will be difficult, Moley said it should be easier to recoup the lost profits because of the low-margin nature of the company's business with Micron. He said CMC had expected Micron's contribution to its revenue to decline on a percentage basis in the future as the company concentrated more on its core business, including surface mounting technology. Analysts said they would need more time before they could say with any accuracy what the impact on CMC's financial results will be. While analysts said CMC was in the process of lessening its dependence on any one customer, this is clearly not how the company intended to achieve that goal. "Going forward, we had expected the Micron exposure to be lower, because the company has been diversifying and reducing its exposure to any single customer," said Inder Tallur, who follows CMC for Commonwealth Associates. "But this is a major blow." For its first quarter ended in October, CMC garnered about $38 million of its $90 million in sales from Micron. For Micron, CMC assembled, tested and shipped personal computers - business that J.J.B. Hilliard Lyons analyst David Foropoulas said was generally lower-margin because it was mostly systems assembly. He also noted that CMC's fiscal first half, which ends in January, is its most important period given the peak holiday season for PC sales. "So they get about two-thirds of what they were going to get from Micron in this quarter anyway," Foropoulas said, as the first two months of the second quarter are complete. Copyright (c) 1997 Dow Jones & Company, Inc. All Rights Reserved.