10560 Ninth Street North
The foundation of Jabil's strategy is the development and support of long-term manufacturing partnerships with leading electronic companies. Jabil offers its customers a complete turnkey solution, including circuit and production design; component selection, sourcing and procurement; automated assembly; design and implementation of product test; and shipment to points of end-user distribution. The Jabil turnkey approach enables a customer to transfer virtually all internal manufacturing responsibilities. This approach, coupled with advanced manufacturing technologies, enables customers to improve cost, manufacturing performance and time-to-volume production. Jabil's production design process is performed concurrently with resolution of manufacturing issues to enhance the manufacturability of products and improve the production benefits achieved.
Jabil Circuit, Inc. has benefited from the rapid growth of the electronic manufacturing services (EMS) industry. During the 1990s Jabil's revenues grew from slightly more than $200 million to $2 billion. The company designs and manufactures electronic circuit board assemblies and systems for major original equipment manufacturers (OEMs). It serves customers in communications, computer peripherals, personal computer, automotive, and consumer products industries. The company's strategy has been to serve a small number of major customers. Its customer list includes industry leaders such as Cisco Systems, Inc., Gateway 2000 Inc., Hewlett-Packard Co., Johnson Controls, Inc., and Quantum Corporation. During the 1990s these and other customers outsourced much of their electronic manufacturing to EMS companies such as Jabil.
Jabil was founded in 1966 in suburban Detroit as a producer and repairer of circuit board assemblies for Control Data Systems, a major mainframe computer manufacturer. Jabil (pronounced JAY-bill) took its name from the first names of its cofounders, James Golden and Bill Morean. Golden soon sold his stake to Morean, whose son William Morean joined the firm in 1977. The younger Morean obtained contracts with Burroughs Business Systems and a few other customers to assemble circuit boards. At the time Jabil was taking in less than $50,000 a year, but the younger Morean offered to buy 51 percent of the company from his father for $100,000, to be paid over five years.
More Automated Production: 1980s
In a major strategic shift, Jabil established a high-volume manufacturing relationship with General Motors (GM) in 1979. Under its arrangement with GM, Jabil would purchase all necessary parts and provide the necessary engineering to complete the high-volume production work, thus offering GM a turnkey service. The nature of the work forced Jabil to make a strategic commitment to advanced assembly technology and highly automated manufacturing. Up to this time Jabil had been manually assembling circuit boards.
Over the years Jabil would continue to provide complete turnkey services to manufacturing partners, maintaining its commitment to advanced manufacturing technology and highly automated operations. In 1982 the company moved to St. Petersburg, Florida, after obtaining a contract to make add-on circuit boards for the IBM Personal Computer unit in Boca Raton. Within a year Jabil's sales doubled to $100 million. During the 1980s Jabil took advantage of the trend for original equipment manufacturers (OEMs) to seek a broader range of external manufacturing services to more fully leverage their own internal operations. As an external manufacturer, Jabil would procure components, provide automated assembly services, and design and perform electronic testing.
Also during the 1980s, surface mount technology (SMT) replaced pin-through-hole (PTH) technology as the preferred method for circuit board assembly. SMT greatly reduced the size of the circuit board, reducing system costs while enhancing potential signal speed. To keep up with these developments, contract manufacturers such as Jabil were required to maintain more sophisticated automated assembly equipment and engineering expertise.
Along with these advances in the 1980s, there was a proliferation of smaller, more complex products, with product life cycles shrinking dramatically. These factors also contributed to the growth of external manufacturing as a strategy to manage product life cycles and increase product complexity.
In 1981 Jabil began providing independent test engineering and development. In 1982 it initiated volume production of circuit boards using manual SMT processes. Computer-aided production design services were introduced in 1984, and highly automated volume production of circuit boards using SMT processes began in 1985. By the end of the 1980s Jabil was using the automated TAB process for volume production of circuit boards. Toward the end of the decade Jabil had uneven sales and earnings. For fiscal 1988 the company reported net income of $3.8 million on sales of $96 million. In 1989 sales rose to $135 million, while net income declined to $694,000.
Uneven Sales and Earnings: 1990--95
The uneven sales and earnings continued in the 1990s. For 1990 revenues dropped to $124 million, and net income was $1 million. In 1991 revenues were reported at nearly $233 million, with net income of $10.3 million. For 1992 revenues declined to $173.1 million, while earnings fell to nearly $3.2 million. Sales for 1992 were negatively impacted by a $64 million decline in sales to Zenith Data Systems, one of the company's largest clients, and a loss of $32 million in sales to Dell Computer, which temporarily ended its relationship with Jabil.
Jabil went public in April 1993 with shares trading on the New York Stock Exchange. About 20 to 30 percent of the company's shares were offered to the public, depending on whether the underwriters' over-allotment was exercised in full. Jabil was led by Chairman and CEO William D. Morean, who directly and indirectly owned about 72 percent of Jabil's shares before the initial public offering (IPO). Thomas A. Sansone was Jabil's president. The firm's three largest customers--NEC Technologies, Quantum Corp., and Zenith Data Systems&mdashcounted for about two-thirds of its revenues, with NEC accounting for 38 percent. Some ten additional customers accounted for Jabil's remaining revenues. Jabil expected to be dependent on sales to a small number of customers, and it was competing against such well-known circuit board makers as IBM, Texas Instruments, Intel Corporation, and Digital Equipment.
Growth and Diversification: 1995--2000
For fiscal 1995 ending August 31 Jabil reported sales of $559.5 million, with net income of $7.3 million. During the first half of 1995 Jabil's workforce increased by 30 percent to more than 2,000 employees. The company was working three shifts a day to keep up with demand for printed circuit board assemblies, fueled by growing consumer demand for personal computers and other electronic products. With demand for integrated circuits (ICs) outstripping supply, Jabil claimed it could do 20 percent more business if it could find more of the components.
For fiscal 1996 sales increased 54 percent to $863.3 million. Net income more than tripled to $24.3 million. Jabil was benefiting from a trend among high-tech companies toward external manufacturing. It was supplying computer manufacturer Hewlett-Packard (HP) with 130,000 Pentium-based PC units a month, accounting for 25 percent of Jabil's business. HP was now Jabil's largest customer. Jabil also was targeting data communications companies involved in networking and the Internet as an area of future growth. Some 20 percent of Jabil's revenues came from Internet suppliers such as Chipcom and Compression Labs, up from eight percent in 1995.
In January 1996 one of Jabil's top three customers, Quantum Corporation, canceled orders worth $60 million a quarter, or about 25 percent of Jabil's revenues. Jabil had been supplying Quantum with parts for its hard disc drive products, which Quantum decided to stop producing and turn over to another business partner in an effort to regain profitability. To service Quantum, Jabil had built a high-volume factory in Penang, Malaysia, next to a Quantum site that would now be closed. Jabil planned to continue producing parts for Quantum's tape drive assemblies at the Malaysian factory. Partially offsetting the loss of business from Quantum were announcements of production plans for Cascade Communications, CellNet Data Systems, Cisco Systems, PairGain Technologies, and 3Com. For much of 1996 Jabil's stock price was depressed because of the lost business, trading at around $6 a share.
In May 1996 Jabil announced a five-year contract with PairGain Technologies to produce PG2s, gear that could double the capacity of a single telephone line, as well as a corporate version that could split a single line into 64 lines, or the equivalent of a T1 line. PG2 technology was developed by PairGain in the early 1990s, and the company had about two-thirds of the telecommunications market for the device. Jabil would manufacture the PG2s using plans provided by PairGain, then inventory and sell them. Jabil also planned to make other products for PairGain.
By December 1996 Jabil's stock had risen to more than $30. At the end of the year the company was looking to double its local workforce in St. Petersburg over the next several months. In spite of losing a significant share of Quantum's business, Jabil was able to remain profitable for fiscal 1996. The company also had diversified, from mainly producing circuit boards for personal computers to providing them for laptop computers and, more significant, for data communications hardware to access and maintain the Internet. A new 120,000-square-foot building was completed in January 1997 and doubled Jabil's manufacturing space in St. Petersburg. By February 1997 the company had to lease another 91,000-square-foot building in St. Petersburg to keep up with near-term customer demand. The company's other plants were located in Scotland, Malaysia, and California. Jabil also built a new 150,000-square-foot facility in Guadalajara, Mexico, which opened in November 1997. By early 1997 Jabil's global workforce had grown to about 3,000.
Growing demand, combined with a better-than-expected earnings report for the quarter ending May 31, 1997, resulted in a nearly 20 percent boost in Jabil's stock in one day. In June the stock rose more than $13 a share to close at $82.25, nearly ten times its price of July 1996. Fortune magazine ranked Jabil as the number one performing stock among its 100 fastest-growing U.S. companies. When the stock price passed $100 a share, the company declared a two-for-one stock split, which took place in July 1997.
For fiscal 1997 ending August 31, Jabil's net income more than doubled to $52.5 million, while sales rose a modest 13 percent to $978.1 million. Data network products, such as switchers and routers, were accounting for more of Jabil's revenue as the company shifted away from personal computer components. The company's largest customers were 3Com and Cisco Systems, which accounted for about 40 percent of Jabil's revenues. Hewlett-Packard, NEC, and Quantum together accounted for another 30 percent.
For fiscal 1998, sales passed the $1 billion mark, reaching $1.28 billion, while net income rose to $56.9 million. During the year Jabil strengthened its association with Hewlett-Packard and hired 600 former HP employees when it purchased the manufacturing assets of the Hewlett-Packard LaserJet Solutions Formatter Manufacturing Organization (FMO) for $80 million. The assets included two manufacturing facilities in Boise, Idaho, and Bergamo, Italy. They would be used to produce the printed circuit board assemblies for all laser printers sold by HP.
In October 1998 Jabil announced a new manufacturing relationship with Nortel Networks Inc., formerly known as Bay Networks, with production to be increased throughout fiscal 1999. The company also gained new business from Network Applicance, Inc., which made computer servers for the Internet and corporate networks. To expand its North American capacity, Jabil began constructing a 120,000-square-foot addition to its plant in Guadalajara, Mexico, in December. It also broke ground on a 60,000-square-foot corporate headquarters building in St. Petersburg to be completed by the fall of 1999. Between September and December 1998, Jabil's stock tripled from $23 to $69.50. At the end of 1998 the company had more than 5,300 full-time employees worldwide.
In January 1999 Jabil registered to sell 10.5 million shares of stock, including six million shares by the company and 4.5 million by shareholders; they were sold to the public in a secondary offering in March for about $30 a share, following a two-for-one stock split in February. The proceeds would be used to repay debt as well as for capital expenditures and general corporate purposes. The company also made a number of executive changes, promoting Thomas Sansone from president to vice-chairman, and Timothy L. Main from senior vice-president of business development to president. At the beginning of 1999 Jabil had manufacturing facilities in California, Michigan, Idaho, Scotland, Italy, Mexico, and Malaysia.
For 1999 Jabil's revenue of $2 billion was more than double revenue of 1997. For the first six months, Jabil performed ahead of expectations, with sales increasing 45 percent over the same period in 1998. Net income for fiscal 1999 was $91.5 million, an increase of nearly 61 percent over the previous year. The company added four new customers, including Lucent Technologies Inc.
In July 1999 Jabil acquired Denver-based EFTC Corp.'s electronics warranty service business for $30 million. The purchase added 500 employees, increasing Jabil's workforce to 7,500 people. After the acquisition, Jabil renamed the operation Jabil Global Services, Inc. and would offer repair and warranty services from operations in Memphis, Tennessee; Louisville, Kentucky; and Tampa, Florida.
In September 1999 Jabil completed a merger with GET Manufacturing Inc. of Hong Kong. The $250 million acquisition added about 5,000 employees and made Jabil a leading supplier of electronic manufacturing services in China. GET had six manufacturing facilities totaling one million square feet, four of which were located in China, with two smaller operations in Mexico and California. The acquisition of GET was expected to add about $300 million in annual revenue.
To keep up with increased demand, Jabil continued to expand its manufacturing capacity through plant expansions and building and leasing new facilities. In 2000, for example, after receiving a 20-year, $14.5 million tax credit from Michigan, it began a $40 million expansion of its Auburn Hills manufacturing operations to 200,000 square feet. Its southeastern Michigan customers included General Motors, Ford Motor Company, and Johnson Controls.
With more and more OEMs closing or selling off their manufacturing facilities and outsourcing their electronics manufacturing, the electronic manufacturing services sector was expected to grow by about 50 percent a year between 2000 and 2003. Jabil continued to expand its production facilities in mid-2000 to keep up with demand. It also raised $543 million through a secondary stock offering to reduce debt and finance a corporate building program that included plant expansions in California, Michigan, Massachusetts, Florida, and Idaho. Internationally the company announced plans to build a plant in Hungary, purchase manufacturing capacity in Brazil, and expand its facilities in Malaysia and Mexico. It also acquired a European repair and services operation from Telenor Technology Services of Norway. As one of the leading companies in the electronic manufacturing services sector, which also included Flextronics International, Solectron Corp., SCI Systems, Sanmina Corp., and Toronto-based Celestica, Jabil could look forward to continued revenue and earnings growth.
Principal Subsidiaries: Jabil Circuit Ltd. (U.K.); Jabil Circuit Sdn. Bhd. (Malaysia); Jabil Circuit of Michigan, Inc.; Jabil Circuit Foreign Sales Corporation (Barbados); Jabil Circuit de Mexico, S.A. de C.V.; Jabil Partners (Scotland); Jabil Circuit Luxembourg, SARL; Jabil Circuit Srl (Italy); Jabil MPC, LLC; Jabil Circuit of Texas, LP; Jabil Texas Holdings LLC; Jabil Global Services, Inc.; GET Manufacturing, Inc. (British Virgin Islands); General Electronics (HK) Ltd. (Hong Kong); General Electronics Services, Ltd. (Hong Kong); General Electronics (China) Ltd. (Guernsey); General Electronics Telecommunication (Panyu) Ltd. (China; 85%); Digitek Electronics Ltd. (Hong Kong); Link Win (Far East) Ltd. (Hong Kong); GET Manufacturing USA, Inc.; GETM Mexico S.A. de C.V. (Mexico); GET Manufacturing Services GbmH (Germany); GET Manufacturing Europe (Belgium); General Electronic Development (Hong Kong); Skytop International Ltd. (Hong Kong); CGE International Ltd. (Hong Kong).
Principal Competitors: Flextronics International Ltd. (Singapore); Solectron Corp.; SCI Systems, Inc.; Celestica, Inc. (Canada); Sanmina Corp.