Flextronics International Ltd. will gain industrial design capability with its planned acquisition of Palo Alto Products International Pte. Ltd. Flextronics announced a definitive agreement Feb. 1, and said the purchase should be completed April 4. Palo Alto Products will be renamed Flextronics Design. Terms were not disclosed.
Both firms are incorporated in Singapore and have administrative offices in northern California. Nasdaq-traded Flextronics in San Jose and privately held Palo Alto Products in Palo Alto have worked together on projects, including the original Palm Pilot personal digital assistant.
Flextronics has closed myriad acquisitions in recent years, boosting its contract-manufacturing capabilities — including injection molding — in Europe, Asia and North and South America. Flextronics contracts with multinational original equipment manufacturers on outsourced work, mostly involving advanced electronics.
The acquisition will give Flextronics mechanical and industrial design services, Michael Marks, Flextronics chairman and chief executive officer, said in a news release.
Palo Alto Products started in 1982 as a group focusing on proprietary designs and has expanded rapidly since 1996 into toolmaking, injection molding, metal stamping and assembly, largely for computer enclosures.
Palo Alto withheld current sales figures but reported sales of $93 million for the fiscal year ended March 31, 1998, before major growth. Employment now approaches 1,000.
In November, Palo Alto began operations in a custom-designed, 40,000-square-foot tooling facility employing 45 in Linkuo, Taiwan. The shop is stocked with electronic discharge machining stations and high-speed milling centers, said Malcolm Smith, Palo Alto vice president of design and engineering.
The tooling operation was moved 30 miles from a 107,000-square-foot factory in Tu Cheng, Taiwan, where Palo Alto employs 200, operates seven robot-equipped Toshiba horizontal molding machines and assembles enclosures for computers and flat-panel displays. A key FPD customer is ViewSonic Corp. of Walnut, Calif., a major player in the emerging market.
Last summer, Palo Alto began production in two large Bangkok, Thailand, factories that supply component-level plastic and metal parts to various customers, including nearby plants of Taipei, Taiwan-based Delta Electronics Ltd. Palo Alto operates 96 injection molding machines of 25-1,300 tons in a 255,000-square-foot plastics processing plant, and dozens of sheet-metal-stamping presses in an adjacent, 86,000-square-foot facility. Palo Alto's Thailand operations employ more than 600.
During 1998, Palo Alto constructed a 47,000-square-foot plant in New Braunfels, Texas, and acquired 15 Krauss-Maffei presses of 110-675 tons. A block away, Palo Alto leased in April a former Casco Molded Plastics Inc. facility with 50,000 square feet for warehousing and 45,000 square feet with manufacturing potential. The Texas operations employ 60.
Palo Alto Products' California site with administrative and core design operations employs 45.
"We will benefit from Flextronics' deep and sophisticated manufacturing expertise," Palo Alto's Smith said, and Flextronics will gain design and tooling capabilities. "We will supply molds to Flextronics out of our tool shop."
For the fiscal year ended March 31, Flextronics reported profit of $51.5 million on sales of $1.81 billion, including 18 percent to Philips NV, 16 percent to Telefon AB L.M. Ericsson and 13 percent to Cisco Systems Inc.