Merix Corporation - Company Profile, Information, Business Description, History, Background Information on Merix Corporation
Forest Grove, Oregon 97116
U.S.A.
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History of Merix Corporation
Merix Corporation is a leading manufacturer of advanced printed circu it boards that are used in sophisticated electronics equipment. Merix serves the data and wireless communications, computer, and test and industrial instrumentation markets, supplying "interconnect" devices that link microprocessors, integrated circuits, and other components. The company operates two manufacturing facilities in Oregon, one at its headquarters complex in Forest Grove and another in Wood Village. Merix's Data Circuit Holdings subsidiary operates in San Jose, Calif ornia. Overseas, manufacturing operations are maintained at four plan ts in southern China and at one facility in Hong Kong. Merix serves o riginal equipment manufacturers (OEMs), deriving the majority of its revenue from customers such as Cisco Systems, Juniper Networks, Motor ola, Nokia, and Silicon Graphics. The company generates nearly 80 per cent of its sales from the data and wireless communications markets.
Origins
Merix was born from the corporate structure of Tektronix, Inc., a tro ubled Fortune 500 company that freed itself from several of it s divisions as part of a reorganization plan implemented during the e arly 1990s. Before being beset by the problems that triggered Merix's formation, Tektronix had developed into one of Oregon's most importa nt and largest enterprises. Founded in 1946 and based in Beaverton, O regon, the company established a lasting presence in the business wor ld by developing a way to accurately measure and display high-speed e lectrical signals. Tektronix's pioneering developments in the testing , measurement, and calibration of electric signals served it well dur ing the postwar period, creating one of the largest concerns of its k ind in the country. The company leveraged its mainstay business to br anch out into other businesses, notably the formation of a circuit bo ard operation in 1959.
Tektronix's circuit board business blossomed in the years to follow, eventually earning distinction by occupying a separate facility in 19 83 in Forest Grove. From Forest Grove, the circuit board division ser ved a distinguished clientele, supplying products to IBM, NCR, and Ro ckwell International, among others. Tektronix, meanwhile, was beginni ng to show its age. Throughout the 1980s, the company was hobbled by declining sales from its core products and, significantly, its strate gic focus became blurred by numerous side ventures. Tektronix managem ent took action in the early 1990s, and part of the solution for the company's ills was the creation of Merix.
As Tektronix entered the 1990s, its chief executive officer and chair man, Jerry Meyer, began formulating a plan to rid his company of the unflattering tag of a moribund former powerhouse. An important part o f his plan hinged upon narrowing the company's focus on its core prod uct lines. Those businesses deemed outside the company's strategic pa le were to be either divested or spun off as separate entities. To as sist him in his restructuring efforts, Meyer hired John Karalis, a fo rmer vice-president and general counsel at Apple Computer, Inc. who j oined Tektronix in 1992 as vice-president for corporate development. Karalis was one of the first of a group of former Apple executives wh o migrated to Tektronix in the early 1990s, a group that included Deb orah Coleman, an 11-year Apple veteran who joined Meyer and Karalis i n 1992 as vice-president of materials operation.
By the time Coleman joined Tektronix to head the company's circuit bo ard division, she was already a renowned figure in the corporate worl d. A native of Providence, Rhode Island, Coleman earned a Bachelor of Arts degree in English literature from Brown University in 1974 and an M.B.A. from Stanford Business School four years later. During coll ege, she worked at Texas Instruments before beginning her post-academ ic career at Hewlett-Packard as a financial manager. In 1981, in what she later hailed as her best business decision, Coleman joined Apple as part of founder Steve Jobs's Macintosh management team. At Apple, Coleman established her reputation as an ambitious, indefatigable, a nd sometimes over-ardent executive. She logged 100-hour work weeks wh ile at Apple, drove a car bearing the personalized license plate "GEC EO2B"--proclaiming her goal to be chief executive officer of General Electric Company one day--and struck one of her greatest admirers as being "too bossy, too loud, too rough around the edges, too everythin g," as quoted in the May 1996 issue of Oregon Business. Colema n's supporters acknowledged she had a somewhat abrasive managerial st yle, but they also applauded her rise within the executive ranks at A pple. She started at Apple developing Macintosh and LaserWriter produ cts, before being selected to manage the Macintosh manufacturing plan t. Coleman was named vice-president of operations and later, at the a ge of 34, she became the youngest chief financial officer of a For tune 500 company in the country.
Merix's 1994 Spinoff
Not long after Coleman joined Tektronix, Meyer and Karalis began impl ementing their plan to spin off non-strategic internal components ope rations. The restructuring that ensued included the sale of Tektronix 's ceramic packaging operation to VisPro Corp., a combination joint v enture and divestiture of its integrated circuits operation, and the spinoff of its Forest Grove circuit board manufacturing plant. Colema n was selected to serve as the chief executive officer and chairperso n of the new company created by the March 1994 spinoff, a company nam ed Merix Corporation that began as a $78.5 million-in-sales compa ny. Although Merix was created as a distinct business, its ties to Te ktronix remained strong after the spinoff. Tektronix ranked as Merix' s largest customer, accounting for nearly half of the circuit board m aker's sales immediately following the separation. Further, Tektronix owned a considerable portion of Merix. Merix converted to public own ership in June 1994, with Tektronix retaining a 43 percent interest i n its former division.
Despite Merix's financial connections to its former parent company, t he Forest Grove-based concern was an independent enterprise capable o f standing on its own in its industry. The company was a leading supp lier of printed circuit boards, backplanes, and flexible circuits--de vices referred to as "interconnect" products because they are used to link microprocessors, integrated circuits, and other components. Arm ed with approximately $30 million raised from Merix's initial pub lic offering, Coleman was intent on greatly increasing the company's stature, hoping to create a $500-million-in-sales business by the end of the 1990s. She wasted little time adding to the production ca pacity and technological expertise of the firm, acquiring a printed c ircuit board manufacturing facility in Loveland, Colorado, from Hewle tt-Packard in 1995. The following year, Coleman acquired the Soladyne division belonging to Rogers Corporation. The acquisition gave Merix a printed circuit board manufacturing facility in San Diego, Califor nia. Following the Soladyne acquisition, Merix's sales reached $1 55.6 million, nearly twice the amount collected two years earlier whe n Coleman was just beginning to navigate on her own.
Faltering in the Late 1990s
As Coleman prepared for further expansion during the late 1990s, her hopes were dashed for a spurt of explosive growth to catapult the com pany toward the $500 million mark. Merix, like other companies in its industry, was buffeted by the collapse of markets in the Far Eas t. The impact of the Asian economic crisis was exacerbated by an indu strywide oversupply of electronics components, causing scores of elec tronics firms to adopt defensive postures. Coleman was forced to retr eat as well, as Merix's profits plummeted in 1997 and again in 1998. As the industry downturn dragged on, Merix's losses increased, prompt ing Coleman to scale down the company's operations, lay off workers, and cut costs wherever possible. A $28 million restructuring prog ram was begun in mid-1998 that saw the company shutter its manufactur ing facility in Loveland in October 1998. Coleman conceded that the a cquisition of the printed circuit board facility was the worst busine ss decision of her career, declaring that she had paid too much for t he plant. Coleman also rid Merix of its manufacturing facility in San Diego, selling the former Soladyne business in early 1999 to Tyco Pr inted Circuit Group Inc., a subsidiary of Tyco International Ltd.
Shortly after Merix's structural changes were complete, the company u nderwent managerial changes. In the midst of the restructuring proces s, Mark Hollinger, the company's senior vice-president of operations, was named chief operating officer. In May 1999, Hollinger was promot ed to president and promised the chief executive position by Septembe r 1999. His ascension was triggered by a decision Coleman made in Jan uary 1999 to step down as Merix's chief executive officer, ending her reign five years after it had begun. Coleman professed a desire to d evote more time to investing in emerging technology companies. She re mained CEO until September 2001. Hollinger, meanwhile, inherited a co mpany poised to emerge from a worldwide surfeit of circuit board manu facturing capacity.
As the company waited for conditions to improve, having done what it could to position itself for the market's return to equilibrium, Holl inger declared his intentions to diversify Merix's customer base and to pursue strategic alliances with other concerns in the electronics industry. At the time he took the helm as president in May, there wer e already signs that recovery was on its way. Merix completed the exp ansion of its Forest Grove facility, a project that had commenced at the beginning of 1998, and began to hire employees after months of tr imming its payroll. By late 1999, when Hollinger added the title of c hief executive officer, there were tangible signs of recovery on the company's balance sheet. During Merix's second quarter in 2000, which represented the last months of calendar 1999, the company recorded & #36;1.2 million in net income, a figure that compared favorably to th e $1.9 million loss registered during the same period a year earl ier. A significant contributor to the financial results was increased orders from manufacturers of communications equipment, a market segm ent that grew from 30 percent to approximately 50 percent of Merix's revenue during the previous year. The company's stock recorded an enc ouraging gain as well, increasing from $5 per share in May 1999 t o $14 per share by the end of 1999.
Merix at the Beginning of the 21st Century
As Merix entered the new century, the company appeared to have put th e difficult years of the late 1990s behind it. One positive outcome o f the industrywide downturn was the consolidation it triggered, as a form of corporate Darwinism played itself out. Those printed circuit board manufacturers that proved less resilient to the harsh market co nditions either exited the business or were acquired by other firms, thereby reducing the number of competitors Merix faced as it plotted its course in the 21st century. Hollinger, who continued to steer the company toward an increased presence in the data communications and wireless communications markets, stood to gain from the return to mor e favorable market conditions. "The order rate for high-technology pr inted circuit boards continues to be very strong," he noted in a June 19, 2000 interview with Electronic News, "and capacity in the industry is definitely tightening. Demand from both new and existing customers in the communications market segment is driving much of ou r sales growth."
Hollinger's optimism soon faded as Merix entered the new century. Lik e Coleman, Hollinger was preparing for growth and expansion when mark et conditions soured, forcing him to retreat instead of advance. Not long after announcing plans to build a new production plant in Wood V illage, Oregon, Merix felt the blows delivered by the dot-com industr y's collapse and a nationwide recession. During the first two years o f the decade, the company lost money, forcing another series of layof fs, which eventually reduced the company's payroll to 850, and forcin g it to suspend plans for constructing the Wood Village plant. The cu mulative effect of the Asian economic crisis and domestic economic pr oblems, occurring in quick succession, left the company battered, but after Merix had endured its latest challenge, Hollinger prepared to lead the company toward a brighter future.
Market conditions began to improve by the end of 2003. After recordin g eight consecutive money-losing quarters, the company posted a profi t of $707,000 at the end of November, which drove the price of it s stock up to heights not reached in more than two years. Encouraged by the result, Hollinger pressed forward with plans to build a new ma nufacturing plant in Wood Village, a facility that eventually increas ed manufacturing capacity by 50 percent. Sales increased by 100 perce nt or more in each of the ensuing quarters, as the company enjoyed re newed demand from electronics manufacturers, but it continued to stru ggle with consistent profitability. "The big issue for them has alway s been execution," an analyst remarked in an April 15, 2005 interview with the Oregonian. Merix registered two profitable quarters in 2004 and lost money in the other two quarters, a record repeated i n 2005.
To give his company a firmer footing, Hollinger completed two signifi cant deals as the company began its second decade of independence. At the end of 2004, he acquired Data Circuit Systems Inc., paying $ 43 million for the San Jose, California-based printed circuit board m anufacturer. Data Circuit, a $27.7 million-in-sales company, spec ialized in quickly completing small orders of circuit boards used for prototypes and new products, serving customers such as Boeing, Hewle tt-Packard, and Intel. The company's ability to produce circuit board s quickly, known as "quick-turn" in the industry, gave Merix a new sk ill. Data Circuit could print a new board design within 24 hours, whi le it took Merix at least three days to accomplish the same feat. Aft er enhancing his company's ability to produce small numbers of circui t boards quickly, Hollinger next turned to strengthening Merix's high -volume capabilities. For years, he had wanted to establish a presenc e in Asia, where lower labor costs were conducive to the high-volume segment of Merix's industry. In April 2005, Hollinger achieved his go al, signing an agreement to acquire Eastern Pacific Circuits Limited for roughly $120 million. The acquisition of Hong Kong-based East ern Pacific, which was completed in September 2005, gave Hollinger fo ur manufacturing plants in southern China and one facility in Hong Ko ng, operations that generated $143 million in sales in 2004. For Merix, which was generating $186 million in sales at the time of the purchase, the addition of Eastern Pacific promised to increase it s revenue volume substantially, but the more pressing need for the co mpany was to improve its bottom-line performance. As the company prep ared for the future, consistent profitability represented its single greatest challenge, putting Hollinger in the position of accomplishin g something none of his predecessors had achieved.
Principal Subsidiaries: Merix San Jose, Inc.; Data Circuit Hol dings, Inc.; Merix Nevada, Inc.; Merix Europe B.V.
Principal Competitors: Dynamic Details Inc; Multek; Sanmina-SC I; TTM Technologies, Inc.; Tyco International Ltd., Viasystems, Inc.
Chronology
- Key Dates:
- 1959: Tektronix, Inc. forms circuit board division.
- 1983: Tektronix moves circuit board operations to a separate f acility in Forest Grove, Oregon.
- 1992: Deborah Coleman joins Tektronix to manage the circuit bo ard operations.
- 1994: Tektronix spins off its circuit board division as Merix Corporation.
- 1995: Merix acquires Hewlett-Packard's circuit board manufactu ring plant in Loveland, Colorado.
- 1996: A third manufacturing facility is added through the acqu isition of Rogers Corp.'s Soladyne division in San Diego, California.
- 1998: Declining sales and mounting losses force Merix to close its Loveland plant.
- 1999: Soladyne plant is sold to Tyco International Ltd.
- 2000: A three-year expansion project begins that will double p roduction capacity.
- 2004: Merix acquires Data Circuit Systems Inc.
- 2005: Eastern Pacific Circuits Limited is acquired, establishi ng a manufacturing presence in China and Hong Kong.
Additional Details
- Public Company
- Incorporated: 1994
- Employees: 1,533
- Sales: $186.99 million (2005)
- Stock Exchanges: NASDAQ
- Ticker Symbol: MERX
- NAIC: 334412 Printed Circuit Board Manufacturing
Further Reference
- "Debi Coleman," Business Journal-Portland, February 25 , 2000, p. 6.
- Dolan, Kerry A., "Fairfield Bound?," Forbes, February 27, 1995, p. 142.
- "Forest Grove's Merix Corp. Acquires Data Circuit Systems," Da ily Journal of Commerce, December 30, 2004.
- Holt, Shirleen, "Business Unusual," Oregon Business, May 1 996, p. 27.
- Keuchle, Jeff, "Good Apples," Oregon Business, December 19 94, p. S12.
- Kosseff, Jeffrey, "Investment Fuels Forest Grove, Ore., Circuit B oard Makers Growth," Knight-Ridder/Tribune Business News, Jul y 12, 2000,
- ------, "Oregon Tech Companies Tektronix, Merix Show Signs of Rec overy," Oregonian, December 19, 2003.
- LaBarre, Polly, "The Seamless Enterprise," Industry Week, June 19, 1995, p. 22.
- Levine, Bernard, "Merix Completes Soladyne Sale to Tyco," Elec tronic News, February 15, 1999, p. 34.
- Manning, Jeff, "Stock Drops Sharply As Forest Grove, Ore., Tech S upplier Merix Projects Loss," Oregonian, May 15, 2004.
- "Merix Corporation Acquires Data Circuit Systems, Inc.," EDP W eekly's IT Monitor, December 13, 2004, p. 5.
- "Merix Moves to Cut Costs," Electronic News, August 24, 19 98, p. 48.
- "Merix to Acquire Eastern Pacific Circuits," Wireless News, April 14, 2005.
- Rogoway, Mike, "Forest Grove, Ore., Circuit Board Maker Merix to Gain Speed with Buyout," Oregonian, December 11, 2004.
- Sickinger, Ted, "Latest Acquisition Gives Merix Gateway to Asia," Oregonian, April 15, 2005.
- Williams, Elisa, "CEO of Forest Grove, Ore.-Based Circuit Board M aker Departs," Knight-Ridder/Tribune Business News, May 25, 1 999.
- Woodward, Steve, "Oregon-Based Circuit Board Maker Credits Restru cturing for Sales Rise," Knight-Ridder/Tribune Business News, December 24, 1998.
- Zimmerman, Rachel, "Merix CEO Prevails in Male-Dominated Industry ," Business Journal-Portland, September 30, 1994, p. 16. < /UL>